Sierra Leone - Third Power Project : Credit 0734 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 734 SL Project Agreement (Third Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SIERRA LEONE ELECTRICITY CORPORATION Dated September 29, 1977 CREDIT NO. 734-SL PROJECT AGREEMENT AGREEMENT, dated September 29, 1977, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and SIERRA LEONE ELECTRICITY CORPORATION (hereinafter called SLEC). WHEREAS by the Development Credit Agreement of even date here- with between SIERRA LEOWE (hereinafter called the Borrower) and the Association, the As.ociation has agreed to make available to the Borrower an amount in various currencies equivalent to eight million two hundred thousand dollars ($8,200,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SLEC agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement of even date herewith between the Borrower and SLEC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to SLEC on the terms and conditions therein set forth; and WHEREAS SLEC, 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: -2- 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, and "fiscal year" and "FY" mean the year starting April 1 and ending March 31. -3- ARTICLE II Execution of the Project Section 2.01. SLEC shall carry out Parts A through E of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. Section 2.02. (a) In order to assist SLEC in the preparation of plans and specifications, the preparation of bidding documents, and the supervision of the construction, for Parts A, C and D of the Project, SLEC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. (b) In order to assist SLEC in the preparation of a master plan for the further electrification of provincial areas, SLEC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. (c) In carrying out Part B of the Project, SLEC shall employ a specialist whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association. Section 2.03. In order to strengthen SLEC's financial manage- ment and accounting procedures, SLEC shall employ financial con- sultants, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.04. In order to train capable local staff for future management positions, SLEC shall appoint a local counterpart to the expatriate Head of the Generation Department. Section 2.05. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions of the Schedule to this Agreement. Section 2.06. (a) SLEC 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 acquisitioi, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freel, usable by SLEC to replace or repair such goods. (b) Except as the Association may otherwise agree, SLEC 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 2.07. (a) SLEC shall furnish to the Association, 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 Association shall reasonably request. -5- (b) SLEC: (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 paragraph (c) of this Section, enable the Association's representa- tives to visit the facilities and construction sites included in the Project and to examine 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 rea- sonably 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. (c) SLEC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of SLEC and any relevant records and documents. Section 2.08. SLEC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SLEC 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. Section 2.09. (a) SLEC shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other mat- ters relating to the purposes of the Credit. -6- (b) SLEC shall promptly inform the Association of any condi- tion which interferes, or threatens to interfere, with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by SLEC of its obligations under this Agreement and under the Subsidiary Loan Agreement. -7- ARTICLE III Management and Operations of SLEC Section 3.01. SLEC shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. Except as the Association shall otherwise agree, SLEC shall not increase the number of its employees until an appro- priate staffing and training plan shall have been agreed upon be- tween the Borrower, the Association and SLEC. Upon agreement there- on, the Borrower shall start implementing such plan not later than September 30, 1978, or such other date as may be agreed upon between the Association and SLEC. Section 3.03. SLEC shall operate and maintain its plants, equipment and other property and from time to time make all necessary renewals and repairs thereof and shall at all times carry on its operations in an efficient manner under capable management and with competent staff and maintain its financial position, all in accor- dance with sound engineering and public utility practices. -8- ARTICLE IV Financial Covenants Section 4.01. SLEC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. SLEC shall: (i) have its accouncs and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four 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 con- cerning the accounts and financial statements of SLEC and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, SLEC shall from time to time take all steps necessary, including tariff revisions, to achieve an annual rate of return of not less than ten per cent (10%) on its currently valued assets. Upon the completion of the revaluation of the SLEC's assets in accordance with Section 4.04 (a) of this Agreement, the Association and SLEC -9- shall agree on a new annual rate of return on revalued assets to be earned by SLEC starting FY1980, which annual rate of return shall not be less than eight per cent (8%). For the purposes of this Section: (a) the term "assets" means the average of the net fixed assets in operation at the beginning and end of each year; and (b) the term "return" means the net amount of income after deducting from gross revenue all expenses of operation, including adequate maintenance and depreciation, administration and general expenses and taxes, if any, but excluding interest and other charges on debt. Section 4.04. SLEC shall: (a) not later than March 31, 1979, revalue its assets and thereafter keep such assets revalued annually in accordance with appropriate accounting standards and procedures acceptable to the Association; and (b) not later than March 31, 1978, revise its depreciation policy in a manner acceptable to the Association. Section 4.05. SLEC shall consult with the Association about any capital expenditure to be incurred from its own resources during FY1978-80 which shall exceed in any one year an aggregate amount of $100,000 equivalent excluding any capital expenditure under the Project. - 10 - Section 4.06. Except as the Association and SLEC shall other- wise agree, SLEC shall not incur any debt unless its net revenue for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever is the 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. For the purposes of this Sec- tion: (a) the term "debt" shall include the assumption and guarantee of debt and shall mean all indebtedness of SLEC 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 execu- tion and delivery of a contract or loan agreement providing for such debt; (c) the term "net revenue" shall mean gross revenue from all sources, adjusted to take account of power rates in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-month period to which such revenue relates, less all operating and administrative expenses and pro- vision for taxes, if any, but before provision covering deprecia- tion, interest and other charges on debt; (d) the term "debt service" shall mean the aggregate amount of amortization (including sinking fund payments, if aay), interest and other charges on debt; and - 11 - (e) whenever it shall be necessary to value in currency of the Borrower debt payable in another currency, such valuation shall be gade on the basis of the rate of exchange at which such other currency is otainable by SLEC at the time such valuation is made, tional for the purposes of servicing such debt or, if such currency is not AggESPUtainable, at the rate of exchange which will be reasonably Cord4t@rmined by the Association. Section 4.07. Except as the Association shall otherwise agree, pr ti,,shall not assume the financial obligations of the Guma hydro- pla. ref err Section 4.08. Except as the Association shall otherwise agree, SLE@(shall consult with the Association before it shall declare fofh ividend on its equity. SE ment sl ment Ci after t - 12 - ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SLEC 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 years after the date of this Agreement, (b) If the Development Credit Agreement terminates in ac- cordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SLEC of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. - 13 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have des- ignated 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 SLEC: Sierra Leone Electricity Corporation Electricity House Private Mail Bag Freetown, Sierra Leone Cable address: ELECTRON Freetown - 14 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of SLEC may be taken or executed by its General Manager or such other person or persons as the General Manager shall designate in writing. Section 6.03. SLEC 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 SLEC, take any action or execute any documents required or permitted to be taken or executed by SLEC pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 15 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Roger Chaufournier Regional Vice President Western Africa SIERRA LEONE ELECTRICITY CORPORATION By /s/ Philip J. Palmer Authorized Representative - 16 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part B, contracts for the purchase of goods or for civil works shall be procured in accordance with pro- cedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Bidders for the works included in the Project shall be prequali- fied as described in paragraph 1.3 of Part A of the Guidelines. B. Other Procurement Procedures Accounting machines for SLEC may be procured on the basis of international competitive bidding from firms with local service facilities. C. 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 for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and sim- ilar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to SLEC of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 17 - 2. Goods manufactured in Sierra Leone may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Sierra Leone if the bidder shall have established to the satisfaction of SLEC and the Association that the manufacturing cost of such goods includes a value added in Sierra Leone equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Sierra Leone. (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 evalu- ated bid of each group. Such lowest evaluated bids shall then be - 18 - 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 fur- ther comparison only, an amount equal to (i) the amount of cus- toms duties arnd 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. D. Evaluation and Comparison of Bids for Civil Works; Preference for Domestic Contractors With respect to any contract for civil works included under Category (1) (b) of the table set forth in Schedule 1 to the Devel- opment Credit Agreement and to be procured in accordance with the procedures described in Part A of this Schedule, SLEC may grant a margin of preference of 7-1/2% to domestic contractors, in accor- dance with, and subject to, the following provisions: - 19 - (a) Contractors shall be required to prequalify as provided in Part A of this Schedule and applicants for qualification apply- ing also for such preference shall be asked to provide, as part of the data for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification accepted by the Association, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by SLEC, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. E. Review of Procurement Decisions by the Association 1. With respect to all contracts estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, SLEC shall furnish to the Asso- ciation, for its comments, the text of the invitations to bid and - 20 - the specifications and other bidding documents, together with a aescription of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures 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, SLEC shall, before a final decision on the award is made, inform the Associa- tion of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report, by the consultants referred to in Section 2.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Associa- tion shall reasonably request. The Association shall, if it deter- mines that the intended award would be inconsistent with the Guide- lines or this Schedule, promptly inform SLEC and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Association'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 Association promptly after its execution and prior to the delivery to the Association of the first application for with- drawal of funds from the Credit Account in respect of such contract. - 21 - 2. With respect to each contract to be financed out of the pro- ceeds of the Credit and not governed by the preceding paragraph, SLEC shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first applica- tion for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reason- ably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform SLEC and state the reasons for such determination.