Philippines - Provincial Cities Water Supply Project : Loan 1415 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1415 PH Loan Agreement (Provincial Cities Water Supply Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated May 13, 1977 LOAN AGREEMENT AGREEMENT, dated May 13, 1977, between REPUBLIC OF THE PHILIPPINES (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). FHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) Parts A and B of the Project will be carried out by Local Water Utilities Administration (hereinafter called LWUA) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to LWUA part of the proceeds of the Loan as hereinafter provided; (C) Part C of the Project will be carried out by Metro- politan Waterworks and Sewerage System (hereinafter called MWSS) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to MWSS part of the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Bank and LWUA; NOW THEREFORE the parties hereto hereby agree as follows: - 2 - 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Bank and LWUA of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "LWUA Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and LWUA pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to t'Ae, and such term includes all schedules to the Subsidiary Loan Agreement; and - 3 - (c) "MWSS Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and MWSS pursuant to Section 3.01 (d) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; and (d) "Water District" means a water district established pursuant to the provisions of Title II of the Borrower's Presidential Decree No. 198 as amended by Presidential Decree No. 768, in the cities of Baguio, Cabanatuan, Lipa, Lucena-Pagbilao-Tayabas, San Fernando and Tarlac. 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. (a) 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 by agreement between the Borrower and the Bank, 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 and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) On each of the semi-annual interest payment dates specified in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amount allocated, in Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank. - 5 - Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 1 to the Project Agreement. Section 2.04. The Closing Date shall be March 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower 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 two-tenths per cent (8.20%) 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 1 and December 1, 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. - 6 - ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause LWUA to perform in accordance with the provisions of the Project 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 LWUA to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Loan required to carry out Parts A and B of the Project to LWUA under a subsidiary loan agreement to be entered into between the Borrower and LWUA, under terms and conditions which shall have been approved by the Bank. (c) The Borrower shall cause 4WSS to carry out Part C of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices and shall cause MWSS to provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. - 7 - (d) The Borrower shall relend the proceeds of the Loan required to carry out Part C of the Project to MWSS under a subsidiary loan agreement to be entered into between the Borrower and MWSS under terms and conditions which shall have been approved by the Bank. (e) The Borrower shall exercise its rights under the LWUA Subsidiary Loan Agreement and the MWSS Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the LWUA Subsidiary Loan Agreement, the MWSS Subsidiary Loan Agreement or any provision thereof. (f) The Borrower shall carry out Part D of the Project with due diligence and efficiency and in co-nformity with appropriate administrative, financial, training and engineering practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. In order to assist MWSS in carrying out Part C of the Project, the Borrower shall cause MWSS to employ engineering consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. - 8 - Section 3.03. (a) In carrying out Part D of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. (b) The Borrower shall carry out the said Part D under a training program acceptable to the Bank. 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 iizCdent 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 may otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loans to be used exclusively for the Project. Section 3.05. (a) The Borrower shall, and shall cause MWSS to furnish to the Bank, promptly upon their preparation, the plans and reports for Parts D and C, respectively, the Project and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower shall, and shall cause MWSS to: (i) maintain records adequate to record the progress of Parts D and C respectively, 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) without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities included in the said Parts of the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) furnish to the Bank all such information as the Bank shall reasonably request concerning the said Parts of the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) The Borrower shall cause MWSS to enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of MWSS and any relevant records and documents. - 10 - ARTICLE IV Other Covenants Section 4.01. (a) It is the mutual intention of the Borrower and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. (b) To that end the Borrower: (i) represents that at the date of this Agreement no lien exists on any governmental assets as security for any external debt except as otherwise disclosed in writing by the Borrower to the Bank; and (ii) undertakes that, except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto equally and ratably, and at no cost to the Bank, 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 made to that effect. The Borrower shall promptly inform the Bank of the creation of any such lien. (c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. - 11 - (d) As used in this Section, the term "governmental assets" means assets of the Borrower or of any agency of the Borrower including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Borrower. (e) The Borrower further undertakes that, within the limits of the laws in force in its territories, it will make the foregoing undertaking effective with respect to liens on the assets of its political subdivisions and their agencies, and to the extent that the Borrower is unable within the limits of the laws in force in its territories to make this undertaking effective, the Borrower will give to the Bank an equivalent lien satisfactory to the Bank. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. - 12 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) LWUA shall have failed to perform any covenant, agreement or obligation of LWUA under the Project Agreement or the LWUA Subsidiary Loan Agreement. (b) MWSS shall have failed to perform any covenant, agreement or obligation of MWSS under the MWSS Subsidiary Loan Agreement. (c) An extraordinary situation shall have arisen which shall make it improbable that LWUA will be able to perform its obligations under the Project Agreement. (d) Presidential Decree No. 198 of the Borrower, as amended to the date of this Agreement shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of LWUA to carry out the covenants, agreements and obligations set forth in the Project Agreement. (e) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of LWUA or MWSS or for the suspension of the operations of LWUA or MWSS. - 13 - Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraphs (h) thereof: (a) the events specified in paragraphs (a) or (b) of Section 5.01 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; and (b) the events specified in paragraphs (d) or (e) of Section 5.01 of this Agreement shall occur. - 14 - ARTICLE VI Effective Date; Termination Section 6.01. 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) the execution of the Project Agreement on behalf of LWUA has been duly authorized or ratified by all necessary corporate and governmental action; (b) the execution of the LWUA Subsidiary Loan Agreement on behalf of the Borrower and LWUA, respectively, has been duly authorized or ratified by all necessary corporate and governmental action; and (c) the execution of the MWSS Subsidiary Loan Agreement on behalf of the Borrower and MWSS, respectively, has been duly authorized or ratified by all necessary corporate and governmental action. Section 6.02. 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: - 15 - (a) that the Project Agreement has been duly authorized or ratified by LWUA, and is legally binding upon LWUA in accordance with its terms; (b) that the LWUA Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and LWUA, respectively, and is legally binding upon the Borrower and LWUA in accordance with its terms; and (c) that the MWSS Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and MWSS, respectively, and is legally binding upon the Borrower and MWSS in accordance with its terms. Section 6.03. The date August 12, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. - 16 - ARTICLE VII Represcentative of the Borrower; Addresses Section 7.01. The Secretary of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Secretary of Finance Department of Finance Manila, Philippines Cable address: Telex: SECFINANCE 7550 CBP-PH Manila 0268 CBCONF For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 17 - IN WITNESS 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. REPUBLIC OF THE PHILIPPINES By /s/ Eduardo Z. Romualdez Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President East Asia and Pacific - 18 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of 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) Civil works 1,400,000 15% of local expenditures or 100% of foreign expenditures (2) Equipment and 7,900,000 materials (a) directly 100% of foreign imported expenditures (b) locally manu- 100% of local factured expenditures ex-factory (c) imported but 65% locally pro- cured (3) Consultants' 6,000,000 100% of foreign services expenditures (a) under Parts A and B of the Project (b) under Part C of the Project - 19 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Training 200,000 100% of foreign expenditures (5) Interest and other 3,300,000 Amounts due charges on the Loan accrued on or before November 30, 1981 (6) Unallocated 4,200,000 TOTAL 23,000,000 - 20 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 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 Borrower 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 then applicable to such item as required to be consistent with the aforementioned policy of the Bank. - 21 - 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $200,000 may be made in respect of Category (3) on account of payments made for such expenditures before that date but after January 1, 1977. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 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. - 22 - 6. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such i 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. - 23 - SCHEDULE 2 Description of the Project The Project consists of the following Parts: Part A: Water Supply The provision of improved water supply through rehabilitation and construction works in six provincial water systems and through the development of efficient public utility organizations to operate the said systems as follows: (1) For all Water Districts included in the Project Immediate minor improvement works to provide better service, leak detection surveys; replacement of leaking service connections, provision of new service connections, meters and hydrants, provision of vehicles for operation and maintenance, and construction and equipment of office accommodations, meter shops, laboratories and stores; and boring of test wells as needed for field investigations. (2) For Baguio Water District Rehabilitation of Buyog Spring and Santo Thomas Reservoir, construction of a well field to produce about 130 1/sec with booster - 24 - pumping system, construction of about 13 km of transmission pipelines and of two storage tanks of about 3,800 m3 capacity at Baguio Hospital (with booster pumping station) and at Camp Allen, construction of about 110 km of distribution pipelines and rehabilitation of Kilometer 8 storage tank. (3) For Cabanatuan Water District Rehabilitation of two wells and construction of a new well field to produce about 180 1/sec and of one well to produce about 12 1/sec, construction of two storage tanks of a capacity of about 1,200 m3 each or of additional wells to meet peak demand and construction of about 50 km of distribution pipelines. (4) For Lipa Water District Rehabilitation of two wells and one storage tank, construction of a well field to produce about 100 1/sec and construction of about 30 km of distribution pipelines. - 25 - (5) For Lucena-Pagbilao-Tayabas Water District Expansion of, and improvements to, the May-it Spring intake works, construction of about 8 km of transmission pipelines and of two storage tanks of capacity of about 500 m3 and 700 m3 respectively, the rehabilitation of the Tongko storage tanks and construction of about 50 km of distribution pipelines. (6) For San Fernando (La Union) Water District Construction of six wells of a total capacity of about 100 1/sec in the banks of the Bauang and Baroro Rivers, of about 35 km of transmission and distribution pipelines. (7) For Tarlac Water District Rehabilitation of two wells and construction of a new well field to produce about 180 1/sec, construction of two storage tanks of a capacity of about 2,100 m3 and 600 m3 respectively and of about 24 km of distribution pipelines. - 26 - Part B: Provincial water systems studies Feasibility studies for about 10 provincial water systems. Part C: Manila Sewerage Studies Review and evaluation of the 1967-1969 feasibility study, and of on-going studies, of the Metro-Manila Sewerage Master Plan, a sanitation program, additional economic and tariff studies, project construction phasing, final design, contract documentation and other studies and long term advisory services to MWSS. Part D: Training Training of staff of the Borrower's Department of Health and the Bureau of Public Works in the Borrower's Department of Public Works, Transportation and Communications, the Borrower's Department of Local Government and Community Development, LWUA and MWSS and such other agencies of the Borrower as the Borrower and the Bank shall agree, in the design and construction of water supply systems for small communities (including the provision of equipment related thereto). The Project is expected to be completed by December 31, 1981. - 27 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (express,ed in dollars)* On each June 1 and December 1 beginning June 1, 1982 through December 1, 1996 740,000 On June 1, 1997 800,000 * 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. - 28 - Premiums on Prepayment The following percentages are specified as th- 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 before maturity 1.25% More than three years but not more than six years before maturity 2.45% More than six years but not more than eleven years before maturity 4.50% More than eleven years but not more than sixteen years before maturity 6.55% More than sixteen years but not more than eighteen years before maturity 7.40% More than eighteen years before maturity 8.20%