Senegal - Ileven Centers Water Supply Project : Credit 1554 - Project Agreement - Conformed

OFFICIAL CREDIT NUMBER 1554 SE DOCUMENTS Project Agreement (Eleven Centers Water Supply Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NATIONALE D'EXPLOITATION DES EAUX DU SENEGAL Dated ,1985 CREDIT NUMBER 1554 SE PROJECT AGREEMENT AGREEMENT, dated A A. , 1985, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and SOCIETE NATIONALE D'EXPLOITATION DES EAUX DU SENEGAL (hereinafter called SONEES). WHEREAS by the Development Credit Agreement of even date herewith between Republic of Senegal (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty four million one hundred thousand Special Drawing Rights (SDR 24,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SONEES agree to undertake such obligations toward the Asso- ciation as are hereinafter set forth; WHEREAS by a Subsidiary Financing Agreement to be entered into between the Borrower and SONEES, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to SONEES on the terms and conditions therein set forth; and WHEREAS SONEES, in consideration of the Association's enter- it4g into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. SONEES declares its commitment to the objec- tives of the Project as set forth in Schedule 2 to the Develop- ment Credit Agreement and, to this end, shall carry out Parts A -2- and B of the Project described in said Schedule with due dili- gence and efficiency and in conformity with appropriate adminis- trative, financial, engineering and public utility practices. Section 2.02. For the purpose of carrying out Parts A and B of the Proje-ct, SONEES shall employ management, financial and water supply consultants and experts whose qualifications, expe- rience and terms and conditions of employment shall be satis- factory to the Association, such consultants and experts to be selected in accordance with principles and procedures satis- factory to the Association on the basis of 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. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) SONEES undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent or made avail- able to it by the Borrower against hazards incident to the acqui- sition, 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 SONEES to replace or repair such goods. (b) SONEES shall cause all goods and services financed out of the proceeds of the Credit relent or made available to it by the Borrower to be used exclusively for the purposes of Parts A and B of the Project. Section 2.05. (a) SONEES shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and work and pro- curement schedules for Parts A and B of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) SONEES shall: (i) maintain records and procedures ade- quate to record and monitor the progress of Parts A and B of the Project (including their cost and the benefits to be derived from them), to identify the goods and services financed out of the -3- proceeds of the Credit, and to disclose their use in Parts A and B of the Project; (ii) enable the Association's representa- tives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such informa- tion as the Association shall reasonably request concerning Parts A and B of the Project, their cost and, where appropriate, the benefits to be derived from them, the expenditures of such pro- ceeds and the goods and services financed out of such proceeds. (c) Upon the award by SONEES of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association 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 SONEES and the Association, SONEES shall prepare and furnish to the Association a report, of such scope and in such detail as the Association 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 SONEES and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit. (e) SONEES shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of SONEES or managed by SONEES and any relevant records and documents. Section 2.06. SONEES shall duly perform all its obligations under the Subsidiary Financing Agreement. Except as the Associa- tion shall otherwise agree, SONEES shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Financing Agreement or any provision thereof. Section 2.07. (a) GONEES shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Financing Agreement, and other matters relating to the purposes of the Credit. -4- (b) SONEES shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Parts A and B of the Project, the accomplishment of the purposes of the Credit, or the performance by SONEES of its obligations under this Agreement and under the Subsidiary Financing Agreement. Section 2.08. SONEES shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction (and operation) of the facilities included in Parts A and B of the Project and shall furnish to the Association, promptly upon the Association's request, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to Parts A and B of the Project. Section 2.09. SONEES shall, for each fiscal year, establish a list of spare parts and a list of chemicals to be procured during such fiscal year, specifying the timing and method of pro- curement of such spare parts and chemicals. SONEES shall, not later than one month before the beginning of each fiscal year, submit such lists to the Association for its review and approval. ARTICLE III Management and Operations of SONEES Section 3.01. SONEES shall carry on its operations and con- duct its affairs in accordance with sound administrative, finan- cial, and public utility practices under the supervision of qua- lified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SONEES shall at all times operate and maintain its plants, equipment, materials, and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. Section 3.03. SONEES shall take out and maintain with res- ponsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. SONEES shall carry out a comprehensive train- ing program for its staff. As part of such program, SONEES shall: -5- (i) establish a training department staffed with suitably quali- fied personnel in adequate numbers; (ii) focus on training inter- mediate level staff; and (iii) improve skills of high level staff. ARTICLE IV Financial Covenants Section 4.01. (a) SONEES shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure. (b) SONEES shall 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 Credit Account on the basis of statements of expenditure, and shall enable the Associa- tion's representatives to examine such records. Section 4.02. SONEES shall: (a) 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 Association; (b) furnish to the Association as soon as available, but in any case not later than eight months after the end of each such year, (i) certified copies of its financial statements for such year as so audited, and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Credit made available to it and withdrawn from the Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and -6- (c) furnish to the Association such other information con- cerning said accounts, financial statements, records and expen- ditures, as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.03. SONEES shall, during the execution of the Pro- ject: (a) furnish to the Association for its review the financing plan of any new capital investment contemplated in the urban water supply and pipe sewerage sectors which exceeds the equiva- lent of $1,000,000; and (b) consult with the Association prior to undertaking any such investment. Section 4.04. Except as the Association shall otherwise agree: (a) SONEES shall, from time to time take, or propose to the Borrower to be taken, all such measures (including, without limitation, adjustments of the structure or levels of its water and sewerage tariffs) as shall be required to produce, for each of its fiscal years after its fiscal year ending on December 31, 1984, a contribution to capital expenditures and working capital equivalent to not less than 15% of SONEES' total annual gross revenues. (b) Before November 1 in each of its fiscal years, SONEES shall, on the basis of forecasts prepared by SONEES and satis- factory to the Association, review the adequacy of its tariffs to meet the requirements set forth in the preceding paragraph (a) and shall furnish to the Association a copy of such review upon its completion. (c) For the purposes of this section: (i) The term "contribution to capital expenditures and working capital" means the difference between: (1) the sum of all income accruing to SONEES; and (2) the sum of all expenses of SONEES, excluding depreciation but including interest and other charges on debt and taxes or payments in lieu of taxes, and of repayment of principal of loans (including sinking fund payments, if any) as well as all cash dividends and other cash distributions of surplus. (ii) The term "total annual g-ross revenues" means the sum of revenues accruing to SONEES from sales of -7- water, from billing of works, and any other reve- nue accruing to SONEES in respect of its opera- tions. Section 4.05. (a) Except as the Association shall otherwise agree, SONEES shall not incur any debt unless a reasonable fore- cast of the revenues and expenditures of SONEES shows that the estimated net revenue of SONEES for each fiscal year during the term of the debt to be incurred shall be at least 1.5 times the estimated debt service requirements of SONEES in such year on all debt of SONEES including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of SONEES maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations and net non-operating income; and (B) the sum of all expenses related to operations including administration, adequate mainte- nance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the dif- ference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred'in the generation of revenues in (A) above. (v) The term "debt service requirements" means the aggregate amount of repayments (including sinking funds payments, if any) of, and interest and other charges on, debt. (vi) The term "reasonable forecast" means a forecast prepared by SONEES not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and SONEES accept as reasonable and as to which the Association has notified SONEES of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of SONEES. (vii) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.06. SONEES shall carry out an annual revaluation of fixed assets in operation on a pro forma basis starting with fiscal year 1985, in accordance with sound methods of valuation satisfactory to the Association. Section 4.07. SONEES shall take all necessary measures to ensure that parapublic and private sector receivables are reduced to less than four months of billing by December 31, 1985. Section 4.08. SONEES shall submit to the Association for its information and comments: (i) one month before the beginning of each fiscal year, starting with fiscal year 1985, its proposed operating and investment budgets for such fiscal year; and (ii) not later than 60 days after the end of each fiscal period of -9- four months, a report which shall include technical and financial monitoring indicators relating to its operations; all of such budgets and reports to be of such scope and in such detail as the Association may reasonably request. Section 4.09. SONEES shall take all necessary measures in order to reimburse to the Borrower, not later than December 31, 1985 or such later date as the Association may agree, all amounts paid by the Borrower after January 1, 1984 on account of debt service obligations in respect of water supply facilities con- structed by the Borrower and transferred to SONEES. Section 4.10. Not later than December 31, 1985, SONEES shall, in accordance with, but without limitation to its obliga- tions under Section 3.01 of this Agreement, take all necessary measures to set in consultation with the Association, and to com- ply with, appropriate annual rate of return targets. Such annual rate of return targets shall be expressed as a percentage of SONEES' average currently valued net fixed assets in operation (as revalued from time to time in accordance with Section 4.06 of this Agreement) and SONEES shall annually, in consultation with the Association, review the adequacy of such targets. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SONEES thereunder shall terminate on the ear- lier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SONEES of this event. - 10 - Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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) For SONEES: Societ6 Nationale d'Exploitation des Eaux du Sen6gal 97 Avenue Andre Peytavin P.O. Box 400 Dakar, Senegal Telex: 3137 SG Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under - 11 - this Agreement on behalf of SONEES may be taken or executed by SONEES' Director General or such other person or persons as SONEES' Director General shall designate in writing, and SONEES shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By L -. -t , Pa -aQL W 'FK.L Regional Vice President Western Africa SOCIETE NATIONALE D'EXPLOITATION DES EAUX DU SENEGAL By Authorized Representative - 12 - SCHEDULE 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 procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in August 1984 (the Guidelines). B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Senegal may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. C. Other Procurement Procedures 1. Contracts for spare parts and chemicals included under Cate- gories (3) and (4), respectively, of the table set forth in Sche- dule 1 to the Development Credit Agreement may be procured on the basis of an evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the Guide- lines and in accordance with procedures set forth in Part A of the Guidelines (excluding paragraphs 2.8, 2.52 and 2.55), pro- vided that such chemicals and spare parts may be purchased by direct negotiated purchase from one manufacturer or supplier if in the opinion of the Association: (a) suitable spare parts, compatible with equipment already in place, cannot be obtained from another source; (b) suitable chemicals cannot be obtained from another source; and (c) the cost of such spare parts and chemicals is reason- able. 2. Construction of house connections pursuant to Part A.6 of the Project may, after approval of the Association, be carried out by force account. - 13 - D. Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for Civil Works estimated to cost the equivalent of $1,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. 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 FOR SECRETARY