Ghana - Second Power Distribution Project : Credit 0256 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 256 GH Project Agreement (Second Power Distribution Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND ELECTRICITY CORPORATION OF GHANA DATED JUNE 21, 1971 PROJECT AGREEMENT AGREEMENT, dated June 21, 1971, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and ELECTRICITY CORPORATION OF GHANA (hereinafter called ECG). WHEREAS by a development credit agreement of even date herewith between the Republic of Ghana (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million one hundred thousand dollars ($7,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ECG agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and ECG, the proceeds of the credit provided for under the Development Credit Agreement will be made available to ECG on the terms and conditions therein to be set forth; and WHEREAS ECG, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. ECG shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound engineering, financial and public utility practices. 4 a Section 2.02. Except as the Association shall otherwise agree, ECG shall, in the carrying out of the Project, employ qualified and experienced consultants and contractors acceptable to the Association, upon terms and conditions satisfactory to the Association. Section 2.03. In carrying out Parts A through E of the Project, ECG shall employ contractors acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.04. (a) Except as the Association shall otherwise agree, (i) the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit relent to ECG by the Borrower shall be procured on the basis of international competitive bidding in accordance with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969, and in accordance with such other procedures supplementary thereto as are set forth in the Schedule to this Agreement or as shall be agreed from time to time between the Association and ECG, and (ii) contracts for the procurement of all goods and services to be financed out of such proceeds of the Credit shall (except as otherwise provided in such Schedule) be subject to the prior approval of the Association. (b) ECG undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against marine, transit and other hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ECG to replace or repair such goods. (c) Except as the Association may otherwise agree, ECG shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) ECG shall furnish to the Association, promptly upon their preparation, the plans, specifications and work schedules for the Project, and any material modifications or amplifications thereof, in such detail as the Association shall reasonably request. (b) ECG: (i) shall maintain records adequate to record the progress of the - Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to inspect the Project, the goods financed out of such proceeds 5 and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.06. ECG shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ECG 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. ARTICLE III Management and Operations of ECG Section 3.01. (a) ECG shall operate its business and conduct its affairs in accordance with sound business, public utility and financial practices under the supervision of qualified and experienced management and shall operate, maintain, renew and repair its plants, equipment and property, including the Project, in accordance with sound engineering and public utility practices. (b) ECG shall consult the Association about any proposed appointment to the position of chief financial officer or chief engineer of ECG sufficiently in advance of any such appointment for the Association to have adequate opportunity to comment on the qualifications and experience of the person, or persons, ECG is considering for the respective position and shall make any such appointment only after consideration of the views expressed by the Association. (c) ECG shall take all action reasonably required to maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 3.02. ECG shall take out and maintain with responsible insurers, insurance against such risks and in such amounts as shall be consistent with sound practice. ECG shall review its insurance periodically to determine the adequacy of its coverage in view of expansions of ECG's assets and operations. Section 3.03. ECG shall (i) maintain records adequate to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of ECG, (ii) enable the Association's representatives to inspect the plants, sites, works, property and equipment of ECG and any relevant records and documents and (iii) furnish to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial conditions of ECG. 6 Section 3.04. ECG shall not, without the consent of the Association, sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying on of its business. Section 3.05. Except as the Association shall otherwise agree, ECG shall not undertake in the period from the date of this Agreement through December 31, 1973 any construction or expansion project not included in the Project except (i) projects referred to in Section 4.04 of the Development Credit Agreement, and (ii) other projects involving aggregate annual expenditures not exceeding Nit500,000. Section 3.06. Except as the Association shall otherwise agree, ECG shall: (i) take all reasonable action required to achieve an economic and efficient level of staff; (ii) continue to employ through at least September 30, 1971 two members of the team of accounting consultants presently in ECG's service or make other arrangements satisfactory to the Association for accounting assistance; and (iii) by September 30, 197 1, either (A) recruit an adequate number of qualified personnel for its senior engineering staff or (B) employ a team of engineers acceptable to the Association on terms and conditions satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. ECG shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound 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 (iii) furnish to the Association such other information concerning the accounts and financial statements of ECG and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. (a) ECG shall take promptly as required all action as may be necessary (including, where appropriate, adjustments in its tariffs for the supply 7 of electricity) to ensure that its revenues are sufficient to produce an annual return of not less than eight per cent (8%) measured by taking its net operating income as a percentage of the sum of (i) the fair value of its fixed assets and (ii) an appropriate allowance for its working capital. (b) For Che purposes of this Section: (i) "Net operating income" means the amount of income remaining after subtracting from total operating revenues all charges which in the normal conduct of business are proper to be charged to revenue account, including provision for adequate maintenance and straight line depreciation of assets, but before deducting interest and other charges on borrowings. (ii) "Fair value of its fixed assets in operation" means the average value of ECG's gross fixed assets in operation less the accumulated provision for depreciation at the beginning and end of the financial year under consideration, reduced by the amount contributed by customers for assets in service, and by the Borrower as capital contributions for subsidized stations, averaged on a similar basis. The values employed for such depreciated fixed assets in operation shall be the values shown in ECG's balance sheets as certified in accordance with Section 4.01 of this Agreement. If the values shown in such balance sheets become unrealistic as a result of currency revaluations, changes in prices or similar factors, ECG shall adjust such values adequately to reflect such changes, in accordance with methods satisfactory to the Association. (iii) "An appropriate allowance for its working capital" means a figure equal to 5% of the average depreciated value of ECG's fixed assets in operation for the respective financial year, computed in accordance with paragraph (ii) above. (iv) "Straight line depreciation of assets" means straight line depreciation computed on the realistic value of each category of ECG's gross fixed assets in operation. Section 4.03. (a) Except as the Association shall otherwise agree, ECG shall not incur any debt unless ECG's net revenue for the financial year next preceding the date of such incurrence or for a later 12 month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum debt service requirement on all ECG's debt (including the debt to 8 be incurred) in any succeeding financial year (including the financial year in which such debt is to be incurred). (b) For the purposes of this Section: (i) The term "debt" means all indebtedness (including any indebtedness assumed or guaranteed by ECG) except: (A) indebtedness representing money borrowed in the ordinary course of business and maturing by its terms on demand or not more than one year after incurrence, to the extent that the amount of such indebtedness at any time outstanding does not exceed 10% of ECG's total operating expenses excluding depreciation for the preceding financial year or any later 12 month period, whichever is greater; and (B) indebtedness which is incurred in the ordinary course of business other than for money borrowed and which is payable not more than one year after its incurrence. (ii) The term "incur" with reference to any debt shall include any modification of the terms of payment of such debt. Debt shall be deemed to be incurred on the date of execution and delivery of the contract or loan agreement providing for such debt, and debt guaranteed by ECG shall be deemed to be incurred by it on the date of execution and delivery of the agreement for such guarantee. (iii) The term "net revenue" shall mean gross operating revenue, adjusted to take account of tariffs in effect at the time of incurrence of debt even though they were not in effect during the financial year or 12 month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements. (iv) The term "debt service requirement" shall mean the aggregate amount of principal repayments, amortization (including sinking fund payments, if any), interest and other charges on debt. (v) Whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall 9 be made on the basis of the rate of exchange at which such other currency is obtainable by ECG, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. Section 4.04. ECG shall maintain the accounts for projects referred to in Section 4.04 of the Development Credit Agreement separately from the accounts for ECG's other operations. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and ECG shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and ECG shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of ECG and other matters relating to the purpose of the Credit. Section 5.02. The Association and ECG shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and ECG of their respective obligations under the Subsidiary Loan Agreement. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of ECG 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 on which the Subsidiary Loan Agreement shall terminate in accordance with its terms. 10 (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 ECG of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension of any part of the Credit under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. For ECG: Managing Director Electricity Corporation of Ghana P. 0. Box 521 Accra, Ghana 0 11 Cable address: Headtric Accra Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of ECG may be taken or executed by the Managing Director of ECG or such other person or persons as ECG shall designate in writing. Section 7.03. ECG shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ECG, take any action or execute any documents required or permitted to be taken or executed by ECG pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their * representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. Burke Knapp Vice President ELECTRICITY CORPORATION OF GHANA By /s/ E. M. Debrah Authorized Representative 12 SCHEDULE Procurement With respect to contracts for goods and services required for the Project (excepting contracts for consultants' services), the following supplementary procurement procedures shall apply: 1. With respect to all contracts involving estimated expenditures exceeding the equivalent of $50,000, the following procedures shall be complied with: (a) Invitations to bid, specifications, conditions of contract, all other tender documents and the method and places of advertising will be submitted to the Association for its review and approval prior to the issuance of invitations to bid. (b) Where applicable, bidders will be furnished all pertinent information regarding the matters set forth in paragraph 3 below. (c) After bids have been received and analyzed, the analysis of the bids, the recommendations of the consulting engineers and ECG's proposals for awards, together with the reasons for such proposals, will be submitted to the Association for its review and approval prior to making any award of contract or issuing any letter of intent. (d) If the final contract is to differ substantially from the terms and conditions contained in the respective documents approved by the Association under paragraphs (a) and (c) above, the text of the proposed changes will be submitted to the Association for its review and approval prior to the execution of such contract. (e) As soon as a letter of inteitt has been issued or a contract referred to above has been executed a copy thereof will be sent to the Association. 2. For other contracts ECG shall furnish to the Association any invitation to bid, bid evaluation report and one signed copy of any such contract or letter of intent, and any other material relevant thereto that the Association shall request, promptly after the execution of any such contract or issuance of any such letter of intent and prior to the submission to the Association of the first application for withdrawal from the Credit Account in respect of such contract. 13 3. With respect to contracts for the procurement of copper and aluminium conductors and pursuant to paragraph 2.8 of the Guidelines for Procurement referred to in Section 2.04 of this Agreement, the Bank agrees that where any hid is submitted by any manufacturer, located in the territories of the Borrower, of equipment, materials or supplies manufactured or processed in the territories of the Borrower to a substantial extent as determined by the Bank (Local Bid), the following rules shall be observed for the purpose of comparing any Local Bid as thus defined to any bid other than a Local Bid (Foreign Bid): (a) All customs duties and similar taxes on the importation of the goods offered shall first be deducted from the total of any Foreign Bid; (b) The portion of any Foreign Bid representing the c.i.f. landed price of the goods shall then be increased by 15% thereof or the rate of such duties as apply to non-exempt purchasers in the territories of the Borrower for the importation of such goods, whichever is lower; (c) The resulting figure plus the portion of such Foreign Bid representing inland freight, insurance and other costs of delivery of the goods to the site of use for the Project, shall be deemed to be the comparison price of the Foreign Bid; (d) For the purpose of determining the lowest evaluated bid under Section 3.9 of the Guidelines for Procurement the comparison price of the Foreign Bid shall then be compared with the price of the goods delivered to such site offered by the competing Local Bid; and (e) In cases where it is recommended to award a contract to a Local Bid, the bid analysis shall state the rate of duties which would be applicable to a non-exempt purchaser for the importation of such goods.