Senegal - Water Sector Project : Credit 2758 - Project Agreement - Conformed

CREDIT NUMBER 2758 SE Project Agreement (Water Sector Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NATIONALE DES EAUX DU SENEGAL Dated I ( 2 , 1995 CREDIT NUMBER 2758 SE PROJECT AGREEMENT AGREEMENT, dated CU v 2 , 1995, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SOCIETE NATIONALE DES EAUX DU SENEGAL (SONES). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Senegal (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixty-three million five hundred thousand Special Drawing Rights (SDR 63,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SONES agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and SONES, a portion of the proceeds of the Credit provided for under the Development Credit Agreement will be relent to SONES on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS SONES, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE H Execution of the Project Section 2.01. (a) SONES declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part B of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, management and water supply practices, -2- and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part B of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and, except as the Association and SONES shall otherwise agree, SONES shall carry out Part B of the Project in accordance with the Implementation Program set forth in Schedule 1 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services, required for Part B of the Project and to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.03. SONES shall carry out 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 the Project Agreement and Part B of the Project. Section 2.04. Without limitation upon the provisions of Article IX of the General Conditions, SONES shall: (i) prepare and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, a plan, of such scope and in such detail as the Association shall reasonably request, for the future operation of Part B of the Project; (ii) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan; and (iii) thereafter, carry out said plan with due diligence and efficiency and in accordance with appropriate practices, taking into account the Association's comments thereon. Section 2.05. SONES shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SONES 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. -3- Section 2.06. (a) SONES shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement, the Subsidiary Loan Agreement, the Contrat-Plan the Concession Contract, the Performance Contract, and other matters relating to the purposes of the Credit. (b) SONES shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Credit, or the performance by SONES of its obligations under this Agreement, the Subsidiary Loan Agreement, the Contrat-Plan the Concession Contract and the Performance Contract. Section 2.07. SONES shall: (a) prepare and furnish to the Association, not later than October 31 in each year of the Project, an action plan to include, without limitation, a work program and budgetary allocations, for the implementation of Part B of the Project in the following year; (b) conduct, not later than December 31 in each year, commencing December 31, 1996, an annual review of Part B of the Project, together with the Borrower and the Association, to assess progress and evaluate performance during the preceding year; (c)- revise the action plan prepared in accordance with paragraph (a) above after the review conducted in accordance with paragraph (b) above, taking into account the Association's comments and recommendations in a manner satisfactory to the Association; and (d) implement the revised action plan during the course of the following year in a manner satisfactory to the Association. Section 2.08. SONES shall: (i) implement, in conjunction with the Borrower, the Environmental Mitigation Plan; and (ii) organize jointly with the Borrower and ONAS, a Project launch workshop. -4- ARTICLE III Management and Operations of SONES Section 3.01. SONES shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and management practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SONES shall ensure that, at all times, SDE 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, management and environmental practices. Section 3.03. SONES shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) SONES shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SONES shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in- accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and -5- (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. Except as the Association shall otherwise agree, SONES shall maintain its annual expenditures on personnel to an amount, in constant 1995 CFAF, equivalent to not more than CFAF 500,000,000 for the year 1996, CFAF 510,000,000 for the year 1997, CFAF 520,000,000 for the year 1998, CFAF 530,000,000 for the year 1999, CFAF 540,000,000 for the year 2000, CFAF 550,000,000 for the year 2001, CFAF 560,000,000 for the year 2002 and CFAF 570,000,000 for the year 2003. Section 4.03. (a) Except as the Association shall otherwise agree, SONES shall produce, for each of its fiscal years, commencing from the fiscal year 1996, funds from internal sources, or any other private commercial sources, equivalent to not less than 10% of the annual average of SONES' capital expenditures incurred, or expected to be incurred, for that year, the previous fiscal year and the three next following fiscal years. (b) SONES shall, on the basis of forecasts prepared by SONES and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association a copy of such review upon its completion. (c) If any such review shows that SONES would not meet the requirements set forth in paragraph (a) for SONES' fiscal years covered by such review, SONES shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (d) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: (A) the sum of revenues from all sources related to operations, consumer deposits and consumer contribu- tions in aid of construction, net non-operating income and any reduction in working capital other than cash; and (B) the sum of all expenses related to operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for -6- depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash distributions of surplus, increase in working capital other than cash and other cash outflows other than capital expenditures. (ii) 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. (iii) The term "working capital other than cash" means the difference between current assets excluding cash and current liabilities at the end of each fiscal year. (iv) The term "current assets excluding cash" means all assets other than cash which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inventories and pre-paid expenses properly chargeable to operating expenses' within the next fiscal year. (v) The term "current liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes, and dividends. (vi) 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. (vii) The term "capital expenditures" means all expenditures on account of fixed assets, including interest charged to construction, related to operations. -7- (viii) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, SONES shall not incur any debt, unless the net revenues of SONES for the fiscal year immediately preceding the date of such occurrence or for a later twelve-month period ended prior to the date of such occurrence, whichever is the greater, shall be, for the year 1996, at least 0.8, for the year 1997, at least 0.9, for the year 1998, at least 1.3, and for the year 1999 and thereafter, at least 1.4 times, the estimated maximum debt service requirements of SONES for any succeeding fiscal year on all debt of SONES, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of SONES 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 adjusted to take account of SONES' rates in effect at the time of the occurrence of debt even though they were not in effect during the twelve-month period to which such revenues relate and net non-operating income; and -8- (B) the sum of all expenses related to operations including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the 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) Whenever for the purposes of this Section, it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.05. SONES shall: (i) furnish to the Association its annual capital and operating budgets for review and comments; (ii) report to the Association, quarterly, on the progress of Part B of the Project including the evolution of specified monitoring indicators; (iii) not later than July 31, 1995, furnish to the Association the audit report of the accounts of SONEES for the year 1994; -9- (iv) not later than June 30, 1996, establish a monthly cash-flow model for the purpose of managing cash, acceptable to the Association; and (v) not later than June 30, 1996, establish a cost-accounting system corresponding to generally accepted utility practices, satisfactory to the Association. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SONES thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty (20) years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SONES of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such - 10 - party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For SONES: 97, Avenue Peytavin B.P. 400 Dakar Senegal Telex: 6137 G 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 SONES may be taken or executed by the director general or such other person or persons as the director general shall designate in writing, and SONES shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 11 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By t51 ad~ -A- J Q, 1%CcP Regional Vice President Africa SOCIETE NATIONALE DES EAUX DU SENEGAL By u,rz S R e a Authorized Representative - 12 - SCHEDULE Implemeztation Program SONES shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Association, the carrying out of Part B of the Project; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about November 30,1997, May 31, 1999 and November 31, 2000, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of Part B of the Project during the period preceding the date of said report and setting measures recommended to ensure the efficient carrying out of Part B of the Project and the achievement of the objectives thereof during the period following such date; (c) review with the Association, not later than December 31, 1997, June 30, 1999 and December 31, 2000 respectively, or such later date as the Association shall request, the report referred to in paragraph (b) of this Section, and thereafter, take all measures required to ensure the efficient completion of Part B of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association's views on the matter. 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. FORS SIRETARY