Senegal - Second Railway Project : Credit 0314 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 314 SE Project Agreement (Second Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND REGIE DES CHEMINS DE FER DU SENEGAL DATED JUNE 23, 1972 CONFORMED COPY CREDIT NUMBER 314 SE Project Agreement (Second Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND REGIE DES CHEMINS DE FER DU SENEGAL DATED JUNE 23, 1972 PROJECT AGREEMENT AGREEMENT, dated June 23, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and the REGIE DES CHEMINS DE FER DU SENEGAL, an agency of the Republic of Senegal (hereinafter called the Rdgie). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Senegal (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to three million two hundred thousand dollars ($3,200,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the Rggie 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 the Regie, the part of the proceeds of the credit provided for under the Development Credit Agreement, which shall be required to carry out Parts A, B, C, D and E of the Project, will be made available to the Regie on the terms and conditions therein set forth; WHEREAS by the Loan Agreement of even date herewith between the International Bank for Reconstruction and Development (hereinafter called the Bank) and the Rgie, the Bank has agreed to make a loan to the Regie in an amount in various currencies equivalent to six million four hundred thousand dollars ($6,400,000), on the terms and conditions set forth in the Loan Agreement; and WHEREAS the Rggie, 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 4 and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. The Rdgie shall carry out Parts A, B, C, D and E of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial, engineering and railway practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. In carrying out Part F of the Project, the Rgie shall employ consultants acceptable to the Association upon terms and conditions (including terms of reference) satisfactory to the Association. Section 2.03. In carrying out Part B of the Project, the Regie shall employ contractors acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.04. Except as the Association shall otherwise agree, all equipment and materials required for Parts A, B and D of the Project and to be financed out of the proceeds of the Credit, and all works under Part B of the Project, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, and in accordance with, and subject to, the provisions set forth in Schedule 1 to this Agreement. Section 2.05. (a) The Rigie 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 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 the Regie to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Rdgie 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 2.06. (a) The Rgie shall furnish to the Association promptly upon their preparation, the plans, specifications, contract documents and work and 5 procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The R6gie: (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, without limitation upon the provisions of Section 5.03 of this Agreement, enable the Association's representatives to inspect the Project, the goods financed out of such proceeds 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 2.07. The Regie shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, the Rggie 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 the R6gie Section 3.01. (a) The Rdgie shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound administrative, financial, engineering and railway practices and under the supervision of experienced and competent management assisted by qualified and competent staff. (b) The Rdgie shall take all such action as shall be necessary on its part to carry out or cause to be carried out the Plan of Action set forth in Schedule 2 to this Agreement. Section 3.02. The Rdgie shall at all times operate and maintain the Railways and promptly make all necessary renewals and repairs, all in accordance with sound engineering and railway practices. Section 3.03. The Rdgie shall enter into arrangements satisfactory to the Association for insurance against such risks and in such amounts as shall be consistent with sound practice. 6 Section 3.04. The Regie shall carry out appropriate training programs that will (i) insure the availability of a sufficient number of competent managerial, supervisory and technical personnel required in the conduct of its operations; and (ii) allow for the gradual replacement of foreign technical staff by Senegalese counterparts. Section 3.05. The Rggie shall take such action as shall be reasonable in the circumstances to facilitate railway operations between the territories of the Borrower and the territories of the Republic of Mali, in accordance with the International Traffic Agreement, the Customs Agreement and the Railway Convention. ARTICLE IV Financial Covenants Section 4.01. (a) The Rdgie shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. (b) For its fiscal year 1973/74 and thereafter, the Regie's accounts shall be maintained so as to include a detailed breakdown of income and expenses by nature, and to provide cost data by types of railway operations. Section 4.02. For its fiscal year 1971/72 and thereafter, the Rdgie 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 the Rggie and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, the Redgie shall not incur any debt unless the amount of its net cash revenue for its fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever amount is the greater, shall be not less than 1.5 times the maximum debt service requirements for any 7 succeeding fiscal year on all its debt including the debt to be incurred. For the purposes of this Section: (a) "debt" means all debt, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred (i) under a loan contract or agreement, on the date and to the extent it is drawn down and outstanding pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the underlying debt is outstanding; (c) the term "net cash revenue" means gross operating revenue from all sources, adjusted to take account of the Rgie's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve-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; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever in connection with this Section it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by the Rdgie, 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. (a) Except as the Association shall otherwise agree, the Rdgie shall from time to time take all such measures, including but not limited to adjustments of its tariffs, as are necessary to enable the Regie to generate revenues sufficient to earn in its fiscal year 1976/77 and thereafter an annual rate of return -of not less than 2% on its net fixed assets in operation. (b) For the purposes of this Section: (i) The annual rate of return shall be calculated by relating the operating income for the year in question to the average of the value of the net fixed assets of the Rdgie in operation at the beginning and at the end of each year. 8 (ii) The term "value of net fixed assets in operation" shall mean the gross book value of such assets, less the amount of accumulated depreciation, both as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Association. (iii) The term "operating income" shall mean the difference between: (A) gross operating revenue accruing from the Regie s services; and (B) the operating and administration expenses, taxes (if any) and adequate maintenance and depreciation but excluding interest and other charges on debt. Section 4.05. Until the Project shall have been completed, the Regie shall not, without the prior approval of the Association, commit itself to any capital expenditures not required under the Project exceeding in the aggregate for any fiscal year of the Rdgie an amount equivalent to two hundred fifty thousand dollars ($250,000) or relating to any individual capital item estimated to cost the equivalent of one hundred thousand dollars ($100,000) or more. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and the Regie shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and the R6gie 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 the Rggie and other matters relating to the purpose of the Credit. Section 5.02. The Association and the Regie 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, the performance by the Borrower and the R6gie of their respective obligations under the Subsidiary Loan Agreement, or which shall increase or threaten to increase materially the estimated cost of the Project. 9 Section 5.03. The Rgie shall enable the Association's representatives to inspect all plants, sites, works, properties and equipment of the Regie and any relevant records and documents. ARTICLE VI Modification of 1966 Project Agreement Section 6.01. Section 2.10 of the 1966 Project Agreement is amended by the deletion of the provisions thereof and the substitution therefor of the provisions of Section 4.04 of this Agreement. ARTICLE VII Effective Date; Termination; Cancellation and Suspension Section 7.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 7.02. (a) This Agreement and all obligations of the Association and of the Rgie 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) a date twenty-five 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 so notify the Rdgie of this event. Section 7.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VIII Miscellaneous Provisions Section 8.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated 10 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 the R6gie: R6gie des Chemins de Fer du S6ndgal Thies S6n6gal Cable address: Fersenegal Thies S6n6gal Section 8.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of the Rdgie may be taken or executed by the Director of the Rdgie or such other person or persons as he shall designate in writing. Section 8.03. The Rdgie 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 the Rdgie, take any action or execute any documents required or permitted to be taken or executed by the Rgie pursuant to any of the provisions of this Agreement. 11 Section 8.04. 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/ Mohamed Shoaib Vice President REGIE DES CHEMINS DE FER DU SENEGAL By /s / Andr6 Coulbary Authorized Representative 12 SCHEDULE 1 Procurement 1. Except as otherwise provided below, with respect to any contract for equipment and materials included in Category I, II or III of the allocation of the proceeds of the Credit and of the Loan as set forth in Schedule 1 to the Development Credit Agreement, or for works included in Category II of such allocation, estimated to cost the equivalent of $30,000 or more: (a) Before bids are invited, the Regie shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Regie shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Regie and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 2. With respect to any other contract for the procurement of items referred to in paragraph 1, the Rgie shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the 13 contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the Rdgie and state the reasons for such determination. 3. For the purpose of evaluating bids for cement required by the Rdgie for purposes of Part A of the Project and included in Category I of the table set out in paragraph I of Schedule 1 to the Development Credit Agreement, bid prices shall be determined and compared in accordance with the following rules: (a) the term "Local Bid" means a bid submitted by a manufacturer established in the territories of the Borrower for cement manufactured or processed to a substantial extent (as reasonably determined by the Association) in such territories; any other bid shall be deemed to be a "Foreign Bid"; (b) the bid price under a Local Bid shall be the ex-factory price of the cement; and (c) for the purpose of comparing any Foreign Bid with any Local Bid, the bid price under a Foreign Bid shall be the sum of the following amounts: (i) the c.i.f. (landed) price of the cement; and (ii) the amount of any taxes on the importation of cement into the territories of the Borrower which generally apply to non-exempt importers, or 15% of the amount specified in (i) above, whichever shall be the lower. 4. Works included in Categories I and III of the allocation of the proceeds of the Credit and of the Loan shall be carried out by the Rdgie directly. 5. Procurement of ballast, sand and aggregate required for Part A of the Project and included in Category I of the allocation of the proceeds of the Credit and of the Loan may be procured locally by competitive bidding and in accordance with the Borrower's usual procedures for governmental procurement. 14 SCHEDULE 2 Plan of Action 1. Introduction The physical and financial rehabilitation of the Regie has been of concern to the Borrower. It is the aim of the Borrower to enable and assist the Regie to carry out the physical rehabilitation of the Railways and to achieve a sound financial position that will permit the Rggie, out of internally generated funds, to meet all of its operating expenses (including adequate maintenance and depreciation) and debt service obligations, and to make a contribution towards its investment needs. The Borrower and the Regie intend to implement the following measures with the objective of enabling the Regie to continue to fulfill its appropriate economic role in an increasingly competitive environment and to achieve financial equilibrium. 2. Adjustment of Personnel Expenses (a) The Regie recognizes that the proportion of direct personnel expenses to total working expenses is out of line with that experienced in similar railway systems. Therefore, the Regie will devise a five-year personnel program (1972/73-1976/77) which will lead to a gradual reduction of the proportion of direct personnel expenses to total working expenses, to about 64% by the Regie's fiscal year 1976/77. (b) For purpose of the above, "direct personnel expenses" means total personnel expenses less pension payments, the cost of training, transport of personnel, medical services and other fringe benefits, and "working expenses" means all operating expenses less depreciation and interest on debt. 3. Tariffs and Rates (a) The Regie will set rates and fares in such a way that no rate or fare shall be set below the incremental cost of providing the relevant service, or so high as to divert to or fail to regain from other modes of transport any traffic which the railways are able to carry at the lowest economic cost. (b) The Rdgie will introduce modifications to its existing tariff system in accordance with the recommendations of the Regie's consultants in a report dated October 1971, and will introduce selective rate adjustments in its tariffs 15 leading to an overall increase in average revenue per ton-kilometer from about CFAF 5.0 to not less than CFAF 5.5 by the second quarter of the Rdgie's fiscal year 1972/73. 4. Uneconomic Branch Lines (a) It is recognized that the Regie has branch lines of low traffic density which appear to make an inadequate contribution toward the overhead expenses relative to such lines. The Regie will undertake a detailed study with regard to the economic and financial viability of its branch lines referred to below, in order to determine whether satisfactory financial results can be obtained by rationalizing services, or if this is not possible, by partially or totally eliminating some services, some stations or an entire line. The lines to be studied are the following: Tivaouane - St. Louis Louga - Linguere Diourbel - Touba Guinguineo - Kaolack (b) Promptly after completion of such study but in any event by a date not later than June 30, 1973, or such later date as shall be agreed to by the Association, the Regie will enter into consultations with the Borrower and the Association regarding the possible elimination of services, stations or lines found to be uneconomical or financially non-profitable. (c) Should the Borrower deem it necessary for the Rdgie to maintain non-profitable lines, stations, or services after June 30, 1973, the Borrower will reimburse the Regie's losses in respect thereof. A methodology will be determined and mutually agreed upon between the Regie, the Borrower and the Association leading to the identification of such losses and the terms of reimbursement. 5. Depreciation Except as the Association shall otherwise agree, the Regie will: (i) complete the revaluation of its fixed assets by June 30, 1973, in accordance with the recommendations of the Regie's consultants in a report entitled "Prix de Revient et Politique Tariftire" dated October 1971; 16 (ii) calculate depreciation of its fixed assets on the basis of such revaluation and in accordance with the rates of depreciation recommended by the Rdgie's consultants in Annex 3 of the report referred to in paragraph (i); (iii) incorporate such depreciation in its accounts for its fiscal year 1973/74 and thereafter; and (iv) revise the value of its fixed assets, and recalculate depreciation from time to time, in accordance with sound and consistently maintained methods of valuation acceptable to the Association. 6. Operations (a) The Regie will on the basis of the recommendations of its consultants, take all necessary steps to improve its operating efficiency and to achieve the following targets by its fiscal years 1973/74 and 1975/76: Specific Operating Objectives 1970/71 1973/74 1975/76 Locomotive-km per day per locomotive 286 290 290 in stock Wagon-km per day per wagon in stock 70 80 90 Availability of diesel locomotives (%) 70 80 85 Availability of freight cars (%) 80 85 85 Availability of railcars (%) 70 85 95 Average load of freight car (other 18 23 28 than phosphate and service) Turnaround freight car time per year: National traffic 66 80 96 Mali traffic 30 40 50 Staff productivity (Traffic units 171 203 233 per '000 employees) 17 (b) The Regie will establish a system of control to be agreed with the Association that will permit prompt evaluation of progress in the physical and financial rehabilitation of the Railways and in the attainment of the targets referred to in paragraph (a) above. 7. Operating Targets (a) The Regie will, from time to time, take all necessary steps to achieve an operating ratio of not more than 100% in its fiscal year 1973/74, 95% in its fiscal year 1974/75, and 91% in its fiscal year 1975/76. (b) For purposes of the above, "operating ratio" means total operating and administration expenses, tLaxes (if any) and adequate maintenance and depreciation but excluding interest and other charges on debt, divided by gross operating revenue accruing from the Rdgie's services. 8. Railway Investment Program The Regie will prepare in consultation with the Borrower and the Association and by a date not later than June 30, 1973, or such later date as shall be agreed to by the Association, an investment program covering the period of the Fourth Four-Year Investment Plan 1973/74-1976/77, based on sound technical, financial and economic criteria aimed at continuing and completing the physical and financial rehabilitation of the Railways initiated during the Second and Third Four-Year Investment Plans 1965/66-1968/69 and 1969/70-1972/73.