Ghana - Telecommunications Project : Loan 1122 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1122 GH Loan Agreement (Telecommunications Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND POSTS AND TELECOMMUNICATIONS CORPORATION DATED JUNE 10, 1975 CONFORMED COPY LOAN NUMBER 1122 GH Loan Agreement (Telecommunications Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND POSTS AND TELECOMMUNICATIONS CORPORATION DATED JUNE 10, 1975 LOAN AGREEMENT AGREEMENT, dated June 10, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and POSTS AND TELECOMMUNICATIONS CORPORATION (hereinafter called the Borrower). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). 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 term "Decree" means the Posts and Telecommunications Corporation Decree, 1975 (N.R.C.D.31 1) of the Guarantor, as such Decree shall be amended from time to time. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to twenty-three million dollars ($23,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time, for expenditures made (or, if the Bank 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 out of the proceeds of the Loan. Section 2.03. (a) Except as the Bank shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out 4 of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. (b) The Borrower shall have exclusive responsibility for and control over, and shall itself undertake, the procurement of the goods and services required for the Project. Section 2.04. The Closing Date shall be December 31, 1979, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on June 15 and December 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, commercial, engineering and telecommunications practices. (b) The Borrower shall establish on or before July 1, 1975, or such later date as the Bank may agree, and shall thereafter maintain until the completion of the Project, within its organization a unit charged with the organization, coordination and supervision of the implementation of the Borrower's telecommunications investment programs, including the Project, and headed by a manager appointed after consultation with the Bank on his qualifications and terms of reference. The manager shall be responsible to the Director-General of the Borrower. 5 Section 3.02. In order to assist the Borrower in the detailed engineering, procurement and construction supervision required for the implementation of the Project, and the technical assistance in accountancy included in the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Guarantor and the Bank. Section 3.03. The Borrower shall ensure that the Taniale-Bolgatanga-Yendi-Wa, Kumasi-Mampong (Ashanti) and Sunyani-Techiman-Wenchi UHF radio systems and the interministerial telephone exchange, included in its ongoing investment program, will have been placed into service on or before June 30, 1976, or such later date as the Bank may agree. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan 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 Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.05. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (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 Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) The Borrower shall, at the reasonable request of the Bank, enable the Bank's representatives to examine all plants, installations, sites, works, buildings, 6 property and equipment and any relevant records and documents of the Borrower relating to the obligations of the Borrower under this Agreement. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall: (a) at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate business, financial and telecommunications practices and under the supervision of experienced and competent management, assisted by qualified staff in adequate numbers; (b) discuss with the Bank the qualifications of the person or persons being considered for appointment to the position of Financial Controller of the Borrower; (c) before March 31, 1976, or such later date as the Bank may agree, draw up and discuss with the Bank a program of recruitment and training of its middle-level telecommunications management staff, and thereafter implement that program; (d) undertake a comprehensive review of its telecommunications staff structure and requirements, formulate measures to increase the productivity of such staff, including staff-training programs, and consult with the Bank on such measures before July 1, 1976, or such later date as the Bank may agree; and (e) reduce in accordance with reasonable targets acceptable to the Guarantor and the Bank and establish before July 1, 1976, or such later date as the Bank may agree, its telecommunications staffing ratio to a level substantially below the present level of 100 staff members per 1,000 telephones served by the Borrower. Section 4.02. (a) The Borrower shall take all steps necessary to acquire, maintain and renew all such rights and interests in land and all such other rights, powers, privileges and franchises as are necessary or useful in the conduct of its business. (b) The Borrower shall at all times operate and maintain its installations, equipment and other property, and promptly as required make all necessary repairs and renewals thereof, all in accordance with appropriate business and engineering practices. 7 (c) The Borrower shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient conduct of its operations. ARTICLE V Financial Covenants Section 5.01. Beginning with its fiscal year 1975/76, the Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices, and separately for its post and telecommunications services, its operations and financial condition. Section 5.02. The Borrower shall, commencing with its fiscal year 1975/76: (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 Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. The Borrower shall, before July 1, 1976, or such later date as the Bank may agree, introduce, and thereafter maintain, a system of internal audit satisfactory to the Bank. Section 5.04. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest 8 and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.05. Except as the Bank and the Borrower, with the approval of the Guarantor, may otherwise agree: (a) The Borrower shall establish and maintain tariffs for its telecommunications service which shall generate at least the following annual rates of return on the average current net value of the Borrower's fixed telecommunications assets in operation: seven percent (7%) in its fiscal years 1975/76, 1976/77 and 1977/78; and nine percent (9%) in its fiscal year 1978/79 and subsequent fiscal years. Such rates of return shall be calculated in accordance with the method outlined in Schedule 5 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrower. (b) Before April 1 in each fiscal year, the Borro-wer shall on the basis of realistic forecasts of revenues and costs review the adequacy of its telecommunications tariffs to produce in the following fiscal year such agreed annual return, and furnish to the Bank a copy of such review. Section 5.06. Except as the Guarantor and the Bank may otherwise agree, the Borrower shall ensure that funds generated by its telecommunications service during any fiscal year will be allocated to its postal service only to the extent that such funds shall exceed the sum of the Borrower's operating and administrative expenses (including adequate maintenance and taxes, if any), adequate provision for depreciation and investments, and interest and other charges on debt, accountable to its telecommunications service and to the same fiscal year. Section 5.07. Except as the Guarantor and the Bank and the Borrower shall otherwise agree, the Borrower shall not incur on account of either its postal service or its telecommunications service any debt, other than for money borrowed for financing the Project, unless its net revenues generated by such service for the fiscal year next preceding such incurrence or for a later twelve-months period ended 9 prior to such incurrence, whichever amount is greater, shall be not less than 1.5 times the maximum debt service requirement for any succeeding fiscal year on all debt, including the debt to be incurred, on account of the same service. For the purposes of this Section: (a) The term "debt" shall mean any indebtedness of the Borrower maturing by its terms more than one year after the date on which it is originally incurred. (b) Debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt. (c) The term "net revenues" shall mean gross revenues from all sources, adjusted to take account of the Borrower's tariffs for the service in question in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-months period to which such revenues relate, less all operating and administrative expenses (including adequate maintenance and taxes, if any), but before provision covering depreciation and interest and other charges on debt. (d) The term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (e) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, 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. Section 5.08. (a) Except as the Guarantor, the Bank and the Borrower shall otherwise agree, the Borrower shall not incur any short-term debt on account of its telecommunications service, except if the aggregate principal amount of all its short-term debt outstanding on account of its telecommunications service, including the debt to be incurred, shall be less than one-fourth of its cash operating and administrative expenses accountable to that service and to the fiscal year next preceding such incurrence or to a later twelve-months period ended prior to such incurrence, whichever amount is greater. (b) The Borrower shall use the proceeds of any short-term borrowing by it only to finance its normal telecommunications working capital requirements. 10 (c) For the purposes of this Section: (i) The terms "short-term debt" and "short-term borrowing" shall mean all indebtedness and borrowing, respectively, maturing by its terms less than one year after the date on which it is originally incurred. (ii) The provisions of sub-sections (b) and (e) of the preceding Section 5.07 shall apply. Section 5.09. Until the Project will have been completed and except as the Guarantor and the Bank may otherwise agree, the Borrower shall not make expenditures, or commitments for expenditures, for fixed or capital telecommunications assets (including investments in or loans to other entities made out of telecommunications revenues), except: (a) investments in short-term marketable securities solely for the purpose of temporarily employing its idle funds; (b) expenditures, or commitments for expenditures, not exceeding $600,000 equivalent in any fiscal year; (c) other expenditures, or commitments for expenditures, required for repairs, maintenance or replacement of assets; (d) other expenditures, or commitments for expenditures, required for the implementation of its on-going investment program, described in Section 3.03 of this Agreement, or for the implementation of the Project; and (e) other expenditures, or commitments for expenditures, covered by a financing plan agreed between the Bank and the Borrower. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that the Decree, or any provision thereof, has been amended, suspended, abrogated or waived so as to affect materially and adversely the carrying out of the Project or the financial condition of the Borrower. 11 Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event specified in Section 6.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions: (a) a full settlement, in form and substance satisfactory to the Bank, has been made between the Guarantor and the Borrower settling in full all claims and counterclaims between the Guarantor and the Borrower on account of services rendered from July 1, 1974 through June 30, 1975; (b) an increase in the Borrower's telecommunications tariffs so that the aggregate amount of gross revenues which the Borrower is expected to earn on account of its telecommunications service provided during its fiscal year 1975/76 exceeds by not less than forty per cent (40%) the aggregate amount of such revenues which the Borrower is expected to have earned during that year under its telecommunications tariffs in effect on the date of this Agreement, and the entering into full force and effect of such tariff increase as of a date not later than July 1, 1975, or such later date as the Bank may agree; and (c) the Borrower has borrowed an aggregate amount equivalent to at least seven million cedis ((7,000,000) in currency of the Guarantor, on terms and conditions acceptable to the Bank, to finance its ongoing telecommunications investment program. Section 7.02. The following are specified as additional matters, within the meaning of Section 12.02(c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the tariffs which the Borrower may charge on account of its telecommunications service after the tariff increase referred to in paragraph (b) of the preceding Section 7.01 have been validly established and duly authorized or ratified by all necessary corporate and governmental action and constitute valid and effective tariffs under the laws of the Guarantor; and 12 (b) that the borrowing referred to in paragraph (c) of the preceding Section ".01 has been duly authorized or ratified by all necessary corporate and governmental action and that the obligations of the respective parties to that borrowing undertaken in connection with that borrowing are legally binding and fully enforceable. Section 7.03. The date September 8, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For the Borrower: Posts and Telecommunications Corporation Headquarters Accra North Ghana Cable address: GENTEL Accra 13 IN NITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ R. Chaufournier Regional Vice President Western Africa POSTS AND TELECOMMUNICATIONS CORPORATION By /s/ Samuel E. Quarm Authorized Representative 14 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out ol the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Air conditioning 1,140,000 100% of foreign equipment expenditures (2) Civil works for 1,000,000 40% buildings (3) Automatic exchange 5,050,000 100% of foreign equipment for local expenditures exchanges and long distance (4) Local and junction 6,850,000 100% of foreign cables, network expenditures and materials and sub- 100% of local ex- scribers' apparatus penditures ex- and installation factory materials (5) Microwave and VHF 2,230,000 100% of foreign radio and openwire expenditures carrier systems with copper wire (6) Telex exchange 1,040,000 100% of foreign equipment and tele- expenditures printers 15 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (7) Miscellaneous items 1,440,000 100% of foreign (vehicles, training expenditures equipment, PBX, PABXs, cable construction tools, telephone billing machines, and test equipment) (8) Consultants' ser- 730,000 100% of foreign vices and accounting expenditures training (9) Unallocated 3,520,000 TOTAL 23,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods or services supplied from the territory and in the currency of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor and for goods or services supplied from the territory of the Guarantor. 3. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage 16 then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category (8) on account of expenditures incurred after May 31, 1975, in an aggregate amount not exceeding the equivalent of $75,000. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category to the extent required to meet the estimated shortfall proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the procurement of any item is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as in the Bank's reasonable opinion represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. 17 SCHEDULE 2 Description of the Project The Project forms part of the Borrower's 1976-1980 telecommunications development program and consists of the following: 1. Installation of automatic switching equipment of 18,300 lines (including replacement of 9,000 lines of worn out equipment) together with cable and subscriber distribution networks, required to establish about 16,000 additional telephone connections. 2. Improvement and expansion of existing long distance facilities by establishing a new Takoradi-Kumasi link, replacing the Accra-Tema link and adding multiplex and switching equipment on the existing and new trunk routes. 3. Expansion of the existing telex exchange capacity by 250 lines in Accra, with conversion to semi-automatic operation in the international telex service; and construction in Kumasi of a telex exchange with a capacity of 50 lines, including associated teleprinters. 4. Introduction of modern systems of commercial accounting and financial management and control for the Borrower, and training of the Borrower's staff in the application of those systems. The Project is expected to be completed by June 30, 1979. 18 SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* December 15, 1980 230,000 June 15, 1981 240,000 December 15, 1981 245,000 June 15, 1982 260,000 December 15, 1982 270,000 June 15, 1983 280,000 December 15, 1983 295,000 June 15, 1984 305,000 December 15, 1984 320,000 June 15, 1985 330,000 December 15, 1985 345,000 June 15, 1986 360,000 December 15, 1986 375,000 June 15, 1987 390,000 December 15, 1987 410,000 June 15, 1988 425,000 December 15, 1988 445,000 June 15, 1989 465,000 December 15, 1989 485,000 June 15, 1990 505,000 December 15, 1990 525,000 June 15, 1991 545,000 December 15, 1991 570,000 June 15, 1992 595,000 December 15, 1992 620,000 June 15, 1993 645,000 December 15, 1993 675,000 June 15, 1994 700,000 December 15, 1994 730,000 June 15, 1995 765,000 December 15, 1995 795,000 June 15, 1996 830,000 December 15, 1996 865,000 June 15, 1997 900,000 December 15, 1997 940,000 June 15, 1998 980,000 December 15, 1998 1,020,000 June 15, 1999 1,065,000 December 15, 1999 1,110,000 June 15, 2000 1,145,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 19 Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years 1% before maturity More than three years but 2-1/4% not more than six years before maturity More than six years but 4% not more than eleven years before maturity More than eleven years but 5-1/2% not more than sixteen years before maturity More than sixteen years but 7-1/4% not more than twenty-one years before maturity More than twenty-one years 8% but not more than twenty-three years before maturity More than twenty-three years 8-1/2% before maturity 20 SCHEDULE 4 Procurement A. General Procedures 1. Except as provided in Part A.2 hereof, contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Local switching and transmission equipment needed for the extension of existing installations may, for reasons of compatibility, be procured without bidding directly from the suppliers of the equipment to be extended, provided, however, that (i) the prices offered are in line with prices which must be expected to be obtained as a result of international competitive bidding for similar equipment, and (ii) the aggregate price of the equipment so purchased shall not exceed the equivalent of $2,000,000. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price of domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Ghana may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bid documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: 21 (1) Group A: bids offering goods manufactured in Ghana if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Ghana equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Ghana. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by Bank 1. Review of invitation to bid and of proposed awards and final contracts. With respect to all contracts, other than those referred to in Part A.2 hereof, estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, 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 procedures as the Bank shall reasonably request. Any further 22 modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommndation for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids or price quotations, as the case may be, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 23 SCHEDULE 5 Method for Calculating Rate of Return 1. The annual returns specified in Section 5.05(a) of the Loan Agreement shall be calculated by using as the denominator the average between the aggregate current net value of the Borrower's fixed telecommunications assets in operation at the beginning and at the end of the fiscal year for which the calculation is made and as numerator the operating income of the Borrower for the same fiscal year. 2. The term "current net value of fixed telecommunications assets in operation" shall mean at any given date the gross value of such assets, less the amount of depreciation accumulated to such date, both as valued or revalued from time to time in accordance with consistently maintained appropriate methods acceptable to the Bank. 3. The term "operating income" shall mean the difference between: (a) all operating revenues accruing from the Borrower's telecommunications service; and (b) all operating and administrative costs relating to the Borrower's telecommunications service (including adequate maintenance and taxes, if any) and provision for depreciation on all depreciable telecommunications assets, but excluding interest and other charges on debt relating thereto. 4. Depreciation shall be computed in accordance with the straight-line method at rates acceptable to the Bank and the Borrower on the gross value of the fixed telecommunications assets as shown in the balance sheet of the Borrower.