Conformed Copy - C1805 - Second Telecommunications Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1805 BU Project Agreement (Second Telecommunications Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and OFFICE NATIONAL DES TELECOMMUNICATIONS Dated October 9, 1987 CREDIT NUMBER 1805 BU PROJECT AGREEMENT AGREEMENT, dated October 9, 1987, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and OFFICE NATIONAL DES TELECOMMUNICATIONS (ONATEL). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Burundi (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to three million eight hundred thousand Special Drawing Rights (SDR 3,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ONATEL agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and ONATEL, a part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to ONATEL on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS ONATEL, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Page 2 Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. ONATEL declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants and experts services required for Part A of the Project and to be financed out of the proceeds of the Credit, shall be governed by the Provisions of Section I, Part A, Part B paragraph 2, Part C and Section II of Schedule 3 to the Development Credit Agreement. Section 2.03. ONATEL shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports and maintenance, respectively) in respect of the Project Agreement and Part A of the Project. Section 2.04. ONATEL shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ONATEL shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) ONATEL shall, at the request of the Association, exchange views with the Association with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) ONATEL shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Credit, or the performance by ONATEL of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. For purposes of carrying out Parts A.5 and A.6 of the Project, ONATEL shall, not later than January 1, 1988, furnish to the Association: (a) a training plan of such scope and in such detail as the Association shall have reasonably requested; and (b) not later than March 31 in each Fiscal Year, starting with its Fiscal Year ending December 31, 1988, review with the Association the progress achieved by ONATEL in carrying out such plan; and (c) on the basis of such review take all necessary measures to improve ONATEL's performance in the carrying out of such plan. Section 2.07. For purposes of carrying out Part A.9 of the Project, ONATEL shall not later than January 1, 1988, furnish to the Association: (a) a work plan of such scope and in such detail as agreed with the Association; (b) not later than March 31 in each Fiscal Year starting with its Fiscal Year ending December 31, 1988, review with the Association the progress achieved in carrying out such work plan; and (c) on the basis of such review take all necessary measures to improve ONATEL's performance in the carrying out of such work plan. ARTICLE III Management and Operations of ONATEL Section 3.01. ONATEL shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. ONATEL shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, Page 3 make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. Section 3.03. ONATEL shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. ONATEL shall: (i) not later than October 1, for each Fiscal Year after the Fiscal Year ending December 31, 1987, furnish to the Association a list of targets for ONATEL's performance indicators except for maintenance indicators and call completion rates to be achieved by ONATEL during the following Fiscal Year; (ii) not later than May 1, of each Fiscal Year, starting after the Fiscal Year ending December 31, 1988, review with the Association ONATEL's performance against such targets during the past Fiscal Year; and (iii) on the basis of such review take all necessary measures to improve such performance. Section 3.05. ONATEL shall: (i) not later than December 31, 1987, and October 1, for any Fiscal Year thereafter furnish to the Association a list of maintenance indicators and busy hour call completion rates and targets to be achieved by ONATEL during the following Fiscal Year; (ii) not later than October 1 of each Fiscal Year, starting with the Fiscal Year ending December 31, 1988, review with the Association ONATEL's performance against such targets during the past Fiscal Year; and (iii) on the basis of such review take all necessary measures to improve such performance. ARTICLE IV Financial Covenants Section 4.01. (a) ONATEL shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) ONATEL shall: (i) have its records, 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; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, draft copies of its financial statements for such year; and within six 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. ONATEL shall: (a) not later than October 1, 1987, furnish to the Association for review and comments a proposed plan and timetable for the reduction of the level of ONATEL's accounts receivable from subscribers other than the Borrower, its ministries and agencies, to a level acceptable to the Association; and (b) thereafter on the basis of such review start to implement such plan in accordance with its timetable. Section 4.03. ONATEL shall: (i) not later than May 1, in each Fiscal Year, starting May 1, 1988, furnish to the Association for review and comments a proposed accounts receivable aging schedule for the previous year. Such proposed schedule shall indicate which receivables are irrecoverable; and (ii) on the basis of said review introduce the changes necessary in said schedule before its finalization. Section 4.04. ONATEL shall not introduce any changes to its Investment Program, Page 4 that would increase the cost of such Investment Program by more than 5% in any one year unless a financing plan therefor has been agreed between the Association and ONATEL. Section 4.05. Except as the Association may otherwise agree: (a) ONATEL shall from time to time take all such measures (including without limitation, adjustments of the structure or levels of its tariffs and charges for its services) as shall be required to produce funds from internal sources equivalent to (A) the amount needed to cover ONATEL's financial requirements in FB for the next Fiscal Year for the carrying out of ONATEL's Investment Program; or (B) not less than 25% for each of its Fiscal Years after its Fiscal Year ending on December 31, 1988, of the annual average of ONATEL's total capital expenditures accountable to telecommunications operations and incurred, or on the basis of realistic forecasts expected to be incurred, during each such year, whichever shall be greater. (b) Before December 31, in each of its Fiscal Years, ONATEL shall on the basis of realistic forecasts satisfactory to the Association review the adequacy of its tariffs to meet the requirements set forth in the preceding paragraph (a) for the next following Fiscal Year, and shall furnish to the Association a copy of such review upon its completion. (c) For the purposes of this Section: (i) "funds from internal sources" means gross revenues from all sources related to ONATEL's telecommunications operations, cash consumer contributions in aid of construction, net non-operating income and any reduction in non-cash working capital less all expenses incurred on account of such operations, including expenses of administration and adequate maintenance (excluding depreciation and other non-cash operating charges), interest and other charges on debt (excluding interest financed under a loan contract), repayment of loans (including sinking fund payments, if any), taxes or payments in lieu of taxes, if any, cash dividends and other cash distribution of surplus, increase in net working capital other than cash, and any other cash outflows other than capital expenditures related to telecommunications operations; and (ii) the term "capital expenditures" means all expenditures incurred on account of fixed or capital assets, including interest charged to construction. Section 4.06. Except as the Association may otherwise agree: (a) ONATEL shall from time to time take all such measures (including, without limitation, adjustments of the structure or levels of tariffs charged for its services) as shall be required to produce an annual return of not less than 12% for each of its Fiscal Years after its Fiscal Year ending on December 31, 1987, of the average current net value of the ONATEL fixed assets in services. (b) Before December 31 in each of its Fiscal Years, ONATEL shall, on the basis of realistic forecasts satisfactory to the Association review the adequacy of its tariffs to meet the requirements set forth in paragraph (a) above for the next following Fiscal Year, and shall furnish to the Association a copy of such review upon its completion. (c) For the purposes of this Section: (i) The annual return shall be calculated by dividing ONATEL's net operating income for the Fiscal Year in question by one-half of the sum of the current net value of ONATEL's fixed assets in service at the beginning and at the end of that Fiscal Year. (ii) The term "net operating income" means gross revenues from all sources related to ONATEL's telecommunications operations less all expenditures incurred on account of such operations, including expenses of Administration, adequate maintenance and taxes or payments Page 5 in lieu of taxes, if any, and provision for depreciation. Interest and other charges on debt shall not be deducted from gross revenues. (iii) The term "current net value of ONATEL's fixed assets in service" means the gross value of ONATEL's fixed assets in service, less the amount of accumulated depreciation, both as valued from time to time in accordance with consistently maintained appropriate methods of valuation or revaluation acceptable to the Association. 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 ONATEL thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty-one 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 ONATEL of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation 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 (IT), Washington, D.C. 248423 (RCA) or 64145 (WUI) For ONATEL: Office National des Telecommunications B.P. 60 Bujumbura Republique du Burundi Page 6 Cable address: Telex: ONATEL 5081 BDI Bujumbura Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of ONATEL may be taken or executed by its Director General or such other person or persons, jointly or separately as ONATEL shall designate in writing, and ONATEL 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 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Paul Isenman Acting Regional Vice President Africa OFFICE NATIONAL DES TELECOMMUNICATIONS By /s/ Edouard Kadigiri Authorized Representative