Ghana - Third Power Project : Loan 1381 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1381-GH LOAN AGREEMENT (Third Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and ELECTRICITY CORPORATION OF GHANA Dated March 24, 1977 LOAN AGREEMENT AGREEMENT, dated March 24, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and ELECTRICITY CORPORATION OF GHANA (hereinafter called the Bor- rower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agree- ment; (B) the Republic of Ghana (hereinafter called the Guarantor) has requested the Association to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Guarantor and the Association (herein- after called the Development Credit Agreement) the Association is agreeing to provide such assistance in an aggregate principal amount equivalent to nine million dollars ($9,000,000) (hereinafter called the Credit); (C) the Project will be partly carried out by the Borrower with the Guarantor's assistance and, as part of such assistance, the Guarantor will make available to the Borrower part of the proceeds of the Credit as provided in the Development Credit Agreement; (D) the Bank and the Borrower intend, to the extent practic- able, that the proceeds of the Loan provided for in this Agreement be disbursed on account of expenditures on the Project after dis- bursement of the proceeds of the Credit, other than the proceeds -2- allocated for Part A.5 and Part D of the Project, provided for in the Development Credit Agreement is completed; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -3- 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 Guar- antee 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 Gen- eral Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "VRA" means the Volta River Authority, a corporation established under the Volta River Development Act, 1961, of the Guarantor; (b) "Development Credit Agreement" means the agreement of even date herewith between the Guarantor and the Association for the purposes of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Appli- cable to Development Credit Agreements of the Association dated March 15, 1974, as made applicable to such agreement, all agree- ments supplemental to the Development Credit Agreement and all schedules to the Development Credit Agreement; -4- (c) "fiscal year" means the Borrower's fiscal year; and (d) "Cedis" and the sign "V" mean Cedis in currency of the Guarantor. -5- 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 re- ferred to, an amount in various currencies equivalent to nine mil- lion dollars ($9,000,000). 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 by agreement between the Borrower and the Bank, for expendi- tures 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 fi- nanced out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods or for civil works required for the Project and to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1980 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%) -6- 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 February 1 and August 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. -7- ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Parts A to C of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and public utility practices. Section 3.02. In order to assist the Borrower in the procure- ment of goods and services required for Parts A to C of the Project and in the supervision of the carrying out of said Parts of the Project, the Borrower shall employ engineering consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 3.03. (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 re- place 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 Parts A to C of the Project. Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, -8- contract documents and construction and procurement schedules for Parts A to C of 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 Parts A to C 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 said Parts of the Project; (ii) shall enable the Bank's accredited 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 informa- tion as the Bank shall reasonably request concerning Parts A to C 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 enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents. 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 public utility practices and under the supervision of experienced and competent management, assisted by qualified staff in adequate num- bers; (b) by July 1, 1977 or such later date as the Bank may agree, have appointed a qualified and experienced person to the position of chief engineer and have employed two qualified and experienced accountants; (c) by January 1, 1978 or such later date as the Bank may agree, prepare, with the assistance of qualified and experienced experts, a plan, satisfactory to the Bank, defining the Borrower's manpower needs, and thereafter carry out such plan; (d) by July 1, 1977 or such later date as the Bank may agree, carry out a survey on the feasibility of increasing the efficiency of its operations through staff training, and shall appoint a senior member of its staff to be in charge of its train- ing programs; and - 10 - (e) consult the Bank about any proposed appointment to the position of managing director or chief engineer of the Borrower sufficiently in advance of any such appointment to afford the Bank an adequate opportunity to comment on his qualifications and expe- rience, and shall make any such appointment only after due consi- deration of the Bank's views thereon. 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, povers, 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 re- quired make all necessary repairs and renewals thereof, all in accordance with appropriate business and engineering practices. (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. Section 4.03. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.04. The Borrower shall take such action as shall be appropriate to ensure that, as'from January 1, 1978 or such other date as the Bank shall agree, all power supplied by it to its cus- tomers for industrial steam production be the surplus hydroelectric power supplied to the Borrower by VRA and be supplied to them on an interruptible basis. - 11 - ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.02. The Borrower 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 appropriate auditing principles consistently ap- plied, by independent auditors approved by the Auditor General of the Guarantor and 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 fi- nancial 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 finan- cial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. - 12 - (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 and other charges on, the Loan; provided, however, that the foregoing provi- sions 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 5.04, The Borrower shall revalue its fixed assets in service at the end of fiscal year 1976 in accordance with a method acceptable to the Bank, such revaluation to be completed by June 30, 1977, or such later date as the Bank may agree. Thereafter, the Bor- rower shall revalue its fixed assets in service at the end of each fiscal year in accordance with appropriate revaluation principles and procedures acceptable to the Bank. Section 5.05. (a) The Borrower shall take promptly as required all action as may be necessary (including, where appropriate, adjustments in its rates for the sale of electricity) to ensure - 13 - that its revenues are sufficient to produce an annual rate of return of not less than eight per cent (8%) measured by taking its net operating income as a percentage of the sum of (i) the fair value of its fixed assets in service and (ii) an appropriate allowance for its working capital; provided, however, that if the revaluation of the Borrower's fixed assets in service that accord- ing to Section 5.04 shall be completed by June 30, 1977, shows that, as of December 31, 1976, the value of the Borrower's net fixed as- sets in service is not equal to sixty-nine million Cedis (0 69,000,0o0O) the rate of return specified in this paragraph (a) shall be adjusted by multiplying the rate of return by a fraction composed of 69,000,000 as numerator and said value of the Borrower's fixed assets in service (expressed in Cedis at rates of exchange in effect on December 31, 1976) as denominator. (b) On or before July 31 of each year, the Borrower shall: (i) review on the basis of realistic estimates and forecasts whether its revenues will be sufficient to produce the annual return required by paragraph (a) of this Section for the current fiscal year and the next following fiscal year, and (ii) furnish to the Bank the results of such review. (c) For the purposes of this Section: (i) "Net operating income" means income remaining after subtracting from total operating revenues all charges which in the normal conduct of business are proper to be charged to the revenue account, including pro- vision for adequate maintenance and straight line depreciation of assets, but before deducting interest and other charges on borrowings. - 14- (ii) "Fair value of its fixed assets in service" means the average value of the Borrower's gross fixed assets in service at the beginning and end of the fiscal year under consideration less the accumu- lated provision for depreciation, reduced by the amount contributed by customers for assets in service, and by the Guarantor as capital contribu- tions for subsidized stations, averaged on a similar basis. The values employed for such depreciated fixed assets in service shall be the values shown in the Borrower's balance sheets as certified in accordance with Section 5.02 of this Agreement. (iii) "An appropriate allowance for its working capital" means an amount equal to 5% of the average depre- ciated value of the Borrower's fixed assets in service for the respective fiscal year, computed in accordance with paragraph (ii) above. (iv) "Straight line depreciation of assets" means straight line depreciation computed on the realistic value of each category of the Borrower's gross fixed assets in service. Section 5.06. (a) Except as the Bank shall otherwise agree, the Borrower shall not incur any debt unless the Borrower's net revenue for the fiscal year next preceding the date of such incur- rence or for a later 12-month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum debt service requirement on all the Borrower's - 15 - debt (including the debt to be incurred) in any succeeding fiscal year (including the fiscal year in which such debt is to be incurred). (b) For the purposes of this Section: (i) The term "debt" means all debt (including any indebtedness assumed or guaranteed by the Borrower) but shall exclude: (A) debt representing money borrowed in the ordinary course of business and maturing by its terms on demand or not more than one year after the original date of in- currence, provided that the amount of such debt at any time outstanding shall not ex- ceed 10% of the Borrower's total operating expenses excluding depreciation for the preceding fiscal year or any later 12-month period, whichever is greater; and (B) debt which is incurred in the ordinary course of business other than for money borrowed and which is payable not more than one year after the original date of its incurrence. (ii) The term "incur" with reference to any debt shall include any modification of the terms of payment of such debt. Debt shall be deemed to be incurred on the date of execution and delivery of the loan contract or agreement providing for such debt, and debt guaranteed by the Borrower shall be deemed - 16 - to be incurred by it on the date of execution and delivery of the agreement for such guarantee. (iii) The term "net revenue" shall mean gross operating revenue, adjusted to take account of rates for the sale of electricity in effect at the time of incur- rence of debt even though they were not in effect during the fiscal year or 12-month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, and operating expenses, but before provision for depre- ciation and debt service requirements. (iv) The term "debt service requirement" shall mean the aggregate amount of principal repayments, amortization (including sinking fund payments, if any), interest and other charges on debt. (v) Whenever it shall be necessary to value in the currency of the Guarantor debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by the Borrower, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Bank. Section 5.07. Except as the Bank may otherwise agree, the Borrower shall ensure that the aggregate amount due to it as of the first business day of every calendar month following December - 17 - 1977 on account of electricity supplied to its customers will be less than the sum of the amounts charged or to be charged by it on account of electricity supplied to its customers during the three calendar months immediately preceding that day. Section 5.08. (a) The Borrower shall, at all times, apply uniform rates for the sale of electricity to all industrial enterprises. (b) Notwithstanding paragraph (a) above, the Borrower may continue to apply to industrial enterprises such rates as the Borrower is obliged to charge them under contractual arrangements in effect on the date of this Agreement. Except as the Bank shall otherwise agree, the Borrower shall not extend the duration of such contractual arrangements. Section 5.09. The Borrower shall, subject to the provisions of Section 12 of the Electricity Corperation of Ghana Decree, 1967, N.L.C.D. 125 of the Guarantor, declare an appropriate annual divi- dend out of such portion of its accumulated net earnings as in its reasonable judgment will not be needed: (i) to meet any of its liabilities due and payable on, or shall become due and payable during the 12-month period immediately following, the date on which such declaration or distribution is made; or (ii) to meet any capital investment expenditure expected to be incurred. -18 - Section 5.10. The Borrower shall: (a) not later than December 31, 1977 revalue its inventories and review its inventory management system; (b) employ experienced and qualified financial experts to assist the Borrower in carrying out the action specified in para- graph (a) hereof; and (c) (i) furnish to the Bank, promptly upon the completion of the review of its inventory management system, the results of such review, (ii) give the Bank a reasonable opportunity to com- ment thereon, and (iii) promptly take such action as shall be appropriate to improve said system. Section 5.11. Except as the Bank shall otherwise agree, the Borrower shall not, from the date of this Agreement to June 30, 1980, undertake any construction or expansion project other than the Project and rural electrification projects, involving aggregate annual expenditures exceeding $2,000,000 equivalent. - 19 - ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that all conditions to the effectiveness of the Development Credit Agreement have been fulfilled. Section 6.02. The date June 24, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. - 20 - ARTICLE VII Addresses Section 7.01. 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: Managing Director Electricity Corporation of Ghana P.O. Box 521 Accra, Ghana Cable address: HEADTRIC Ghana - 21 - 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ R. Chaufournier Regional Vice President Western Africa ELECTRICITY CORPORATION OF GHANA By /s/ S. Quarm Authorized Representative - 22 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Loan and the allocation of amounts of such proceeds to each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment, materials, 6,700,000 supplies, spare parts and vehicles (a) imported 100% of foreign expenditures (b) locally manu- 100% of ex-factory factured cost (2) Erection of lines 500,000 100% of foreign and sub-stations, expenditures and related works (3) Consultants' 150,000 100% of foreign services expenditures (4) Unallocated 1,650,000 TOTAL 9,000,000 - 23 - 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor. 3. The disbursement percentages have been calculated in compli- ance 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 impor- tation, 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. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (a) payments made for expenditures on account of goods or services required for Part A.4 of the Project until evidence satisfactory to the Bank has been furnished to the Bank showing that a letter of intent has been issued by VRA in respect of the conclusion of a contract for the construction of a 161 kV electric power transmission line linking VRA's substation at Dunkwa to VRA's substation at Asanwinso; and - 24 - (b) payments made for expenditures on account of goods or services required for A.5 of the Project. In addition, except as the Borrower, the Association and the Bank shall otherwise agree, and until all amounts of the Credit other than amounts allocated to Categories (4) and (5) of paragraph 1 of Schedule 1 to the Development Credit Agreement shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 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 Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated short- fall, 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 th- disbursement per- centage then applicable to such expenditures in order that fur- ther vithdrawals under such Category may continue until all ex- penditures thereunder shall have been made. - 25 - 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 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 Credit and of the Loan. - 26 - SCHEDULE 2 Description of the Project The Project consists of the following: Part A: 1. Construction of a 33/11 kV 2 x 10 MVA substation at the Aboso glass factory and a 33 kV double circuit transmission line linking that substation with VRA's substation at Tarkwa. 2. Construction of a 33/11 kV 2 x 10 MVA substation at Teshie-Nungua and a 33 kV double circuit transmission line and cable linking that substation with substation L in Accra. 3. Construction of a 33/3.3 kV 2 x 5 MVA substation be- tween Accra and Weija, a 33 kV double circuit trans- mission line linking the pumping station of the Ghana Water and Sewerage Corporation at Weija through that substation with substation A in Accra, and a 33 kV single circuit transmission line linking said pumping station to the irrigation area located about 6 km southwest of Weija. 4. Construction of seven 33/11 kV substations with a total installed capacity of about 11.45 MVA, about 86 km of 33 kV single circuit transmission lines linking VRA's substation near Asanwinso through said -27 - substations with various industries at Sefwi-Wiawso, Awaso, Subin and Bibiani, and related LV distribution lines necessary to serve about 30,000 residents of the Sefwi-Wiawso-Bibiani area. 5. Construction of four 33/11 kV substations and fifteen 33/11 kV/LV substations and a 33 kV single circuit transmission line of about 91 km linking Kumasi through said substations with Nsuta and Kumavu, together with related LV distribution lines necessary to permit supply of electricity to 12 townships and various industries, water pumping stations and schools in the Nsuta-Kumavu area. Part B: Improvement of the distribution network serving Tema, including the laying of about 11 km of 33 kV cable, equipping of two new 33/11 kV substations of 2 x 20 MVA each, reinforcing of two 33/11 kV substations of 2 x 20 MVA and 2 x 10 MVA, respectively, and con- struction of about 4 km of 33 kV overhead lines. Part C: 1. Supply of spare parts for the Borrower's existing 33 kV, 11 kV, and LV distribution grids, miscellaneous distribution materials required for the development of the Borrower's distribution networks during a three-year period, and necessary service vehicles. - 28 - 2. Reinforcement of Accra's distribution network. Part D: Study of the costs of power generation, transmission and distribution, and of the pricing of electricity in Ghana. * * e e The Project is expected to be completed by June 30, 1980. - 29 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1 beginning February 1, 1982 through August 1, 1996 295,000 On February 1, 1997 150,000 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 equiva- lents determined as for purposes of withdrawal. - 30 - Premiums on Prepayment The following percentages are specified as the premiums pay- able 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 1-1/4% More than three years but not more than six years before maturity 2-1/2% More than six years but not more than eleven years before maturity 4-1/2% More than eleven years but not more than sixteen years before maturity 6-3/4% More than sixteen years but not more than eighteen years before maturity 7-1/2% More than eighteen years before maturity 8-1/2% - 31 - SCHEDULE 4 Procurement A. International Competitive Bidding Except as provided in Part B hereof, contracts for the pur- chase of goods or for civil works shall be procured 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. B. Other Procurement Procedures Contracts for transmission lines and distribution equipment and materials costing less than $50,000 equivalent may be awarded to suppliers from which such items have been previously purchased by the Borrower, provided, however, that: (a) the aggregate cost of the items so procured does not exceed $500,000 equivalent; (b) such awards are made on the basis of negotiated prices; (c) such awards are justified by considerations of stan- dardization; and (d) the prices of the contracts so awarded are reasonably close to prices quoted for similar items under international com- petitive bidding. - 32 - 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 the Borrower of inland freight and other expen- ditures 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 pref- erence 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- loved 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 Ghana if the bidder shall have established to the satis- faction of the Borrower and the Bank that the manu- facturing cost of such goods includes a value added - 33 - 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 evalu- ated 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 fur- ther comparison only, an amount equal to: (i) the amount of cus- toms 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. - 34 - D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equivalent of $100,000 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 docu- ments or procedures as the Bank shall reasonably request. Any further 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 Bor- rower 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 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 recommendations 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. - 35 - (c) The terms and conditions of the contract shall not, with- out 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 submis- sion 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 pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execu- tion and prior to the submission to the Bank of the first applica- tion for withdrawal of funds from the Loan 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 Bank shall reasonably re- quest. 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 de- termination.