Conformed Copy - L3476 - Berke Hydropower Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3476 TU (Berke Hydropower Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and CUKUROVA ELEKTRIK A.S. Dated June 12, 1992 LOAN NUMBER 3476 TU PROJECT AGREEMENT AGREEMENT, dated June 12, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and CUKUROVA ELEKTRIK A.S. (CEAS). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Turkey (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred seventy million dollars ($270,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that CEAS agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and CEAS, the proceeds of the loan provided for under the Loan Agreement will be relent to CEAS on the terms and conditions set forth in said Subsidiary Loan Agreement; (C) CEAS intends to contract from other sources of finance (the Cofinanciers) loans (the Cofinanciers' Loans) in an amount equivalent to about $100,000,000 to assist in financing the Project Page 2 on terms and conditions set forth in agreements (the Cofinanciers' Agreements) to be entered into between CEAS and the Cofinanciers; and WHEREAS CEAS, in consideration of the Bank's entering into the Loan 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 Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) CEAS declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices and in accordance with health, safety and environmental standards satisfactory to the Bank, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) In order to assist in the carrying out of the Project, CEAS shall employ consultants with qualifications and experience and under terms of reference satisfactory to the Bank. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. CEAS shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 the Project Agreement. Section 2.04. CEAS shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, CEAS 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) CEAS shall, at the request of the Bank, exchange views with the Bank with regard to progress 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 Loan. (b) CEAS shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of Loan, or the performance by CEAS of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. In order to facilitate the timely carrying out of Part A (4) of the Project, CEAS shall take all action required on its part to ensure that the feasibility study and the detailed designs under Part C (1) of the Project shall be completed, under terms of reference satisfactory to the Bank, by December 31, 1993. Page 3 Section 2.07. In order to facilitate the proper carrying out of Part B of the Project and the achievement of the objectives thereof, CEAS shall: (a) carry out the environmental mitigation and enhancement programs under Part B (1) of the Project in respect of Part A (1) and (2) of the Project and the resettlement program under Part B (2) of the Project in accordance with plans of action agreed with the Bank; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, by December 31, 1992, an environmental review and action plan for the carrying out of the environmental mitigation and enhancement program under Part B (1) of the Project in respect of Part A (3) of the Project, and, thereafter, finalize and carry out the same taking into consideration the Bank's views thereon; (c) maintain arrangements, satisfactory to the Bank, for: (i) the monitoring and evaluation of the carrying out of said action plans; (ii) the preparation and furnishing to the Bank of suitable reports on the conclusions and recommendations of such monitoring and evaluation; and (iii) the updating of the said action plans and implementing the measures required to ensure the achievement of the objectives of Part B of the Project on the basis of the conclusions and recommendations of the reports prepared pursuant to subparagraph (ii) hereof and the Bank's comments thereon. ARTICLE III Management and Operations of CEAS Section 3.01. CEAS shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering, public utility and health, safety and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. (a) CEAS shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. (b) Without limiting the generality of paragraph (a) of this Section and of Section 9.08 of the General Conditions, CEAS shall: (i) under arrangements satisfactory to the Bank cause the dam and appurtenant structures constructed under the Project to be periodically inspected, not less frequently than once a year, in accordance with sound engineering practices in order to determine, whether there are any deficiencies in the condition of such structures, or in the quality and adequacy of maintenance or methods of operations of the same, which may endanger their safety; (ii) furnish to the Bank, promptly after each such inspection, the conclusions and recommendations thereof; and (iii) take all necessary action to ensure the safe condition of such structures and the proper quality and adequacy of maintenance and methods of operations of the same in accordance with sound engineering practices and on the basis of the conclusions and recommendations of each such inspection. Section 3.03. CEAS shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. CEAS shall: (a) review with the Bank any proposal for the transfer to CEAS of title or operating rights to power facilities not owned or operated by CEAS as of the date of this Agreement; and (b) not agree to such a transfer except after the Bank and CEAS shall have agreed that such a transfer will not Page 4 affect materially and adversely the financial condition of CEAS or its ability to conduct its business. ARTICLE IV Financial Covenants Section 4.01. (a) CEAS shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) CEAS 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 Bank; (ii) furnish to the Bank as soon as available, but in any case not later than 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, CEAS shall not incur any debt unless a reasonable forecast of the revenues and expenditures of CEAS shows that the estimated net revenues of CEAS for each fiscal year during the term of the debt to be incurred shall be at least 1.2 times the estimated debt service requirements of CEAS in such year on all debt of CEAS, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of CEAS maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations and net non- operating income; and (B) the sum of all expenses related to operations including administration, adequate maintenance, taxes and payments in lieu of taxes and dividends paid, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. Page 5 (iv) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (v) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) The term "reasonable forecast" means a forecast prepared by CEAS not earlier than twelve months prior to the incurrence of the debt in question, which both the Bank and CEAS accept as reason- able and as to which the Bank has notified CEAS of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of CEAS. (vii) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. (c) Section 4.02 of the Project Agreement (Sir Hydropower Project) dated September 2, 1986, between the Bank and CEAS is hereby amended to read as set forth in paragraphs (a) and (b) of this Section. 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 Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of CEAS thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify CEAS thereof. 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 Page 6 addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For CEAS: Cukurova Elektrik A.S. P.O. Box 239 01322-Adana Republic of Turkey Cable address: Telex: HIDROELEKTRIK 62735 CEASTR Turkey 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 CEAS, or by CEAS on behalf of the Borrower under the Loan Agreement, may be taken or executed by the General Director of CEAS or such other person or persons as said General Director shall designate in writing, and CEAS shall furnish to the Bank 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Michael Wiehen Acting Regional Vice President Europe and Central Asia CUKUROVA ELEKTRIK A.S. By /s/ Mahfi Egilmez Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Page 7 1. Except as provided in Part C 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). 2. Bidders for works shall be prequalified as provided in paragraph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in the Republic of Turkey 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: Other Procurement Procedures 1. Goods estimated to cost the equivalent of $50,000 or less per contract, up to an aggregate amount equivalent to $300,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 2. Contracts for specialized equipment under Part C (2) of the Project, estimated to cost in the aggregate the equivalent of $300,000, may be awarded after direct negotiations with suppliers, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $1,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account 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 the Special Account, 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 Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Loan Account are to be made on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for the purpose of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants Page 8 Consultants' services shall be procured under contracts awarded to consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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.