Zambia - Petroleum Exploration Promotion Project : Loan 2152 - Loan Agreement - Conformed

LOAN NUMBER 2152 ZA Loan Agreement (Petroleum Exploration Promotion Project) between THE REPUBLIC OF ZAMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated LUL , 1982 LOAN NUMBER 2152 A LOAN AGREEMENT AGREEMENT, dated Uvp, I , 1982, between THE REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank). WHEREAS the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions o-f the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated October 27, 1980 with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise aquires, the several terms defined in the General Conditionm have the respective meanings therein set forth and the term "Project Preparation Advance" means the Project Preparation Advance granted by the Bank to the Borrower pursuant to an exchange of letters, dated December 10, 1981 and February 17, 1982 between the Borrower and the Bank. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to six million six hundred thousand dollars ($6,600,000), -2 - Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- ule 1 to this Agreement, as such Schedule may be amended from time to time by agreement betwe,- the Borrower and the Bank, for expenditures made (or, if the Bs.nk shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan including interest and other charges on the Loan. (b) Promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn bal- ance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be gov- erned by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1986 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. Not later than the Effective Date, the Bor- rower shall pay to the Bank a fee equivalent to ninety-seven thousand five hundred and thirty-seven dollars ($97,537). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.06. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the -3- principal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interest and other charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the Amortization Schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project through its Ministry of Mines with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, and petroleum exploration practices and shall pro- vide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall establish and maintain in its Ministry of Mines, a Petroleum Unit whose function shall be to coordinate the execution of the Project. The said Petroleum Unit shall be headed by a Project Coordinator who shall be a senior professional officer of the Geological Survey Department in the Ministry of Mines, assisted by geologists, geophysicists, an accountant and an administrator all of whose qualifications and experience shall be satisfactory to the Bank. Section 3.03. (a) In order to assist the Borrower in carry- ing out the Project, the Borrower shall employ consultants, including petroleum exploration specialists and legal consul- tants whose selection, qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank in accordance with the principles and procedures described in the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency", published by the Bank in August 1981. (b) The Borrower shall furnish to the Bank the draft petro- leum legislation prepared by the legal consultants referred to in -4- (a) above, and shall consult with the Bank on its contents, including incentives proposed, prior to its enactment. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indem- nity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.05. (a) The iorrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (in- cluding its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower -5- and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall rea- sonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.06. Except as the Bank shall otherwise agree, the Borrower shall, until December 31, 1986, record and deposit all proceeds collected from the sale of reports, studies, data and other activities carried out under the Project in a separate account to be kept by the Borrower's Minister of Finance and used solely for financing further petroleum surveys and studies. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution cf foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely -6- as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions 'of a central bank or exchange stabilization fund, or similar functions, for the Bor- rower. Section 4.02. (a) The Borrower shall maintain or cause to be maintained separate accounts to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) Without limitation on the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; and (iii) enable the Bank's represen- tatives to examine such records. (c) The Borrower shall: (i) have the separate accounts referred to in paragraphs (a) and (b) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the fore- going, a separate opinion by said auditors in respect of the expenditures and records referred to in paragraphs (a) and (b) of this Section as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditure -7- have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning said separate accounts, records and expenditures and the audit thereof as the Bank shall from time to time reasonably request. ARTICLE VI Termination Section 6.01. The date oi-NAm A is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purpeses of Section 11.01 of the General Conditions: For the Borrower: Minister of Finance Ministry of Finance P.O. Box 50062 Lusaka, Zambia Cable address: Telex: MINFIN ZA 42221 Lusaka For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -8- Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. THE REPUBLIC OF ZAMBIA Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By A& T Regional Vice President . Eastern Africa -9- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expe,.ditures Category Dollar Equivalent) to be Financed (1) Airmag Survey 1,750,000 100% of foreign expenditures (2) Gravity Survey 1,000,000 100% of foreign expenditures (3) Training 150,000 100% of foreign expenditures (4) Equipment and 150,000 1 of foreign materials expenditures and 80% of local expendi- tures (5) Consultants' 1,250,000 100% of foreign services and expenditures Project administration (6) Refunding of 1,000,000 Amount due Project Preparation Advance (7) Fee 97,537 (8) Unallocated 1,202,463 TOTAL 6,600,000 - 10 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (b) payments made for expenditures prior to the date of this Agreement; (c) expenditur(s under Caterory 2 above unless the Bank shall have determined that the airmag survey under Part A (1) of the Project has yielded satisfactory results. (d) payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manu- facture, procurement or supply thereof. 5. Notwithstanding the allocation of an amount of the Loan set forth in the second column of the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance - 11 - all expenditures in that Category, the Bank may, by notice to the Borrower, reallocate to such Category, to the extent required to meet the estimated shortf-ll, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been elig- ible for financing out of the proceeds of the Loan. - 12 - SCHEDULE 2 Description of the Project The Project's objective is to support the Borrower's efforts to gather geological and geophysical information and promote hydrocarbon exploration by attracting foreign companies to under- take petroleum exploration. The Project consists of the follow- ing main components: Part A: Geophysical Surveys (1) Airmag Survey totalling about 90,000 line-km of the prospective sedimentary areas; (2) Gravity Survey to cover selected traverses in areas identified in the Airmag Survey; and (3) Reprocessing of mineral Airmag Data totalling about 50,000 line-km. Part B: Technical Assistance (1) Exploration Consultants (45 man-months) to help estab- lish the Petroleum Unit, coordinate the various project compo- nents, supervise the geophysical surveys, produce a strategy and a promotion report on Zambia's geological prospects, and provide training to Zambians in geo-science; (2) Legal Consultants (nine man-months) to draft petroleum legislation, prepare model explor- ation/production agreements, and assist the Government in negoti- ating with oil companies; (3) Consultants' services for training of Zambian staff in petroleum geology and interpretation of geophysical surveys and related equipment including vehicles, laboratory and office materials. The Project is expected to be completed by June 30, 1986. - 13 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each March 1 and September 1 beginning March 1, 1988 through September 1, 2002 $220,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawals; see General Conditions, Section 3.04. - 14 - Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years 1.75% before maturity More than three years but not 3.50% more than six years before maturity More than six years but not 6.40% more than eleven years before maturity More than eleven years but not 9.30% more than sixteen years before maturity More than sixteen years but not 10.45% more than eighteen years before maturity More than eighteen years 11.60% before maturity - 15 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. The Gravity Survey under Part A (2) of the Project shall be procured under contracts* awarded in accordance with procedures consistent with those set forth in the current edition of -the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bid-: ding as described in Part A of the Guidelines. . 2. For the Gravity Survey to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the pub- lic of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank. shall reasonably request; the Bank will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international com- petitive bidding. B. Other Procurement Procedures 1. Equipment and vehicles may be procured in accordance with local competitive bidding procedures acceptable tb the Bank. 2. The Airmag Survey including contracts for supervision, quality control and interpretation under Part A (1) of the Pro- ject shall be procured on the basis of limited international ten- dering with bids requested from at least seven suppliers. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: - 16 - With respect to all contracts for the Airmag Survey and the Gravity Survey: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bid- ders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.03 of this Agreement, on the evaluation and compari- son of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the rea- sons for such determination. (c) The terms and conditions of the contracts shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of each contract shall be fur- nished to the Bank promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or - 17 - this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issu- ing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 20% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this / FLday of 4wL,, 198 . FOR SECRETARY