Jordan - Hussein Thermal Power Project : Credit 0386 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 386 JO Development Credit Agreement (Hussein Thermal Power Project) BETWEEN THE HASHEMITE KINGDOM OF JORDAN AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MAY 24, 1973 CONFORMED COPY CREDIT NUMBER 386 JO Development Credit Agreement (Hussein Thermal Power Project) BETWEEN THE HASHEMITE KINGDOM OF JORDAN AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MAY 24, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated May 24, 1973, between the HASHEMITE KINGDOM OF JORDAN (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association and the Kuwait Fund for Arab Economic Development (hereinafter called the Kuwait Fund) to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement. (B) The Project will be carried out by Jordan Electricity Authority, a corporate body established by the Jordan Electricity Law No. 2 1 of 1967 (hereinafter called JEA), with the Borrower's assistance and, as part of such assistance, the Borrower will make available to JEA the proceeds of the Credit as hereinafter provided; and (C) The Kuwait Fund has agreed for the purpose to make available to the Borrower for the same Project a loan (hereinafter called the Kuwait Fund Loan) in the principal amount of three million Kuwait dinar (KD 3,000,000) . equivalent at present parity rate as near as possible to ten million two hundred thousand dollars ($10,200,000); (D) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and JEA: NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Asso,,iation, dated January 31, 1969, with the same force and effect as if hey were fully set forth herein, subject, however, to the deletion of Sections 5.01 and 6.02(h) thereof and to the renumbering of Section 6.02(i) into 6.02(h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). 4 Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and JEA of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and JEA pursuant to Section 3.01(b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "The Kuwait Fund Loan Agreement" means the loan agreement between the Kuwait Fund and the Borrower for the Project. (d) "JEA Law" means the Jordan Electricity Authority Law No. 21 of 1967 establishing JEA, as the same may be amended from time to time. ARTICLE H The Credit Section 2.01. The Association agrees to lend to the Borower. on the terms and conditions in the Development Credit Agreement set forth ot eferred to, an amount in various currencies equivalent to ten million two hundred thousand dollars ($10,200,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule shall be amended from time to time, 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 described in Schedule 2 to this Agreement and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such tefritories. Section 2.03. Except as the Association shall otherwise agree, the goods and services required for the Project and to be financed out of the proceeds of the 5 Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.06 of the Project Agreement. Section 2.04. The Closing Date shall be March 31, 1977 or such other date as shall be agreed between the Borrower and the Association. 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. Service charges shall be payable semi-annually on April 15 and October 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each April 15 and Octobe. 15 commencing October 15, 1983 and ending April 15, 2023, each installment to and including the installment payable on April 15, 1993 to b: one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. The Chairman of the Board of Directors of JEA or such other person as he may appoint in writing is designated as representative of the Borrower for the purpose of taking any action required or permitted to be taken under the provision of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon ally of its other obligations under the Development Credit Agreement, the Borrower shall cause JEA to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable JEA to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. To that end, the Borrower shall take 6 all necessary steps including the provision of any funds necessary to ensure that the construction of the Zarqa to Amman transmission system is completed before September 30, 1975. (b) The Borrower shall relend the proceeds of the Credit under a subsidiary loan agreement to be entered into between the Borrower and JEA under terms and conditions which shall have been approved by the Association and which shall, unless the Association shall otherwise agree, provide for JEA (i) to pay to the Borrower a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount so relent and not withdrawn by JEA from time to time, (ii) to pay to the Borrower interest at a rate of seven and one-quarter per cent (7-1/4%) per annum on the principal amount so relent and withdrawn by JEA and outstanding from time to time, and (iii) to repay to the Borrower the principal amount so relent over a period of 25 years from the date of this agreement, including therein a period of grace of three and one-half years. (c) The Borrower shall relend the proceeds of the Kuwait Fund Loan to JEA. (d) The Borrower shall exercise its rights under the Subsidiary Loan 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, noi amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. The Borrower shall review the JEA Law and propose appropriate legislative action for amending such law so as to allow JEA to develop into an autonomous agency subject only to the direction of the Minister of National Economy of the Borrower in respect of specific matters of national importance. Section 3.03. The Borrower shall: (a) Initiate appropriate legislative action and shall by September 30, 1974, present its proposals to the Legislature for enactment of a General Electricity Law to regulate the power sector; such law to set out the principles and basic requirements for inter alia generation, transmission and distribution of power (including concessions and licenses), tariffs, casements, inspection and testing, a unified accounting system, the collection of statistics and the preparation of technical information. (b) Make available to the Association its proposals for the said Law sufficiently in advance for the Association's comments. 7 (c) Formulate such regualtions or bylaws as may be necessary to achieve the objectives of said Law including the delegation to JEA of regulatory functions of a technical nature. Section 3.04. The Borrower undertakes that it will, not later than June 30, 1975, introduce adequate provisions, satisfactory to the Association, empowering JEA to adjust its charges for the sale of electricity to cover additional operating expenses resulting from variations in the price paid by JEA for residual fuel oil above an average price of JD 7.5 per ton; and, if considered appropriate, will allow the retail charges for the sale of electricity to be adjusted accordingly. Section 3.05. The Borrower shall from time to time take or cause to be taken all measures required on its part to enable JEA to make such adjustments in its rates for the sale of electricity as may be necessary to meet the requirements of Section 4.03 of the Project Agreement. Section 3.06. Unless the Association shall otherwise agree, the Borrower shall prohibit the declaration or payment of dividends by JEA prior to January 1, 1979, unless in the opinion of the Association such a distribution would not be prejudicial to JEA's requirements for financing its expansion program. 0 Section 3.07. The Borrower shall take all necessary action to convert all JEA's preliminary expenditure financed by the Borrower prior to JEA commencing generation from Zarqa steam turbine units into Government owned equity capital. Said preliminary expenditure shall include the initial financing of working capital provided to JEA by the Borrower, the local expenditure on the Project and on the associated Zarqa Amman Transmission System and any amounts lent by JEA to the Jordanian Electricity Power Company (JEPCO) or Irbid District Electricity Company (IDECO) with the Borrower's permission, but shall not include loans made to JEA by the Borrower for on-lending. Section 3.08. The Borrower shall ensure that the Marqa Power Station, or any other appropriate power station, shall be declared a "selected power station" in accordance with the JEA Law wAhen the first Zarqa steam-electric unit becomes operational. ARTICLE IV Consultation, Information and Inspection Section 4.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the 8 Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the performance by JEA of its obligations under the Project Agreement, the administration, operations and financial condition of JEA and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 4.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of JEA and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association 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 maintenance of the service thereof, the performance by either of them of its obligations under the Development Credit Agreement or the performance by JEA of its obligations under the Project Agreement and the Subsidiary Loan Agreement. Section 4.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE V Taxes and Restrictions Section 5.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. 9 Section 5.02. The Development Credit Agreement and the Project Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 5.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VI Remedies of the Association Section 6.01. If any event specified in Section 7.01 of the General Conditions or in Section 6.03 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such * principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section 6.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) The right of the Borrower to utilize the funds provided by the Kuwait Fund Loan under the Kuwait Fund Loan Agreement shall have been suspended or terminated in whole or in part; (b) JEA shall have failed to carry out any of its obligations under the Project Agreement or the Subsidiary Loan Agreement; (c) JEA shall have become unable to pay its debts as they mature or any action or proceedings shall have been taken by JEA or by others whereby any of the property of JEA shall or may be distributed among its creditors; and (d) The JEA Law shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of JEA to fulfill its functions. Section 6.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: 10 (a) the event specified in paragraph (b) of Section 6.02 of this Agreement shall ocour and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower; and (b) the event specified in paragraphs (a) and (c) of Section 6.02 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of JEA have been duly authorized or ratified by all necessary corporate and governmental action. (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and JEA, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. (c) Unless JEA shall have acquired Marqa or any other generating station in accordance with the JEA Law, JEA shall have: (i) signed an agreement acceptable to the Association setting out the necessary contractual arrangements for the operation of any JEPCO's generating stations, designated as a "selected" station under the provisions of the JEA Law, and (ii) agreed to negotiate and conclude a contract by not later than June 30, 1975 for the operation of any such station. (d) The execution and delivery of a Credit Agreement between the Borrower and the Government of the United Kingdom or of any other arrangements acceptable to the Association for the financing of the 132-kV transmission system between Zarqa and Amman, and including the appropriate provisions for relending the proceeds of this Credit to JEA has been duly authorized or ratified by all necessary corporate and governmental action. (e) The Kuwait Loan Agreement has, or will concurrently with this Agreement, become fully effective. Section 7.02. The following are specified as additional m.-tters, within the meaning of Section 10.02(b) of the General Conditions. to be included in the opinion or opinions to be furnished to the Association: (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, JEA, and constitutes a valid and binding obligation of JEA in accordance with its terms. (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and JEA, respectively, and constitutes a valid and binding obligation of the Borrower and JF ', in accordance with its terms. (c) That the Credit Agreement referred to in Section 7.01(d) to this Agreement for the financing of the 132 kV transmission system between Zarqa and Amman has been duly authorized or ratified by, and executed and delivered, on behalf of the Borrower, and the other party respectively, and constitutes a valid and binding obligation of both parties in accordance with its terms. Section 7.03. The date August 22, 1973 is hereby specified for the purposes of Section 10.04 of the General Conditions. ARTICLE VIII * Representative of the Borrower; Addresses Section 8.01. The President of the National Planning Council of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: National Planning Council P.O. Box 555 Amman Hashemite Kingdom of Jordan Cable address: JODB Amman 12 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. 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 to be delivered in the District of Columbia, United States of America, as of the day and year first above written. THE HASHEMITE KINGDOM OF JORDAN By /s/ Z. Mufti Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa 13 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Credit and the allocation of amounts of the Credit to each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed 1. Civil Works 700,000 25% of total ex- penditures (re- presenting the estimated foreign expenditure corn- ponent) II. Electrical Equip- 6,800,000 50% of foreign ex- ment and Mechanical penditures works, Materials and Associated Serv- ices for Part Al of the Project 1II. Equipment, Materials 1,000,000 50% of foreign ex- and Associated Serv- penditures ices for Part A2 of the Project IV. Consultants' Serv- 650,000 50% of foreign ex- ices and Training penditures V. Unallocated 1,050,000 TOTAL 10,200,000 2. For the purposes of this schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; and 14 (b) the term "total expenditures" means the aggregate of foreign expenditures and of expenditures for goods produced in, or services supplied from, the territories of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category IV on account of expenditures incurred after February 6, 1972 in an aggregate amount not exceeding the equivalent of $175,000; and (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph 1 above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the tahle in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.06 of the Project Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the 15 Borower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 5. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of total expenditures under Category I shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 16 SCHEDULE 2 Description of the Project The Project is the first stage of a steam-electric power station and consists of the following: A. Generation 1. Construction of a generating plant at Zarqa, comprising two steam-electric generating units with an aggregate generating capacity of about 66 MW; associated facilities including fuel transfer from the adjacent refinery and storage facilities, a substation and personnel housing. 2. Installation of a simple cycle package type gas turbine-electric generating unit with a rated generating capacity of about 15 MW at sea level, and associated auxiliary facilities. B. Studies and Training 1. Training abroad of power station staff, administrative and other personnel as necessary. 2. A study of organizational requirements for JEA's expanding activities, including accounting procedures, financial planning and budget control; and implementation of the recommendations of this study. 3. (a) A study of JEA's tariff structure required for its operations, and implementation of the recommendations of this study. (b) A study, concurrent with the above study, of all electricity tariff's prevailing in Jordan with the objective of recommending to the Government the basis for a modern tariff structure applicable throughout Jordan. The Project is expected to be completed by March 31, 1976.