Uganda - Second Power Project : Credit 1560 - Credit Agreement - Conformed

CREDIT NUMBER 1560 UG DOCV Development Credit Agreement (Second Power Project) between THE REPUBLIC OF UGANDA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated ot, 1985 CREDIT NUMBER 1560 UG DEVELOPMENT CREDIT AGREEMENT AGREEKENT, dated , 1985, between THE REPUBLIC OF UGANDA (the Borro er) and INTERNATIONAL DEVELOP- MENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower and the Overseas Development Administra- tion (UK) intend to enter into an agreement (the ODA Grant Agreement) for the purpose of making a grant (hereinafter called the ODA Grant) to the Borrower in an amount of UK Pounds Sterling ten million (UK Z 10.0 million) to assist in financing part of the Project on the terms and conditions to be set forth in said Agreement; (C) the Uganda Electricity Board (hereinafter called UEB), with the Guarantee of the Borrower, and the Commonwealth Development Corporation intend to enter into an agreement (the CDC Loan Agreement) for the purpose of making a loan (hereinafter called the CDC Loan) to UEB in an amount of UK Pounds Sterling eleven million (UK -11 million) to assist in financing part of the Project on the terms and conditions to be set forth in said Agreement; (D) part of the Project will be carried out by UEB with the Borrower's assistance and, as part of such assistance, the Borrower will make available to UEB part of the proceeds of the Credit as provided in this Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and UEB; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The General Conditions Applicable to Develop- ment Credit Agreements of the Association, dated January 1, 1985, -2- (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and UEB of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and UEB pursuant to Sec- tion 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (d) "MPPT" means the Borrower's Ministry of Power, Posts and Telecommunications; (e) "UEB" means the Uganda Electricity Board established under the Borrower's Electricity Act of 1964 (Cap. 135); and (f) "CDC Guarantee Agreement" means the Agreement entered into between the Borrower and CDC. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to twenty-nine million five iiundred thousand Special Drawing Rights (SDR 29,500,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended -3- from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association 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 Credit. (b) The Borrower shall, for the purpose of the Project, open and maintain in United States Dollars a Special Account in the Bank of Uganda on terms and conditions satisfactory to the Assciation. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1990 or such later date as the Association shall establish. The Asso- ciation shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without re- strictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Sectio-x 2.06. Commitment charges and service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 1 -4- and November 1 commencing May 1, 1995, and ending November 1, 2034. Each installment to and including the installment payable on November 1, 2004, shall be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. Except with regard to Part C of the Project, UEB is designated as representative of the Borrower for the pur- poses of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Arti- cle V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out Part C of the Project through MPPT with due diligence and efficiency and in conformity with appropriate administrative, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause UEB to carry out Parts A and B of the Project in accordance with the provisions of the Project Agree- ment all the obligations of UEB therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appro- priate to enable UEB to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall relend part of the proceeds of the Credit to UEB under a subsidiary loan agreement to be entered into between the Borrower and UEB, under terms and conditions which shall have been approved by the Association which shall -5- include: (i) repayment of principal in 20 years including a grace period of 5 years; (ii) at an interest rate of 10% per annum; and (iii) UEB to bear the foreign exchange risk. (d) The Borrower shall exercise its rights under the Subsi- diary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purpo- ses of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to in- surance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Parts A and B of the Project shall be carried out by UEB pursuant to Section 2.03 of the Project Agreement. ARTICLE IV Other Covenants Section 4.01. The Borrower shall take appropriate measures to enable UEB to collect promptly payments for electricty sup- plies from Government Ministries or Departments and parastatal organizations. Section 4.02. The Borrower shall consult the Association on the development of the next hydroelectric station. Section 4.03. The Borrower shall: (a) take all measures necessary to enable UEB to earn a rate of return as provided in Section 4.03 of the Project Agreement and to this end; and (b) approve tariff increases sufficient to enable UEB achieve the said objective. Section 4.04. The Borrower shall carry out a national forestry inventory and shall conduct studies into urban household energy utilization and fuelwood marketing according to terms of reference and a timetable acceptable to the Association. -6- Section 4.05. The Borrower shall take measures to strengthen the Energy Department in MPPT along the lines contained in the UNDP/World Bank ESMAP Report "Uganda - Institutional Streng- thening in the Energy Sector (January 1985)", according to a timetable acceptable to the Association. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) UEB shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that UEB will be able to perform its obligations under the Project Agreement. (c) The Electricity Act of 1964 (Cap. 135) of the Borrower shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of UEB to perform any of its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of UEB or for the suspension of its operations. (e) The ODA Grant Agreement shall have failed to become effective by September 30, 1985, or such later date as the Asso- ciation may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. (f) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the ODA Grant or CDC Loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the ODA Grant Agreement or CDC Loan Agreement providing therefor, or (B) the CDC Loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satis- faction of the Association 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 agree- ment; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obliga- tions of the Borrower under this Agreement. (g) UEB shall have failed to establish a post of and appoint a Project Coordinator as provided in Section 3.04 of the Project Agreement. Section 5.02. For the purposes of Section 7.01 (d) of the General Conditions, the following additional events are speci- fied: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; (b) the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement sh&ll occur; and (c) the any event specified in paragraph (f) (i) (B) (subject to the proviso of subparagraph (ii) of that paragraph) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit -8- Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and UEB; (b) the CDC Loan Agreement has been executed on behalf of CDC and UEB, and the CDC Guarantee Agreement has been executed on behalf of CDC and the Borrower, and all conditions precedent for the first disbursement of the CDC Loan except for the effective of this Agreement have been fulfiled. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Association: (a) that the Project Agreement has been duly authorized or ratified by UEB, and is legally binding upon UEB in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and UEB and is legally binding upon the Borrower and UEB in accordance with its terms; Section 6.03. The date 90 days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Sections 4.01 and 4.03 of this Agreement and the provisions of paragraphs (a), (b) and (c) of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agree- ment shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. -9- Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Treasury Ministry of Finance P.O. Box 8147 Kampala, Uganda Cable address: Telex: FINSEC 61170 Kampala For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 10 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 UGANDA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By 6Ad \1" ' Regional Vi Prsident Eastern and Southern Africa - - 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works and 4,600,000 70% of foreign electrical and expenditures mechancial equip- ment under Part A of the Project (2) Transmission, Dis- 10,900,000 70% of foreign tribution Works expenditures and Ancilliary Items under Part B of the Project (3) Uprating and 4,500,000 70% of foreign strengthening of expenditures and Transmission Lines 85% of local ex- under Part B (3) penditures of the Project (4) (a) Consultants' 1,800,000 70% of foreign services under expenditures and Part B.9 and 85% of local 10 (i), (ii) expenditures and (iii) of the Project (b) Techncial 3,500,000 100% of foreign Assistance to expenditures and MPPT under 85% of local Part C of the expenditures Project - 12 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (5) Engineering and 700,000 70% of foreign Design Work for expenditures and the next Hydro- 85% of local Power Station expenditures under Part B.10 (iv) of the Project (6) Special Account 2,000,000 Amounts to be deposited pur- suant to para- graph 3 (a) of Schedule 3 to this Agreement (5) Unallocated 1,500,000 TOTAL 29,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of 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. Notwithstanding the provisions of paragraph 1 above (i) no withdrawals shall be made in respect of payments made for expend- itures prior to the date of this Agreement, and (ii) no withdraw- als shall be made in respect of Category 5 (Engineering and Design Work) .unless the Borrower fulfills its obligation under Section 4.02 of this Agreement. - 13 - SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) upgrade and rehabilitate existing electricity generation capacity at the Owen Falls power station and the capacity of the existing trans- mission and dIstribution system; (ii) strengthen UEB's opera- tional capability; and (iii) strengthen the planning capability of MPPT in the energy sector. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Rehabilitation of Owen Falls Power Station 1. Civil works for structural repairs to the dam and power house. 2. Rehabilitation of the ten turbo generator units. 3. Rehabilitation of electrical and mechanical equipment such as main cables, switchgear and control equipment, auxiliaries, intake and draft tube equipment, and service gates. 4. Workshop refurbishment and provision of tools and equipment for maintenance. Part B: Transmission and Distribution Works and Ancilliary Items 1. Substation Equipment - provision of transmission trans- formers of 132 kV and 33 kV and control and switchgear equipment. 2. Transmission and Distribution Lines - supply conduc- tors, hardware, wood poles, transmission towers, dis- tribution transformers, underground line material and consumer connecting material. 3. (a) Kampala - Owen Falls Line - uprating of the existing 66 kV transmission line to 132 kV; and - 14 - (b) Kampala - Nkenda and Tororo-Lira Lines - streng- thening of the existing 132 kV transmission lines. 4. Communication and Control - provision of new Power Line Carrier SCADA, telephone and radio equipment. 5. Vehicles and tools - provision of about 30 new vehi- cles, as well as forklifts, cranes and the supply of tools and workshop equipment for UEB transmission and distribution crew members as well as to the existing electrical, mechanical, communication, metering and protection workshops in Kampala. 6. Supply of a computer to UEB. 7. Reconstruction of the Jinja Training School and provi- sion of education equipment, as well as the reconstruc- tion of hostel facilities for students. 8. Reconstruction of district offices at Mbarara and Masaka, and civil works repair for operational and residential buildings. 9. Provision of engineering and consulting services including supervision of construction. 10. Provision of consulting services for carrying out studies of (i) the tariff structure, (ii) training needs of UEB, (iii) UEB's billing and collection system, and (iv) engineering and design work for the next hydro-electric power station. Part C: Technical Assistance to the Ministry of Power, Posts and Telecommunications 1. Provision of technical assistance for the operation of the Energy Department. 2. Provision of technical assistance for carrying out a forest and plantation inventory in Uganda. - 15 - 3. Provision of technical assistance for (i) a national fuelwood marketing survey as well as (ii) a household energy survey in the major towns of Uganda. The Project is expected to be completed by June 30, 1990. - 16 - SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Credit as set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to Categories (1) through (5) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount in United States dollars equivalent to the amount allocated to Category (6) which is to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provi- sions of this Schedule. 3. After the Association has received evidence satisfactory to the Association that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdra- wals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible - 17 - expenditures. Except as the Association may otherwise agree, each such deposit shall be withdrawn by the Association from the Credit Account under the respective Categories (1) through (5), and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this SchedulR, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals can be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Sec- tion 2.02 of this Agreement; or (ii) unless otherwise agreed by the Association, when the total unwithdrawn amount of the Credit allocated to Categories (1) through (5) for the Project, minus the amount of any outstanding qualified agreement to reimburse made by the Asso- ciation and of any outstanding special commitment entered into by the Association pursuant to Sec- tion 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to Catego- ries (1) through (5) for the Project shall follow such procedures as the Association shall specify by notice to the Borrower. Except as the Association shall otherwise agree, such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts - 18 - remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless otherwise agreed by the Association, no further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198-5 FOR SECRETARY