Mozambique - Urban Household Energy Project : Credit 2033 - Credit Agreement - Conformed

CREDIT NUMBER 2033 MOZ Development Credit Agreement (Urban Household Energy Project) between PEOPLE'S REPUBLIC OF MOZAMBIQUE and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1989 CREDIT NUMBER 2033 MOZ DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 8 , 1989, between PEOPLE'S REPUBLIC OF MOZAMBIQUE (the Borrower) and INTERNATIONAL DEVELOPMENT 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 intends to contract from the Government of Denmark (DANIDA) a grant (the DANIDA Grant) in an amount equivalent to three million dollars ($3,000,000) to assist in the financing of Parts A, D and E of the Project on the terms and conditions set forth in an agreement (the DANIDA Grant Agreement) to be entered into between the Borrower and DANIDA; (C) the Borrower intends to contract from the Nordic Development Fund (NDF) a credit (the NDF Credit) in an amount equivalent to four million four hundred thousand Special Drawing Rights SDR 4,400,000 to assist in the financing of Parts A, D and F of the Project on the terms and conditions set forth in an agreement (the NDF Credit Agreement) to be entered into between the Borrower and NDF; (D) the Borrower intends to contract from the Arab Bank for Economic Development in Africa (BADEA) a loan (the BADEA Loan) in an amount equivalent to ten million dollars ($10,000,000) to assist in the financing of Parts A and E of the Project on the terms and conditions set forth in an agreement (the BADEA Loan Agreement) to be entered into between the Borrower and BADEA; (E) (i) Electricidade de Mocambique (EDM) will carry out Part A of the Project; (ii) Empresa Nacional Petr6leos de Mocambigue E.E. (PETROMOC) will carry out Part B of the Project; and (iii) Mocacor Distribuidora de Combustiveis S.A.R.L. (MOQACOR) will carry out Part C of the Project with the Borrower's assistance, and as part of such assistance, the Borrower will make available to EDM, PETROMOC and MOQACOR 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 - 2 - terms and conditions set forth in this Agreement and in the Project Agreements of even date herewith between the Association and EDM, PETROMOC and MOQACOR, respectively; 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, with the last sentence of Section 3.02 deleted (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) "EDM" means Electricidade de Mocambique, a public enterprise established and operating under Decree No. 38/77 of the Borrower, dated August 27, 1977; (b) "PETROMOC" means Empresa Nacional Petr6leos de Mocambique E.E., a public enterprise established and operating under Decree No. 22/77 of the Borrower, dated May 1, 1977; (c) "MOCACOR Distribuidora de Combustiveis S.A.R.L." or "MOQACOR" means a commercial enterprise established and operating pursuant to its statutes dated May 17, 1958, as they may be amended from time to time; (d) "EDM Project Agreement" means the agreement between the Association and EDM 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 EDM Project Agreement; (e) "PETROMOC Project Agreement" means the agreement between the Association and PETROMOC 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 PETROMOC Project Agreement; - 3 - (f) "MOQACOR Project Agreement" means the agreement between the Association and MOQACOR 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 MOQACOR Project Agreement; (g) "PROLEC" means Programa de Electrificacdo Urbana, the Household Electrification Program approved by the Borrower and to be implemented under Part E of the Project; (h) "Electrification Agreement" means the agreement entered into between the Borrower and all concerned entities and agencies in order to carry out the PROLEC as set forth in Section 3.01 (b) (ii) of this Agreement, dated April 14, 1989; (i) "EDM Subsidiary Loan Agreement" means the agreement entered into between the Borrower and EDM pursuant to Sec- tion 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the EDM Subsidiary Loan Agreement; (j) "PETROMOC Subsidiary Loan Agreement" means the agreement entered into between the Borrower and PETROMOC pursuant to Section 3.01 (d) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the PETROMOC Subsidiary Loan Agreement; (k) "MOgACOR Subsidiary Loan Agreement" means the agreement entered into between the Borrower and MOQACOR pursuant to Section 3.01 (e) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the MOQACOR Subsidiary Loan Agreement; (1) "Special Account A"; "Special Account B"; "Special Account C"; and "Special Account D" mean the accounts referred to in Section 2.02 (b) of this Agreement; (m) "BDM" means Banco de Mogambique, the Central Bank of the Borrower; (n) "DOE" means the Department of Energy of the Ministry of Industry and Energy of the Borrower; (o) "Supervisory Unit" or "the Unit" means Unidade de Implementagdo, the unit established within DOE to monitor and supervise the implementation of PROLEC, as set forth in paragraph 3 of Schedule 8 to this Agreement; -4- (p) "BEU" means Biomass Energy Unit, the implementation unit established within the National Forestry and Wildlife Directorate (NFWD) of the Ministry of Agriculture of the Borrower, as set forth in paragraph 2 of Schedule 8 to this Agreement; (q) "BPD" means Banco Popular de Desenvolvimento, a banking institution of the Borrower; (r) "Beneficiary" means: (i) any creditworthy individual or householder, or (ii) local wiring contractor, entering into a Loan Agreement with BPD; (s) "Loan Agreement" means the agreement to be entered into by BPD and a Beneficiary under which BPD agrees to provide financial assistance, pursuant to Section 3.01 (f) of this Agreement; (t) "UCPI" means the Coordination Unit for Import Programs established and operating within the Ministry of Trade of the Borrower; (u) "fiscal year" or "FY" means the period from January 1 through December 31 following; and (v) "Project Preparation Advance" means the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters, dated April 9, 1988, and May 17, 1988, between the Borrower and the Association. 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 seventeen million one hundred thousand Special Drawing Rights (SDR 17,100,000). 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 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. - 5 - (b) The Borrower shall, for the purposes of the Project, open and maintain in U.S. dollars four special accounts in a commercial bank on terms and conditions satisfactory to the Association: (i) Special Account A shall be opened for the purposes of Part A of the Project (EDM Account); (ii) Special Account B shall be opened for the purposes of Part B of the Project (PETROMOC Account); (iii) Special Account C shall be opened for the purposes of Part C of the Project (MOQACOR Account); and (iv) Special Account D shall be opened for the purposes of Parts D, E and F of the Project (BDM Account). Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedules 3 through 6 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1996, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue- (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date and at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date in that year speci- fied in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall. reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the -6- 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. Section 2.06. Commitment charges and service charges shall be payable semiannually on March 1 and September 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 1 and September 1, commencing September 1, 1999 and ending March 1, 2029. Each installment to and including the installment payable on March 1, 2009 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national. product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereQf by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the -7- Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. Tha currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. 3ago d. Mocambigue is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article 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, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement: (i) shall carry out Parts D, E and F of the Project, or shall cause them to be carried out, with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds facilities, services and other resources required for the Project; (ii) shall cause EDM, PETROMOC and MOQACOR to perform, in accordance with the provisions of the EDM Project Agreement, the PETROMOC Project Agreement and the MOACOR Project Agreement, respectively, all the obligations of EDM, PETROMOC and MOQACOR therein set forth; and (iii) shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable EDM, PETROMOC and MOQACOR to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) (i) Without limitation upon the provisions of paragraph (a) of this Section, and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out Parts D, E and F of the Project in accordance with the Implementation Program set forth in Schedule 8 to this Agreement; and (ii) shall take all necessary measures to enforce the Electrification Agreement. -8- (c) The Borrower shall relend out of the proceeds of the Credit an amount not exceeding the equivalent of SDR 3,350,000 to EDM under a subsidiary loan agreement to be entered into between the Borrower and EDM, under terms and conditions which shall have been approved by the Association and which shall include, inter alia, repayment over twenty (20) years, including five (5) years of grace, the foreign exchange risk to be borne by EDM, and interest at the rate of 7.65% per annum. (d) The Borrower shall relend out of the proceeds of the Credit an amount not exceeding the equivalent of SDR 1,550,000 to PETROMOC under a subsidiary loan agreement to be entered into between the Borrower and PETROMOC, under terms and conditions which shall have been approved by the Association and which shall include, inter alia, repayment over ten (10) years, including four (4) years of grace, the foreign exchange risk to be borne by PETROMOC, and interest at the rate of 8.4% per annum. (e) The Borrower shall relend out of the proceeds of the Credit an amount not exceeding the equivalent of SDR 550,000 to MOgACOR under a subsidiary loan agreement to be entered into between the Borrower and MOACOR, under terms and conditions which shall have been approved by the Association and which shall include, inter alia, repayment over ten (10) years, including four (4) years of grace, the foreign exchange risk to be borne by MOQACOR, and interest at the rate of 8.4% per annum. (f) For the purposes of Part E.3 of the Project, the Borrower shall extend financial assistance to Beneficiaries on loan terms, conditions and eligibility criteria set forth in the Loan Agreement. (g) The Borrower shall exercise its rights under the Subsidiary Loan Agreements and Electrification Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the said Agreements or any provisions thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services to be financed out of the proceeds of the Credit: -9- (a) for Part A of the Project, shall be governed by the Schedule to the EDM Project Agreement; (b) for Part B of the Project, shall be governed by the Schedule to the PETROMOC Project Agreement; (c) for Part C of the Project, shall be governed by the provisions of the Schedule to the MOQACOR Project Agreement; and (d) for Parts D, E and F of the Project, shall be governed by Schedule 7 to this 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 insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of: Part A of the Project shall be carried out by EDM pursuant to Section 2.03 of the EDM Project Agreement; (b) Part B of the Project shall be carried out by PETROMOC pursuant to Section 2.03 of the PETROMOC Project Agreement; and (c) Part C of the Project shall be carried out by MOQACOR pursuant to Section 2.03 of the MOgACOR Project Agreement. ARTICLE IV Financial and Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of Parts D, E and F of the Project of the departments or agencies of the Borrower responsible for carrying out Parts D, E and F of the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph,(a) of this Section and those for Special Account D for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; - 10 - (ii) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices and pursuant to paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. Section 4.02. The Borrower shall take, promptly as required, all action necessary on its part: (a) to enable EDM to fulfill its obligations under Sections 4.02 and 4.03 of the EDM Project Agreement; (b) to enable PETROMOC to fulfill its obligations under Sections 4.02 and 4.03 of the PETROMOC Project Agreement; and - 11 - (c) to enable MOgACOR to fulfill its obligations under Sections 4.02 and 4.03 of the MOQACOR Project Agreement. Section 4.03. The Borrower shall, not later than Decem- ber 31, 1990, establish the patrimony of EDM and PETROMOC, including for each enterprise: the valuation of its assets, the definition of its outstanding debts and the establishment of its equity base. Section 4.04. The Borrower shall: (a) not later than December 31, 1991, submit to the Association the recommendations of the studies referred to in Parts D.1 (a) (iii) and D.1 (b) (iii) of the Project; (b) not later than March 31, 1992, exchange views with the Association on said recommendations; and (c) implement such recommendations, jointly agreed with the Association, within a timetable agreed with the Association. Section 4.05. The Borrower shall maintain, BEU and DOE's Project Coordination staff and Supervisory Unit during the execution of the Project with such responsibilities, powers, services, facilities and staff whose experience and qualifications are satisfactory to the Association, as are specified in Schedule 8 to this Agreement. Section 4.06. In order to facilitate the carrying out of the Project, the Borrower shall assign qualified staff to work closely with the consultants to be employed under Section II of Schedule 7 to this Agreement, and to receive training from said consultants. Section 4.07. The Borrower shall, not later than September 30, 1990, and, not later than September 30 of each year thereafter until the completion of the Project, review jointly with the Association, the progress achieved in: (a) Project implementation; (b) meeting Project objectives, proposing the necessary adjustments to the targets for woodfuels, electricity, coal, LPG and kerosene; the balance between the fuels; and the priority assigned to the individual urban centers; - 12 - (c) carrying out an annual revaluation of the assets of EDM, PETROMOC and MOQACOR; and (d) implementing the action plans for recovering arrears of account receivables due to EDM, PETROMOC and MOQACOR, respec- tively, in accordance with a timetable agreed between the Borrower and the Association. Section 4.08. The Borrower shall, not later than September 30, 1990: (a) review with the Association the results of the study carried out to design a Household Energy Strategy; and (b) agree with the Association on an action plan to implement the recommendations of said study. Section 4.09. Until the completion of the Project, the Borrower shall cause no new single investment project, other than expenditures under the Project, which exceeds the equivalent of ten million dollars ($10,000,000), to be carried out in the public energy sector without prior consultation with the Association. Section 4.10. The Borrower shall: (a) not later than December 31, 1991, design and review jointly with the Association a system to authorize EDM, PETROMOC and MOQACOR co purchase insurance to provide for replacement of their respective assets; and (b) promptly thereafter approve and implement said insurance system, in accordance with a timetable agreed with the Association. Section 4.11. The Borrower and the Association shall jointly review: (a) semiannually, electricity tariffs and petroleum product prices, ensuring that said petroleum product prices are maintained at least as high as prevailing import parity prices plus internal distribution costs; (b) semiannually, the system for adjusting, and the structure of petroleum product prices, ensuring that they are - 13 - sufficient to enable PETROMOC and MOQACOR to achieve their financial viability; (c) the financial viability and the most immediate financial and technical needs of: (i) PETROMOC and MOgACOR, not later than September 30, 1991; and (ii) EDM, not later than September 30, 1993; and (d) not later than, September 30, 1994, proposals for performance standards to be adopted by EDM, PETROMOC and MOgACOR. 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) EDM shall have failed to perform any of its obligations under the EDM Project Agreement; (b) PETROMOC shall have failed to perform any of its obligations under the PETROMOC Project Agreement; (c) MOgACOR shall have failed to perform any of its obligations under the MOgACOR Project Agreement; (d) 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 EDM, PETROMOC and MOgACOR, as the case may be, will be able to perform its obligations under the EDM Project Agreement, the PETROMOC Project Agreement or the MOgACOR Project Agreement, respectively; (e) Decree No. 38/77 of the Borrower shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of EDM to perform any of its obligations under the EDM Project Agreement; (f) Decree No. 22/77 of the Borrower shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of PETROMOC to perform any of its obligations under the PETROMOC Project Agreement; - 14 - (g) The Statutes of MOQACOR, dated May 17, 1958, shall have been amended, so as to affect materially and adversely the ability of MOq.ACOR to perform any of its obligations under the MOQACOR Project Agreement; (h) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of EDM, PETROMOC or MOgACOR or for the suspension of their operations; (i) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any grant or 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 Agreement providing therefor, or (B) any such 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 satisfaction 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 agreement; and (B) 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. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) the event specified in paragraphs (a), (b), (c)_and (d) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty (60) days after notice thereof shall have been given by the Association to the Borrower; (b) the events specified in paragraphs (e), (f), (g) and (h) of Section 5.01 of this Agreement shall occur; and - 15 - (c) the event specified in paragraph (i) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (i) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the EDM Subsidiary Loan Agreement has been executed on behalf of the Borrower and EDM; (b) the PETROMOC Subsidiary Loan Agreement has been executed on behalf of the Borrower and PETROMOC; and (c) the MOQACOR Subsidiary Loan Agreement has been executed on behalf of the Borrower and MOQACOR. 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 furnished to the Association: (a) that the EDM Project Agreement, the PETROMOC Project Agreement and the MOQACOR Project Agreement have been duly authorized or ratified by EDM, PETROMOC and MOQACOR, respectively, and are legally binding upon EDM, PETROMOC and MOgACOR, respectively, in accordance with their terms; (b) that the EDM Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and EDM and is legally binding upon the Borrower and EDM in accordance with its terms; (c) that the PETROMOC Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and PETROMOC, and is legally binding upon the Borrower and PETROMOC in accordance with its terms; (d) that the MOQACOR Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and MOgACOR, and is legally binding upon the Borrower and MOQACOR in accordance with its terms; - 16 - (e) that the Electrification Agreement has been duly authorized or ratified by the Borrower and other parties to said Agreement and is legally binding upon the Borrower and other parties to said Agreement, in accordance with its terms; and (f) that this Agreement has been duly ratified by the Borrower's Council of Ministers, and is legally binding upon the Borrower in accordance with its terms. Section 6.03. The date one hundred and twenty (120) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Governor of Banco de Mocambique of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Banco de Mogambique Departamento de Relaq6es Internacionais Avenida 25 de Setembro 1695 P.O. Box 423 Maputo People's Republic of Mozambique Cable address: Telex: MOBANCO 6355/7 BM4MO Maputo For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 17 - Cable address: Telex: INDEVAS 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. PEOPLE'S REPUBLIC OF MOZAMBIQUE By O -1 Authorized Re resentative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Africa - 18 - 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) EDM: (a) Power distri- 3,200,000 100% of foreign bution system expenditures and under Part A.1 70% of local of the Project expenditures (b) Vehicles, equip- 150,000 100% of foreign ment, materials, expenditures and and supplies under 70% of local Part A.2 (b) expenditures of the Project (2) PETROMOC: (a) Vehicles, equip- 950,000 100% of foreign ment, materials, expenditures and supplies and 70% of local spare parts under expenditures Parts B.1 and B.3 (b) of the Project (b) Consultants' 600,000 100% services including external audit services under Part B.3 (a) of the Project - 19 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (3) MOQACOR: (a) Vehicles, equip- 450,000 100% of foreign ment, materials, expenditures and supplies and 70% of local spare parts under expenditures Part C.1 of the Project (b) Consultants' ser- 100,000 100% vices including external audit services under Part C.2 of the Project (4) DOE: (a) Vehicles, equip- 2,250,000 100% of foreign ment, materials, expenditures and supplies, spare 70% of local parts and civil expenditures works under Part D of the Project (b) Consultants' ser- 1,250,000 100% vices, including external audit services under Parts D.1, D.2, D.3 and D.4 of the Project - 20 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (5) (a) Vehicles, equip- 2,800,000 100% of foreign ment, materials, expenditures and supplies and 70% of local spare parts under expenditures Part E of the Project (b) Consultants' 1,000,000 100% services, including external audit services under Part E.4 of the Project (6) Vehicles, equipment, 1,600,000 100% of foreign materials, supplies expenditures, and and spare parts 70% of local under Parts F.1, expenditures F.2 and F.3 of the Project (7) Refunding of 580,000 Amount due pur- Project Prepara- suant to Section tion Advance 2.02 (c) of this Agreement (8) Unallocated 2,170,000 TOTAL 17,100,000 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 - 21 - (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, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; (b) expenditures under Category (1) (a), unless: (i) the Borrower has furnished to the Association a plan satisfactory to the Association to resolve EDM's financial situation; (ii) EDM has implemented a satisfactory tariff increase for the second half of FY 1989; and (iii) the NDF Credit Agreement has been duly signed by the Borrower and NDF; (c) expenditures under Categories (1) (a), (2) (a), (3) (a), unless the Borrower has furnished to the Association satisfactory plans for recovering arrears of account receivables due to EDM, PETROMOC and MOQACOR, respectively, and a satisfactory t1metable for their implementation; and (d) expenditures under Category (5) (a): (i) unless the Association has approved the model loan agreement to be entered into by BPD and Beneficiaries; and (ii) unless the Association has received evidence satisfactory to it that the BADEA Loan Agreement has been duly signed by the Borrower and BADEA. - 22 - SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in: (a) improving the availability of low-cost commercial fuels and appliances to urban households; (b) achieving environmental improvements, including slowing down deforestation around urban areas; (c) developing the use of indigenous natural resources and testing of energy efficiency measures; and (d) strengthening of the operational, management, financial and planning capabilities of the agencies and companies involved 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: Electricidade de Mocambique (EDM) 1. Rehabilitation, reinforcement and extension of the power distribution system: (a) in the main cities, including Maputo, Beira and Nampula; and (b) in other cities, including Nacala, Quelimane, Xai-Xai, Chokwd, Chimoio and Tete. 2. Strengthening of EDM's operational, management and financial planning capabilities through: (a) the provision of consultants' services; and (b) the acquisition of vehicles, office equipment, materials and supplies. Part B: Empresa Nacional de Petroleos E.E. (PETROMOC) 1. Reinforcement of kerosene storage and distribution facili- ties: (a) rehabilitation of storage tanks, accessories and equip- ment at, inter alia, Xai-Xai, Inhambane, Manica, Mocuba and Lichinga; (b) rehabilitation and replacement of pumps, air compressors and pressure gauges; (c) acquisition of hand pumps, materials and spares; and (d) acquisition of trucks and four-wheel drive vehicles for bulk and emergency kerosene deliveries. - 23 - 2. Provision of kerosene and LPG. 3. Strengthening of PETROMOC's operational, management and financial planning capabilities through: (a) consultants' services; and (b) the acquisition of vehicles and office equipment. Part C: M2gACOR 1. Reinforcement of LPG (Liquified Petroleum Gas) storage and distribution facilities: (a) rehabilitation of facilities of filling, weighing and bottling of LPG in Maputo; (b) acquisition of materials and spare parts for LPG bottles and consumer appliances; (c) acquisition and rehabilitation of vehicles; and (d) acquisition of office equipment and materials. 2. Strengthening of MOQACOR's operational, management and finan- cial planning capabilities through the provision of consultants' services. Part D: Ministry of Industry and Energy (DOE) 1. Woodfuels program (Ministry of Agriculture): (a) rehabilitation of woodfuel forests at Maputo, Beira and Nampula through: (i) the rehabilitation and acquisition of equipment and vehicles; (ii) design and implementation of a forest fire warning and response system; (iii) design and implementation of strategies for improving fuelwood and charcoal production and commercialization systems; and (iv) design of forest extension programs; (b) improving the efficiency of woodfuel utilization through: (i) provision of satellite imagery and preparation of maps of wood resources; (ii) carrying out consumer surveys of cooking requirements; (iii) identification, design and development of improved charcoaling methods, and improved charcoal and wood - 24- stoves; (iv) a pilot production program for woodfuel stoves; and (v) training of staff of the National Forestry and Wildlife Directorate (NFWD) and of the BEU in forestry management; (c) establishmtnt, equipping, furnishing and operation of BEU. 2. Coal program (Ministry of Mineral Resources): (a) carrying out a program of coal stove assembly and installation; (b) acquisition of vehicles; (c) acquisition of materials and supplies to provide about 50,000 coal stoves; and (d) provision of coal. 3. Strengthening of DOE's Project management and coordination capabilities through: (a) the provision of consultants' services; and (b) the acquisition of vehicles, office equipment, materials and supplies. 4. Strengthening of UCPI's procurement capabilities through: (a) the provision of consultants' services; and (b) the acquisition of vehicles, office equipment, materials and supplies. 5. Carrying out studies to promote the Borrower's industrial capabilities in the energy sector. 6. (a) Rehabilitation and start-up of the Borrower's cable manufacturing capabilities; and (b) strengthening of the operational, managerial and financial planning capabilities of the enterprise responsible for cable manufacturing. - 25 - Part E: PROLEC 1. .Connection of about 40,000 urban households to the distribution system. 2. Provision of electric cable, electric stoves, electric light bulbs, plugs, sockets, fittings, pots, pans and other supplies. 3. Provision of credit to eligible: (a) household wiring contractors to finance the acquisition of equipment, vehicles, tools and materials; and (b) households to finance connection costs and other related materials and equipment. 4. Strengthening of the operational, managerial and supervision capabilities of the agencies and enterprises responsible for PROLEC's implementation through: (a) the provision of consultants' services; and (b) the acquisition of vehicles, office equipment, materials and supplies. Part F: Commercial Energy Program 1. Provision of about 10,000 electric stoves and spare parts for householders not participating in PROLEC. 2. Provision of about 60,000 kerosene stoves, spare parts for stoves and about 80,000 kerosene lamps. 3. Carrying out an experimental energy efficiency program through the provision of: (a) capacitors; and (b) electric fans and solar panels for public buildings. 4. Provision of electrical equipment for the rehabilitation of consumers' electrical systems. The Project is expected to be completed by June 30, 1996. - 26 - SCHEDULE 3 Special Account A - EDM 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) (a) and (1) (b) set forth in the table in paragraph I 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 Part A of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $800,000 to be withdrawn from the Credit Account and deposited into the Special Account A pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of Special Account A shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that Special Account A has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish Special Account A shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account A such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of Special Account A, the Borrower shall furnish to the Association requests for deposits into Special Account A at such intervals as the Association shall specify. - 27 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account A such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made out of Special Account A for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of Special Account A, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into Special Account A: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories for Part A of the Project, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Part A of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories for Part A of.the Project shall follow such procedures - 28 - as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit into Special Account A as of the date of such notice 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 Special Account A: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule, (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into Special Account A (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 the Association shall otherwise agree, no further deposit by the Association into Special Account A shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in Special Account A 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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in Special Account A. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 29 - SCHEDULE 4 Special Account B - PETROMOC 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (2) (a) and (2) (b) 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 Part B of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $400,000 to be withdrawn from the Credit Account and deposited into Special Account B pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of Special Account B shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that Special Account B has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish Special Account B shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account B such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of Special Account B, the Borrower shall furnish to the Association requests for deposits into Special Account B at such intervals as the As.sociation shall specify. - 30 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account B such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made- out of Special Account B for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of Special Account B, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into Special Account B: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories for Part B of the Project, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Part B of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories for Part B of the Project shall follow such procedures - 31 - as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit into Special Account B as of the date of such notice 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 Special Account B: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule, (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into Special Account B (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 the Association shall otherwise agree, no further deposit by the Association into Special Account B shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in Special Account B 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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit into Special Account B. (d) Refunds to the Association made pursua,. to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 32 - SCHEDULE 5 Special Account C - MOgACOR 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (3) (a) and (3) (b) 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 Part C of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $200,000 to be withdrawn from the Credit Account and deposited into Special Account C pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of Special Account C shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that Special Account C has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish Special Account C shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account C such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of Special Account C, the Borrower shall furnish to the Association requests for deposits into Special Account C at such intervals as the Association shall specify. - 33 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account C such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made out of Special Account C for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit tccount under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of Special Account C, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into Special Account C: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories for Part C of the Project, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Part C of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit, allocated to the eligible Categories for Part C of the Project shall follow such procedures -34- as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in Special Account C as of the date of such notice 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 Speci-al Account C: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule, (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into Special Account C (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 the Association shall otherwise agree, no further deposit by the Association into Special Account C shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in Special Account C 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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit into Special Account C. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 35 - SCHEDULE 6 Special Account D (BDM) 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (4) (a), (4) (b), (5) (a), (5) (b) and (6) set forth in the table in para- graph 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 Parts D, E and F of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $1,600,000 to be withdrawn from the Credit Account and deposited into Special Account D pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of Special Account D shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that Special Account D has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish Special Account D shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account D such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of Special Account D, the Borrower shall furnish to the Association requests for deposits into Special Account D at such intervals as the Association shall specify. - 36 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment ur payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into Special Account D such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made out of Special Account D for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categoties, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of Special Account D, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into Special Account D: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories for Parts D, E and F of the Project, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Parts D, E and F of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible - 37 - Categories for Parts D, E and F of the Project shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in Special Account D as of the date of such notice 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 Special Account D: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule, (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into Special Account D (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 the Association shall otherwise agree, no further deposit by the Association into Special Account D shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case'may be. (b) If the Association shall have determined at any time that any amount outstanding in Special Account D 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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit into Special Account D. (d) Refunds to the Association made rursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 38 - SCHEDULE 7 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part 0 hereof, goods and 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 May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Mozambique 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. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A hereof, EDM may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereof. Part D: Other Procurement Procedures 1. Local competitive bidding (a) Vehicles, computers, office equipment, materials and supplies under Parts A through F of the Project; and (b) civil works under Part D.1 of the Project, estimated to cost less than the equivalent of $50,000 up to an aggregate amount not to exceed the equivalent of $4,000,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. - 39 - 2. International shopping Items or groups of items estimated to cost less than the equivalent of $250,000 per contract, up to an aggregate amount not to exceed the equivalent of $3,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from at least two different countries eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Direct contracting: Rehabilitation of equipment, plant and machinery estimated to cost up to an aggregate amount of $200,000 may be awarded on the basis of direct contracting in accordance with procedures acceptable to the Association. Part E: 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 estimated to cost the equivalent of $250,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of Special Account D, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of Special Account D in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of Special Account D, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 6 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the - 40- Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Borrower in carrying out Parts D, E and F of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory 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. - 41 - SCHEDULE 8 Implementation Program 1. Project Coordination (a) The Department of Energy (DOE) of the Ministry of Industry and Energy (MIE) shall be responsible for the overall coordination and supervision of Project implementation. (b) A Project Coordinator with qualifications and managerial experience, acceptable to the Association, shall be appointed within DOE. (c) The Project Coordinator shall be responsible, inter alia, for the following: (i) coordination of all Project activities within MIE and with EDM, PETROMOC, MOQACOR Banco de Mocambique, Ministry of Agriculture, Ministry of Mineral Resourceti and other government agencies, official entities and the Association; (ii) ensuring appropriate compilation and maintenance of Project documentation or files; (iii) preparation and furnishing to the Association every three months of Project evaluation and physical progress reports of the various Project components; (iv) ensuring that disbursements of the Credit funds, employment of consultants, and procurement procedures follow the Association's Guidelines; (v) monitoring and supervising the status of commitments and disbursements of Credit funds allocated to each implementing agency; (vi) monitoring and supervising the status and findings of studies to be carried out under the Project; (vii) monitoring selection, employment and performance of consultants' services funded under the Credit provided by the Association, - 42- (viii) preparing on the basis of Project implementation experience, proposals to strengthen Project design and/or implementation procedures to better achieve the objectives of the Project. (d) In discharging these responsibilities, the Project Codrdinator shall be assisted by: (i) technical staff (two Assistants); and (ii) support staff. 2. Biomass Energy Unit (BEU) (a) BEU shall be established within NFWD to undertake in collaboration with MIE the necessary research, planning and project/program development activities related to the utilization of biomass energy in the urban household sector, and to promote the conservation, protection and further development of energy oriented forest plantations in the territory of the Borrower. (b) The BEU shall have two principal objectives: (i) to consolidate the institutional structures related to biomass energy in order to enable its planning and development within the context of the existing energy development policy of the government; and (ii) to identify, promote, support, and guide energy- oriented reforestation projects and projects which make a rational energy oriented use of existing natural forests, particularly those which seek to attend urban household energy needs. (c) BEU's Principal Duties In order to fulfill its proposed objectives, the BEU shall undertake the following principal duties: (i) identify, promote and undertake applied biomass energy research in the country, geared toward the creation of a solid information base for planning and policy making purposes; (ii) create and maintain a biomass energy resources and forestry data bank; - 43 - (iii) monitor the market evolution of fuelwood and charcoal in the principal consumption centers; (iv) identify and/or develop and promote methods and technologies for the improved, distribution and final household use of fuelwood and charcoal; (v) monitor the evolution of forest and agriculture- based energy resources and provide that information to all other relevant government energy planning agencies; (vi) elaborate and promote biomass resources use and conservation policies on a national basis, but with emphasis on the principal urban centers; (vii) provide technical assistance to existing energy oriented reforestation projects on fuelwood and charcoal production and commercialization matters; and (viii) identify and promote projects and opportunities for the rational and sustainable energy-oriented exploitation of existing natural forests in the territory of the Borrower. (d) Staff BEU shall be staffed as follows: (i) two foresters; (ii) two technicians; and (iii) support staff. 3. Supervisory Unit (Unidade de Implementago) (a) A supervisory Unit (the Unit) established within DOE shall be responsible for coordinating and supervising Part E of the Project. - 44- (b) The Project Coordinator shall, in accordance with Section II of Schedule 7 to this Agreement, recruit consultants for: (i) managing and executing the duties described below; and (ii) providing overall coordination assistance in relation to the Credit provided by the Association. The consultants' team (the Unit) shall act under MIE's responsibility, reporting to the Project Coordinator. All the legal responsibilities and other official duties derived from the implementation of the Project, except those pertaining to the execution of the Electrification Agreement, shall be undertaken by MIE. The Unit shall make use of EDM and MIE's premises, and regional representatives to supervise its responsibilities to be carried out in the different urban centers, including, among others: Maputo, Beira and Nampula. (c) Functions (i) Based on the investment schedules to be defined by EDM, the Unit shall identify the lots of households to be electrified, promote the contacts with householders for identifying their willingness to participate in the program; and establish formal contacts between householders and BPD to formalize the individual Loan Agreements (for this purpose householders shall endorse full responsibility to the Unit). (ii) For each lot of qualified households, the Unit shall prepare and evaluate bidding documents to be tendered by contractors, under criteria to be agreed with the Project Coordinator; Bids shall be called for tenders on a labor-plus basis, as the procurement and supply of necessary equipment shall be done by a local trading company (INTERELECTRA). Standard contracts shall be prepared, negotiated and signed with successful bidders by the Unit on behalf of the householders. (iii) The Unit shall supervise and monitor the work to be performed by successful bidders under the contractual agreements, and shall prepare the necessary progress reports to be presented to the Project Coordinator; reports shall emphasize the schedule requirements and cost monitoring. (iv) Based on the progress of work, the Unit shall instruct INTERELECTRA on the supply of materials - 45 - and equipment and shall certify invoicing procedures to be established by INTERELECTRA; BPD shall pay direct to INTERELECTRA the corresponding amounts for equipment and materials, as well as the perceived fee for its services. Invoices shall be established on a monthly basis. (v) Similarly, based on progress of work, the Unit shall certify invoicing procedures to be established by wiring contractors, who shall be paid directly by BPD. (vi) Jointly with EDM (the ultimate authority), the Unit shall inspect the completed work and shall issue the correspondent certificates; such certificates shall permit contractors to release the performance bonds foreseen in the bidding procedures, and shall legally constitute the termination of the contract. (vii) The Unit shall advise contractors on legal matters pertaining to the creation of companies, as well as banking arrangements. Promotion of training activities on basic managerial matters shall also be considered. The Unit shall make standard household wiring project documents available to contractors. (d) Staffing The Unit shall be staffed as follows: (i) a Coordinator; (ii) two Technical Advisors; (iii) one Legal Counsel (part-time); (iv) one Accountant; and (v) other technical staff. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY