Peru - Lima Water Supply And Sewerage Project : Loan 2139 - Loan Agreement - Conformed

DOCUTS LOAN NUMBER 2139 PE Loan Agreement (Lisa Water Supply and Sewerage Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SERVICIO DE AGUA POTABLE Y ALCANTARILLABO DE LINA - SEDAPAL and SERVICIO N&CIONAL DE ABASTECIMIENTO DR AGUA POTABLE Y ALCANTARILLADO - SENAPA and CORPORACION FINANCIERA DE DESARROLLO S.A. - COFIDE Dated , 1982 LOAN NUMBER 2139 PE LOAN AGREEMENT AGREFMENT, dated * , 1982, between INTERNATIONAL BANK FOR 'ECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and Servicio de Agua Potable y Alcan- tarillado de Lima-SEDAPAL (hereinafter called the Borrower) and Servicio Nacional de Abastecimiento de Agua Potable y Alcan- tarillado - SENAPA (hereinafter called SENAPA). WHEREAS (A) 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 (hereinafter called the Project by making the Loan to the Borrower as hereinafter pro- vided); (B) SENAPA, sole owner of the Borrower, in consideration of the Bank's providing the aforesaid financing, has agreed to undertake certain obligations as hereinafter provided; (C) Corporacion Financiera de Desarrollo S.A. - COFIDE (hereinafter called COFIDE) has participated in the negotiation of this Agreement and has represented to the Bank that it has discharged all of its other responsibilities as financial agent of the Borrower pursuant to Republic of Peru's Decreto Legis- lativo No. 5 published in El Peruano on December 31, 1980; and WHEREAS the Bank is willing, 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 of 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, subject, however, to the modifications thereof set forth in Schedule 5 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions): -2- Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "Engineering Project" means the project described in Schedule 2 to the Loan agreement between the Guarantor and the Bank dated December 22, 1978, as amended from time to time; (b) "Charter" means the Guarantor's Legislative Decree No. 150, as published in El Peruano on June 15, 1981, whereby SENAPA has been established as an enterprise under the form of a public law corporation and as the parent company and sole owner of the Borrower, and the Borrower, formerly Empreea de Saneamiento de Lima, has been transformed into a wholly owned subsidiary corporation of SENAPA; (c) "SENAPA's By-laws" means the By-laws of SENAPA as approved by the Guarantor's Supreme Decree No. 038-81-VI, dated November 6, 1981, and registered in the Registro Mercantil de los Registros Pdblicos de Lima on March 3, 1982 under number 38595 of the Commercial Companies Book; (d) "SEDAPAL's By-laws" means the By-laws of the Borrower as approved by the Guarantor's Supreme Decree No 048-81-VI, dated December 15, 1981, and registered in the Registry mentioned in the preceding paragraph, on March 2, 1982, under the number 38644 of the Commercial Companies Book; (e) "Lima Metropolitan Area" means an area which includes the cities of Lima and El Callao, and smaller communities located in river valleys, all within the jurisdiction of the Provinces of Lima and Constitucional del Callao; (f) "Original Price" means the nominal price of a contract, and the term includes any automatic monetary correction to such price provided for in such contract; (g) "Sol" means sol in currency of the Guarantor; (h) "Contribution to Service Improvements" means the customer contribution charged by the Borrower in accordance with its Board Resolution No. 126-986-81; -3- (i) "Long-term debt" means all indebtedness of the Borrower maturing by its terms one year or more after the date on which it is originally incurred; and (j) "Debt-service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges in respect of long-term debt. ARTICLE II The Joan 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 forty nillion six hundred thousand dollars ($40,600,000). Scction 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. 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 governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1988 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor 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 six hundred thousand dollars ($600,000). 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. -4- 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 principal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interest and other charges shall be payable semiannually on January 1 and July 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. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate engineering and public utility practices. (b) Without limiting or restricting the Borrower's obliga- tions under paragraph (a) of this Section, the Borrower shall use its best efforts to obtain for its benefit other loans or other financing under terms and conditions acceptable to the Bank from sources outside Peru and to apply the proceeds of such loans or financing to meet expenditures required to carry out Part B (4) of the Project and not financed out of the proceeds of the Loan. Section 3.02. In order to assist the Borrower in the carry- ing out of Part D of the Project and to enable the Borrower to comply with its obligation under Section 3.05 of this Agreement, the Borrower shall employ engineering and management consultants or experts, as the case may be, 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 Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 and in Part E of Schedule 4 to this Agreement. -5- Section 3.03. (a) The Borrower undertakes to insure, or make make adequate provision f Dr the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incidental to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity 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 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction 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 prog-ess of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out -f 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, not less frequent than semi-annual, all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, 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, works 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) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents. -6- (e) 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 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 reasonably 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 3.05 (a) The Borrower shall: (i) reorganize the unit it created in 1979 to, inter alia, supervise the carrying out of Part A of the Engineering Project, and hire therefor the services of a Project Manager, a Deputy Project Manager and, as required, long-term experts with functional responsibilities and short-term consultants for Project supervision; avd (ii) expand the respon- sibilities of such unit so as to include coordination of consul- tants' services in respect of Part D (2) of the Project, and supervision of overall Project activities, particularly, supervi- sion of consultants' services, physical construction under the Project, and control of monitoring indicators and preparation of reports required under this Agreement. (b) The Borrower shall maintain the unit referred to in paragraph (a) of this Section until all payments (other than debt service payments) in respect of the carrying out of the Project have been made and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 4.02. The Borrower shall at all times operate and maintain its plants, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs -7- and renewals thereof, all in accordance with sound engineering, financial and public utility practices. Section 4.03. (a) The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. (b) Without limiting the generality of the provisions of paragraph (a) of this Section, the Borrower shall prepare, and furnish to the Bank not later than December 31, 1982 for comment, a comprehensive insurance program which shall be put into effect not later than June 30, 1983. Section 4.04. The Borrower shall cause each Subsidiary that may be created by the Borrower in accordance with Article 49 (c) of SEDAPAL's By-laws to observe and perform the obligations of the Borrower under this Agreement to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such Subsidiary. Section 4.05. The Borrower shall not, unless the Bank and the Borrower have otherwise agreed, sell, lease, transfer or otherwise dispose of any of its assets which shall be required for the efficient operation of its business and undertaking. ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable 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 copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to t:, Bank such other information -8- concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reason- ably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satis- factory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. (a) Except as the Bank shall otherwise agree, the Borrower shall from time to time take all such steps, including those referred to in paragraph (d) of this Section and those necessary or desirable to obtain adjustments in the rates it charges for the services it supplies or for the use of groundwater resources, as shUll be required to earn annually relevant revenues sufficient to cover the sum of: (i) operating and maintenance costs; (ii) taxes; and (iii) the greater of depreciation expenses or Debt-service requirements of Long-term debt, both for the year in question, and in addition, to provide a contribution to the Borrower's capital requirements. Such contribution shall be expressed, in respect of each of the fiscal years set forth below, as a percentage of the sum of the net value of the Borrower's fixed assets in operation plus the value of the Borrower's share of the Mantaro project capital require- ments. The percentage in question shall be as follows: two per cent (2%) for fiscal year 1982, three and one-half of one per cent (3-1/2%) for fiscal year 1983 and four per cent (4%) for -9- fiscal year 1984 thereafter. Any shortfall in relevant revenues shall be compensated in the next following fiscal year. (b) For the purposes of this Section: (i) the term "relevant Aevenues" means the revenue generated by the application of the rates the Borrower charges for the provision of water and sewerage services, including, without limitation, Contributions to Service Improvements, cdnores, connection fees and other charges that may be applied by the Borrower from time to time for such services and for the ust of groundwater resources; (ii) the term "net value of the Borrower's fixed assets in operation" means the average sum of the gross value of fixed assets in operation at the begin- ning of the year in question plus the sum of the gross value of fixed assets in operation at the -end of such year less the related accumulated depreciation, all as revalued in accordance with paragraph (c) of this Section and registered on the Borrower's books; -nd the term also includes the average value of works in progress at the beginning and at the end of such year revalued in accordance with the aforesaid paragraph (c); for purposes of this paragraph, "accumulated depre- ciation" means straightline depreciation, based on the useful life of the asset in question, revalued in accordance with paragraph (c) of this Section, as accumulated at the end of the year in question; (iii) the term "taxes" means the aggregate amount of all taxes payable by the Borrower accrued during the year in question less any rebate on such amount granted by the Guarantor and any portion of such taxes which are charg2d -by the Borrower to the cost of its fixed or capital assets acquired during the year in question; and (iv) the term "Borrower's share of the Mantaro project capital requirements" means the average of the accumulated value of the contributions made by the Borrower for purposes of the carrying out of the - 10 - Mantaro project at the beginning and at the end of the year in question, expressed in terms of Soles revalued as indicated in paragraph (c) of this Section, but only to the extent the Borrower is obligated to make such contributions under the contract between the Borrower and ELECTROPERU and ELECTROLIMA dated September 30, 1981 and approved by the Guarantor's Decreto Supremo 031-81-EM/DGE, as such contract may be amended from time to time. (c) The Borrower shall: (i) revalue the gross value of its fixed assets in operation, works in progress and the share of the Mantaro project capital requirements annually, to such extent as shall be necessary to reflect adequately, at the time of each such revaluation, the current value thereof, in accordance with a sound and consistently applied method of valuation acceptable to the Ba.k; and (ii) register, annually, the results of such reval- uation on its books. (d) The Borrower shall, not later than August 31 in each fiscal year, file with SENAPA a proposed schedule of tariff adjustment to be applied by the Borrower in the next following fiscal year. Such schedule, a copy of which shall be furnished to the Bank upon the filing thereof, shall be aimed at enabling the Borrower to comply with paragraph (a) of this Section and shall take into account all relevant factors therefor, particularly the investments scheduled, as part of the Borrower's five-year investment plan, for such fiscal year, any revenue shortfalls to be compensated, if any, during such year pursuant to paragraph (a) of this Section and the amount of taxes to accrue during such year. Section 5.05. (a) The Borrower shall conduct a study, under terms of reference satisfactory to the Bank (which will include the definition of a timetable of steps to be taken to put into effect the recommendations of such study starting not later than July 1, 1983), on the Borrower's tariff structure and other revenue sources, and shall, not later than March 31, 1983, furnish to the Bank the findings and recommendations of such study and a timetable for putting into effect such recom- mendations which will adhere substantially to the timetable defined by such study. - 11 - (b) The Borrower shall take all steps necessary or desir- able to put the recommendations of the aforesaid study into effect, in accordance with the proposed timetable, with the changes to such recommendations which may have been reasonably requested by the Bank or SENAPA. Section 5.06. (a) Except as the Bank shall otherwise agree, the Borrower shall not incur any Long-term debt, unless its internally generated funds for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum Long-term debt-service requirements, for any succeeding fiscal year, on all Long-term debt of the Borrower (including the Long-term debt to be incurred). For the purposes of this Section: (i) the term "internally generated funds" means gross revenue from all sources less all operating and administrative expenses of the Borrower (including adequate maintenance) and taxes, if any, but before provision for depreciation of assets and social benefits, and before payments on interest and other charges on Long-term debt are made; and (ii) debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agree- ment or other instrument providing for such debt; provided, however, that in the case of guarantee of debt, debt shall be deemed to be incurred on the day the agreement guaranteeing such debt has been entered into but only to the extent that the guaranteed debt is outstanding. Section 5.07. (a) Except as the Bank shall otherwise agree, the Borrower shall from time to time take all steps necessary or desirable to ensure that, at the applicable fiscal year's end, the proportion between the Borrower's accounts receivable and month-sales for fiscal year 1982 and each fiscal year thereafter, shall not exceed the coefficient stipulated below in respect of each respective fiscal year: 1982 3.5 1983 and thereafter 2.5. - 12 - (b) For purposes of paragraph (a) of this Section, (i) the amount billed by the Borrower on account of services shall be divided by 12, and (ii) the quotient so obtained shall be divided into the value of accounts receivable for the year in question. (c) For purposes of paragraph (b) of this Section, the term "services" means water and sewerage services provided by the Bor- rower in the year in question. Section 5.08. The Borrower shall: (i) not later than August 31 on each year and until all payments (other than debt service payments) in respect of the carrying out of the Project have been made, exchange views with the Bank on each five-year investment plan to be taken into account for purposes of Section 5.04 (d) of this Agreement; and (ii) during the twelve-month period next following such exchange of views, exchange views on any subsequent change to such investment plan. ARTICLE VI Obligations of SENAPA Section 6.01. SENAPA shall take all such steps as shall be necessary to enable the Borrower to comply with all of the Bor- rower's obligations under this Agreement, particularly, by means of approving, to the extent they are required by the Borrower to comply with its obligation under this Agreement, all requests by the Borrower for the adjustment of the rates referred to in paragraph (a) of Section 5.04 of this Agreement. Section 6.02. SENAPA shall exchange views with the Bank on the recommendations of the study to be conducted by the Borrower in accordance with Section 5.05 of this Agreement and take all action on its part to authorize the Borrower to put into effect such recommendations with the changes thereto reasonably requested by the Bank or SENAPA. Section 6.03. (a) SENAPA undertakes not to transfer to the Fund provided for in Title II of the Charter and in Articles 71 through 73 of SENAPA's By-laws any amount of Borrower's surplus in any of the Borrower's fiscal years, to the extent that such amount will be required by the Borrower to carry out the invest- ment program approved by the Borrower's Board of Directors in respect of such year and the next following four fiscal years. - 13 - ARTICLE VII Remedies of the Bank Section 7.01. For the purposes of Section 6.02 of the General Conditions, the following events are specified pursuant to paragraph (k) thereof: (a) SENAPA shall have failed to perform any of its covenants, agreements or obligations under this Agreement; (b) the Charter or SENAPA's By-laws or SEDAPAL's By-laws shall have been amended, suspended or abrogated so as to affect materially and adversely the carrying out or operation of the Project or the financial position of the Borrower; (c) the Borrower shall have failed to make any payment required under the subsidiary loan agreement entered into between COFIDE, on behalf of the Guarantor, and the Borrower for purposes of the Engineering Project; (d) (i) Subject to subparagraph (ii) of this paragraph: (A) The Guarantor or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of SENAPA or for the suspension of its operations, or (B) SENAPA or others shall have taken any action which may lead to the suspension of its operations. (ii) Subparagraph (i) of this paragraph shall not apply if the Guarantor establishes to the satisfaction of the Bank that other legal entity or entities, acceptable to the Bank, has or have been assigned functions, powers and responsibilities equivalent to those set forth in the Charter with respect to SENAPA and in SENAPA's By-laws; and (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any loan made to the Borrower for the financing of the Project shall have been -14- suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such loan shall have become due and pay- able prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Bor- rower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 7.02. For the purposeti of Section 7.01 of the Gen- eral Conditions, the following events are specified pursuant to paragraph (h) thereof: (a) any of the events specified in paragraph (a) or in paragraph (c) of Section 7.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; (b) any of the events specified in paragraph (b) of Section 7.01 of this Agreement shall occur and shall continue for a period of 30 days after notice thereof shall have been given by the Bank to the Borrower; and (c) any of the events specified in paragraphs (d) (i) or (e) (i) (B) of Section 7.01 of this Agreement shall occur, sub- ject, in the case of paragraph (d) (i), to the proviso of sub- paragraph (ii) of that paragraph (d) and, in the case of paragraph (e) (i) (B) to the proviso of eubparagraph (ii) of that paragraph (e). ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement - 15 - within the meaning of Section 12.01 (c) of the General Conditions: (a) that this Agreement and the Guarantee Agreement have been duly registered by Direccion General de Cr6dito Pdblico of the Guarantor's Ministry of Economy, Finance and Commerce; (b) that the unit referred to in Section 3.05 of this Agreement has been reorganized and expanded pursuant to such Section, all in form and substance satisfactory to the Bank; and (c) that the services of the Manager and Deputy Manager of the unit referred to in (b) above have been hired. Section 8.02. The following is specified as an additional matter within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank on behalf of the Borrower and the Guarantor, namely, that this Agreement and the Guarantee Agreement have been duly registered by Direccidn General de Cr6dito P5blico of the Guarantor's Ministry of Economy, Finance and Commerce. Section 8.03. The date %VC-'\CkLA - is hereby speci- fied for the purpose of Section 12.04 of the General Conditions. ARTICLE II Addresses Section 9.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -16- For the Borrower: Servicio de Agua Potable y Alcantarillado de Lima Calle Monterrey 281 Chacarilla del Estanque Santiago de Surco Lima, Peru Telex: 20057PE LIGHT For SENAPA Servicio Nacional de Abastecimiento de Agua Potable y Alcantarillado Domingo Cueto 120-70 Piso Jesus Marfa, Lima, Peru Telex: 25158 PE MINVICON Section 9.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SENAPA may be taken or executed by its General Manager or such other person or persons as he shall designate in writing, and SENAPA shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. IN WITNESS WHEREOF, the parties hereto and COFIDE in the role described in the Preamble to this Agreement, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District - 17 - of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By/ ~ ~ da Regional Vice President Latin America and the Caribbean SERVICIO DE AGUA POTABLE Y ALCANTARILLADO DE LIMA - SEDAPAL By UA Authorized Representative SERVICIO NACIONAL DE ABASTECIMIENTO DE AGUA POTABLE Y ALCANTARILLADO - SENAPA By Authorized Representative CORPORACION FINANCIERA DE DESARROLLO S.A. - COFIDE By{u thried Rereenatv Authorized Representative By ~ K\4~& OVAA Authorized Representative I -18- SCHEDULE I 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 financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Materials and 15,000,000 100% of for- equipment (other eign expendi- than for Part B tures and 54% (4) of the Proj- of local ex- ect) penditures (2) Civil works 17,000,000 36% (repre- (excluding senting the amounts with- estimated held as per- foreign ex- formance guar- penditure antees) for the component) Project other than for Part B (4) thereof (3) Consultants' 2,000,000 services: (a) Management 100% staff of, and short-term consultants to, the unit referred to in Section 3.05 of this Agreement (b) Part D of the 40% Project - 19 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent to be Financed (4) Fee under Section 600,000 Amount due 2.05 of this Agreement (5) Unallocated 6,000,000 TOTAL 40,600,000 2. Fi,r the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guaranc . or for goods or services supplied from the territory of the Guarantor. 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 Guarantor 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 payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent -20- of $500,000 may be made in respect of expenditures for Part A (2) of the Project on account of payments made for such expenditures before that date but after April 30, 1982. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, 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; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 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 expenditures 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. - 21 - SCHEDULE 2 Description of the Project The Project consists of: Part A: Provision of water and sewerage services to low-income areas in Lima Metropolitan Area by means of: (1) Construction of about 450 kilometers of water dis- tribution networks and about 20,000 cubic meters of storage capacity, and installation of about 43,000 house connections to serve about 70 low- income settlements. (2) Construction of a water main about 5 kilometers long and one 200 liter-per-second pumping station to continue improving the supply of water to the Canto Grande area. (3) Construction of about 7.5 kilometers of trans- mission pipeline from the Lima distribution system to improve the supply of water in the Comas and Carabayllo low-income settlements. (4) Construction of about 430 kilometers of sewage collectors and 46,000 house discharges. (5) Construction of about 10 kilometers of sewage interceptors to serve about 3,000 hectares in the Canto Grande area. Part B: Development and improvement of water resources to increase the water production of the Lima Metropolitan Area's water supply system by about 4.4 cubic meters per second, and to allow more efficient operation of existing wells, by means of: (1) Building of about 1 kilometer of infiltration galleries and rehabilitation of the existing galleries, along the River Rimac. These works to include widening and leveling of, and building of small dikes across, the River streambed so as to allow water spreading. - 22 - (2) Rehabilitation of about 80 existing wells. (3) Drilling and construction of, and provision of equipment to, about 26 new wells. (4) Design, drilling and construction of, and pro- vision of equipment to, about 50 new wells other than those included in (3) above. Part C: Improvement in the operation of the Lima Metropolitan Area's water supply system and reduction of unaccounted for water produced thereby, by means of: .(1) Provision and installation of about 180 master meters in existing wells and in the main pipelines. (2) Acquisition and installation of about 164,000 house meters and rehabilitation of additional 136,000 house meters. (3) Improvement and expansion of the Borrower's meter repair shop. (4) (i) Expansion of laboratory facilities at the Atarjea plant and acquisition, and utilization, of additional equipment and instrumentation thereof; (ii) acquisition and utilization of auxiliary radio communication equipment, about 190 pick-ups and trucks, spare parts and automotive shop equipment. Part D: Strengthening of the Borrower's operations and finan- cial condition by means of: (1) Execution of a user's survey of water and sewer- age connections with a view to incorporating unregistered connections into the Borrower's com- mercial system and permitting better planning for the expansion of the provision of services by the Borrower. (2) (i) Gathering of data and information on which to base sound methods of management and control of - 23 - water resources, including groundwater recharge and operation and maintenance of deep wells, and (ii) development and execution of programs therefor. The Project is expected to be completed by December 31, 1986. - 24 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each January 1 and July 1 beginning January 1, 1987 through January 1, 1999 1,560,000 On July 1, 1999 1,600,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawals; see General Conditions, Section 3.04. - 25 - Premiums on Prepayment The following percentages are specified as the premiums payable 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 2.05% before maturity More than three years but not 4.10% more than six years before maturity More than six years but not 7.50% more then eleven years before maturity More than eleven years but not 10.25% more than fifteen years before maturity More than fifteen years 11.60% before maturity -26- SCEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with pro- cedures 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 bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, and 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. 3. Civil works contracts, and materials and equipment contracts shall be grouped to the extent possible in contracts estimated to cost each of them, the equivalent of not less than $1,500,000 and $200,000, respectively. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and simi- lar taxes levied in connection with the sale or delivery, pur- suant to the bid, of the goods shall not be taken into account in - 27 - the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. B. Preference for Domestic and Regional Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Peru or in a country which is a party to the Cartagena Agreement or to any other regional trade agreement acceptable to the Guar- antor and the Bank (the Cartagena Agreement or any such other regional agreement hereinafter called the Regional Agreement), may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following four groups: (a) Group A: bids offering goods manufactured in Peru if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Peru equal to at least 20% of the ex-factory bid price of such goods. (b) Group B: all other domestic bids. (c) Group C: bids offering goods manufactured in a country other than Peru which is a party to the Regional Agreement. (d) Group D: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. - 28 - 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C or group D, all group C and D bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C and D bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non- exempt importer would have to pay for the importation of the goods offered in such group C or group D bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid or the group C bid in such further comparison is the lowest, it shall be selected for the award. 5. If, as a result of the further comparison under para- graph (4) above, a bid from group D is the lowest, and provided there are taxes actually payable for the importation of goods offered in the lowest evaluated bid from group C, as determined under paragraph (3) above, all group D bids shall be finally com- pared with such lowest evaluated bid from group C, after adding to the c.i.f. bid price of goods to be imported offered in each group D bid, for the purpose of this final comparison only, an amount equal to the smaller of (i) the positive difference, if any, between the amount of customs duties and other import taxes which would actually be payable for the importation of goods offered in such group D bid and for the importation of goods offered in the group C bid, or (ii) 15% of the c.i.f. price of goods to be imported offered in such group D bid. If the lowest bid in such comparison is the group C bid, it shall be selected for the award; if not, the lowest evaluated bid from group D, as determined under paragraph (3) above, shall be selected for the award. C. Other Procurement Procedures (1) Contracts for civil works estimated to cost the equiva- lent of less than $1,500,000 and contracts for materials and equipment estimated to cost the equivalent of less than $200,000, may be procured under competitive bidding procedures locally advertised, to the extent that such procedures are satisfactory to the Bank and that the aggregate cost of the contracts so awarded does not exceed the equivalent of $6,000,000; and (2) Contracts for civil works or goods estimated to cost less than the equivalent of $50,000 or less, may be awarded to - 29 - contractors or suppliers, as the case may be acceptable to the Bank after obtaining quotations from not less than three of such contractors, or suppliers, as the case may be. The aggregate of contracts so awarded will not exceed the equivalent of $500,000. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts awarded on the basis of inter- national competitive bidding in accordance with Part A thereof. (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 description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents 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 bidders. (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 on the evaluation and com- parison of the bids received, 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 reasons for such determination. (c) The terms and conditions of the contract 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 the contract shall be furnished to the Bank promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after -30- its execution and prior to the delivery 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 contract, together with the analysis of the respective bids, recommenda- tions 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 this Schedule, promptly inform the Borrower and state the reasons for such determination. 4. 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 10% 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. E. Procurement of Consultants or Expert Services 1. Consultants or experts whose services are to be employed pursuant to Section 3.02 of this Agreement shall be selected after inviting proposals from a short list of firms or individuals. Such short list will be sent to the Bank for approval and the invitations to be issued will, in each case, set forth the criteria to be taken into account for the selection of the individual or firm to which the contract will be awarded. Such criteria will be determined from time to time by agreement between the Bank and the Borrower and will, inter alia, take price into account in accordance with methods and procedures satisfactory to the Bank. 2. Since under certain circumstances, as described in the Guidelines referred to in Section 3.02 of this Agreement, the Bank may sympathetically consider the possibility of asking proposals to a single firm or individual, the Borrower will, under such circumstances, do so. However, extended lists will not be used for asking proposals. -31- SCHEDULE 5 Modifications of General Conditions For the purpose of this Agreement, the provisions of the General Conditions are modified as follows: (1) The words "and SENAPA" are added to paragraph 11 of Section 2.01 after the word "Borrower". (2) The words "or SENAPA," are added after the word "Borrower" and the word ", respectively" after the words "Guarantee Agreement", all in paragraph (e) of Section 6.02. (3) The word ", SENAPA" is added after the word "Borrower" after every instance in which the latter occurs in paragraphs (a) and (b) of Section 9.01, and in Section 10.01; and the words "nor SENAPA" are inserted between the words "Borrower" and "nor" in Section 10.01. (4) The words "or SENAPA" are added after every instance of the word "Borrower" in Sections 10.02 and 11.03. 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 day of L &&, 198jZ. FOR SECRETARY