Afghanistan - Power Project : Credit 0627 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 627 AF PROJECT AGREEMENT (Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and DA AFGHANISTAN BRESHNA MOASSESSA Dated May 17, 1976 PROJECT AGREEMENT AGREEMENT, dated May 17, 1976, between INTERNATIONAL DEVELOP- MENT ASSOCIATION (hereinafter called the Association) and DA AFGHANISTAN BRESHNA MOASSESSA (hereinafter called DABM). WHEREAS by the Development Credit Agreement of even date here- with between the Republic of Afghanistan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies i-quiva- lent to ten million dollars ($10,000,000), on the terms and condi- tions set forth in the Development Credit Agreement, but only on condition that DABM agrees to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into be- tween the Borrower and DABM, the proceeds of the credit provided for under the Development Credit Agreement will be made available to DABM on the term and conditions therein set forth; and WHEREAS DABM, 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. -3- ARTICLE II Execution of the Project Section 2.01. DABM shall carry out 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. In order to assist DABM in (i) the preparation of engineering specifications, evaluation of bids, supervision of construction and commissioning of the works provided under Part A of the Project, and (ii) the carrying out of the training program * provided under Part B(2) of the Project, DABM shall make appropri- ate and timely arrangements for the employment of consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Association. Section 2.03. Except as the Borrower and the Association shall otherwise agree, the goods and works for the Project 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 2.04. (a) DABM 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 incidental 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 DABM to replace or repair such goods. (b) Except as the Association may otherwise agree, DABM shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) DABM shall furnish to the Association promptly upon their preparation, the plans, specifications, re- ports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably re- quest. (b) DABM: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identi- fy the goods, works 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 Associa- tion's representatives 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 reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods, works and services financed out of such proceeds. (c) DABM shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, prop- erty and equipment of DAB4 as well as any relevant records and documents related to the Projec;. -5- Section 2.06. DABM shall duly perform all its obligations un- der the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, DABM 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 2.07. (a) DABM shall, at the request of the Associa- tion, exchange views with the Association with regard to the prog- ress 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. (b) DABM shall promptly inform the Borrower and the Associa- tion of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the pur- poses of the Credit, or the performance by DABM of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.08. DABM undertakes to take appropriate steps to en- sure environmental protection against any adverse impact of the Project, including the installation of silencers, in the form of sound-absorbing baffles at compression inlets and turbine exhausts, in the gas turbine units provided under Part A of the Project. Section 2.09. DABM shall demonstrate to the satisfaction of the Borrower and the Association the justification for conversion to a combined cycle plant of the gas turbine units before imple- menting the provision for such conversion as provided under Part A of the Project. ARTICLE III Management and Operations of DABM Section 3.01. (a) DABM shall at all times manage its affairs and conduct its business in an efficient manner under capable man- agement and with competent staff and in accordance with appropriate public utility, administrative and financial practices. (b) DABM shall take within the laws and regulations of the Borrower all necessary steps to acquire, maintain and renew all rights, powers and privileges which are necessary or useful in the conduct of its business. (c) DABM shall at all times operate, maintain and repair its facilities, plants, equipment and other property in accordance with appropriate public utility practices. (d) Except as the Borrower and the Association shall other- wise agree, DABM shall not transfer, or permit to be transferred, to any other person or entity any portion of its property the transfer of which would significantly affect the operations or the financial position of DABM. Section 3.02. DABM shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Bor- rower and the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate public utility practices. -7- Section 3.03. DABM undertakes to meter power supply to the consumers referred to in Section 3.05(c) of the Development Credit Agreement by a date not later than December 31, 1977, or such other date as shall be agreed between the Association and DABM. Section 3.04. DABM undertakes to develop, in consultation with the Borrower and the Association, key indicators for monitor- ing its technical and financial performance. Section 3.05. (a) DABM shall, with the assistance of the con- sultants referred to in Section 3.04 of the Development Credit Agreement: (i) formulate and furnish to the Association by Sep- tember 30, 1976 a work program, acceptable to the Association for continuing or initiating studies and related activities required to develop suit- able programs for improving DABM's management and operations; (ii) carry out, or cause to be carried out, with due diligence and efficiency the studies and related activities included in such work program and con- sult with the Association on the recommendations emerging therefrom; and (iii) implement with due diligence and efficiency and in accordance with a time schedule such recommendations emerging from the said studies and related activi- ties, as such time schedule and recommendations shall be acceptable to the Borrower and the Associa- tion. -8- (b) DABM shall adopt not later than July 31, 1976 or such other date as shall be agreed between the Association and DABM and thereafter implement without delay a program for progress- ively reducing, over a five-year period, DABM's energy losses to not more than 20% of generation. -9- ARTICLE IV Financial Covenants Secticn 4.01. DABM shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. DABM 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 indepen- dent 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 con- cerning the accounts and financial statements of DABM and the audit thereof as the Association shall from time to time reason- ably request. Section 4.03. (a) Without limitation or restriction upon the provisions of Section 3.05 of the Development Credit Agreement, and except as the Association and DABM shall otherwise agree, DABM shall take, from time to time, all necessary steps within its pover (including adjustments of its tariffs) as shall provide, beginning with the Borrower's fiscal year 1980-81 (March 21, 1980-March 20, 1981), revenues sufficient to produce an annual rate of return of -10- not less than 8% on the average value of the net fixed assets of DABM in operation. (b) For the purposes of this Section: (i) the annual rate of return shall be calculated by relating the net operating income for the year in question to the average of the value of the net fixed assets of DABM in operation at the be- ginning and at the end of the year; (ii) the term "net operating income" shall mean the difference between: (A) gross operating revenue accruing from DABM's services relating directly to the generation, transmission, distribution or sale of elec- tricity and other services incidental thereto; and (B) all expenses of operation, administration, adequate maintenance, taxes or any payment in lieu of taxes and adequate provision for de- preciation but excluding interest and other charges on debt; (iii) the term "value of the net fixed assets of DABM in operation" shall mean the gross book value of such assets, less the amount of accumulated depreciation ooth as valued from time to time in accordance with - 11 - sound and consistently maintained methods of valua- tion satisfactory to the Association. - 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 ef- fective. Section 5.02. (a) This Agreement and all obligations of the Association and of DABM 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 accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify DABM 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 de- signated 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 DABM: Water and Power Authority Afghanistan Breshna Moassessa Chamani Hozuri Kabul, Afghanistan Cable address: AFBRESHNA Kabul -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 DABM may be taken or executed by the Vice- President of WAPA in charge of DABM or such other person or per- sons as the Vice-President of WAPA in charge of DABM shall de- signate in writing. Section 6.03. DABM 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 DABM, take any action or exe':ute any documents required or permitted to be taken or executed by DABM pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all col- lectively 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 Is! Willi A. Wapenhans Regional Vice President Europe, Middle East and North Africa DA AFGHANISTAN BRESHNA MOASSESSA By /s/ Abdullah Malikyar Authorized Representative -16 0 SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part A.2 hereof, the goods and works shall be procured under contracts to be awarded in accordance with procedures 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 Guide- lines), on the basis of international competitive bidding. 2. Notwithstanding the provisions set forth in A.1 above, civil works under the Project may be carried out by force account under arrangements acceptable to the Association. B. Review of invitation to bid and of proposed awards and final1 contracts 1. Before bids are invited, DABM shall furnish to the Associa- tion, 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 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. - 17 - 2. After bids have been received and evaluated, DABM shall, be- fore a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the con- tract 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 de- termines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform DABM and state the reasons for such determination. 3. The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. 4. Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the sub- mission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract.