Ceylon - Ceylon : Credit 1048 - Sixth Power Project -Development Credit Agreement - Conformed

OFFICIAL DOCUMENTS CREDIT NUMBER 1048 CE Development Credit Agreement (Sixth Power Project) between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1980 CREDIT NUMBER 1048 CE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1980, between DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out by the Ceylon Electri- city Board with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the said Board the proceeds of the Credit as hereinafter provided; (C) the Borrower intends to contract from the Saudi Fund for Development (hereinafter called the Saudi Fund) a loan (here- inafter called the Saudi Fund Loan) in an amount equivalent to $20,000,000 (twenty million dollars) to assist in financing the Project on the terms and conditions set forth in an agreement (hereinafter called the Saudi Fund Loan Agreement) to be entered into between the Borrower and the Saudi Fund; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and the Ceylon Electricity Board; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). -2- Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and the Ceylon Electricity Board of even date here- with, 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) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Ceylon Electricity Board pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Board" means the Ceylon Electricity Board, a statutory authority established pursuant to the Ceylon Electricity Board Act; (d) "Ceylon Electricity Board Act" means the Ceylon Elec- tricity Board Act, No. 17 of 1969, as amended; (e) "Joint Scheme" means any joint scheme for the generation of electrical energy, the irrigation of land, the control of floods or other like purposes as referred to in Section 12 (1) of the Ceylon Electricity Board Act; (f) "local authorities" means the local authorities carrying on electrical undertakings as referred to in Section 21 of the Ceylon Electricity Board Acl; and (g) "Rupees" and "Rs" means Rupees in the Borrower's cur- rency. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to nineteen million five hundred thousand dollars ($19,500,000). -3- Section 2.02. The amount of the Credit may be withdrawn from the Credit 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 Associa- tion, for expenditures made (or, if the Association 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 Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and works to be financed out of the proceeds of the Credit, shall be governed by the provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be March 31, 1985 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each January 1 and July 1 commencing July 1, 1990, and ending January 1, 2030, each installment to and including the installment payable on January 1, 2000, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. The Chairman of the Board and such other person or persons as he may appoint in writing are designated as repre- sentatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project and Other Covenants Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause the Board to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan 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 the Board 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 Credit to the Board under a subsidiary loan agreement to be entered into between the Borrower and the Board under terms and conditions which shall have been approved by the Association, including those set forth in Schedule 3 to this Agreement. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. (a) The Borrower shall ensure that the Board shall participate in the formulation of each Joint Scheme and enter into the same on terms and conditions consistent with the performance by the Board of its obligations under the Project Agreement. (b) The Borrower shall furnish or cause to be furnished to the Board: (i) on or prior to the commencement of each fiscal year of the Board, an estimate of all capital expendi- tures to be incurred under each Joint Scheme in respect of such year, revising the same from time to time as necessary; and (ii) as soon as reasonably practicable after the end of each such year, a statement of all such capital expenditures incurred in respect thereof. -5- (c) The Borrower shall take such action as may be necessary to enable the Board to participate in the supervision and control of the design, construction and operation of the assets referred to in sub-section (d) of this Section pending their transfer to the Board as therein mentioned and shall furnish, or cause to be furnished, to the Board all data, information, facilities and other assistance required for such purpose. (d) The Borrower shall transfer, or cause to be transferred, to the Board (upon terms and conditions satisfactory to the Borrower, the Board and the Association) all assets relating to the generation, transmission or distribution of electricity financed under, or constructed or installed for the purpose of, or otherwise included in any Joint Scheme entered or to be entered into by the Board, not later than the coming into operation of such assets. Section 3.03. (a) The Borrower shall ensure that all foreign exchange required by the Board to maintain reasonable levels of inventories as referred to in Section 4.07 of the Project Agree- ment shall be promptly made available to the Board for such purpose. (b) The Borrower shall ensure the timely payment of all future amounts owed by the local authorities to the Board, to- gether with the arrears in accordance with a program satisfactory to the Association. (c) The Borrower shall take all such action as may be necessary on its part (including, but without limitation, all necessary authorizations) to enable the Board to effect such adjustments in its tariffs as shall be required to comply with the provisions of Section 4.04 of the Project Agreement. Section 3.04. The Borrower shall, by December 31, 1980 ensure the completion of the following: (a) the transfer to the Board on terms satisfactory to the Association, of the Ukuwela hydro-station; (b) the settlement of the amount shown outstanding in the Board's accounts in respect of the parity variance on loans repayable in foreign currencies; and (c) the determination of the terms of funding by the Bor- rower to the Board in the Borrower's fiscal years 1978 and 1979. -6- For purposes of this Section "parity variance" means the difference resulting from any fluctuation in the value of the Rupee in relation to the currency or currencies in which a loan (as referred to in Section 42 (6) of the Ceylon Electricity Board Act) is expressed. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) The Board shall have failed to perform any covenant, agreement or obligation of the Board under the Project Agreement. (b) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of the Board or for the suspension of its operations. (c) The Ceylon Electricity Board Act shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of the Board to carry out the covenants, agreements and obligations set forth in the Project Agreement. (d) An extraordinary situation shall have arisen which shall make it improbable that the Board will be able to perform its obligations under the Project Agreement. (e) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan made for the financing of the Project (including the Saudi Fund Loan), shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement provid- ing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. -7- (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consis- tent with the obligations of the Borrower under this Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) the event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; and (b) any events specified in paragraphs (b), (c) or (e) (i) (B) of Section 4.01. of this Agreement .hall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of the Board have been duly authorized or ratified by all necessary corporate and governmental action; (b) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Board; (c) consultants whose qualifications, experience and terms and conditions of employment are satisfactory to the Association and the Board have been appointed to provide technical assistance for: (i) the Board's management; -8- (ii) the design and supervision related to Part 3 of the Project; (d) the Association has been furnished with the accounts referred to in Section 4.02 of the Project Agreement, with respect to the fiscal year of the Board ending December 31, 1979; (e) an increase in tariffs of about 65% has been introduced; and (f) the Borrower has made arrangements satisfactory to the Association for the .commitment of the Saudi Fund Loan. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by the Board, and is legally binding upon the Board in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and the Board and is legally binding upon the Borrower and -the Board in accordance with its terms. Section 5.03. The date is hereby specified for the purposes of Section 12.04 of the General Condi- tions. Section 5.04. The obligations of the Borrower under Section 3.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Secretary, Ministry of Finance and Planning of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. -9- Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance and Planning Colombo Democratic Socialist Republic of Sri Lanka Cable address: Telex: SECMINFIN 1232 Colombo FORAID For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President South Asia - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category, Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment, materials 8,500,000 100% of foreign and installations for expenditures the 132 kV trans- mission systems (2) Equipment and 7,500,000 ) 100% of foreign materials for the ) expenditures 33 kV subtrans- ) for directly mission system ) imported items, ) 100% of local (3) Vehicles and ser- 500,000 ) expenditures vice equipment ) (ex-factory) ) for locally ) maunfactured ) items, and 65% ) for locally ) procured items (4) Consultants' services 2,000,000 100% of foreign and training expenditures (5) Unallocated 1,000,000 TOTAL 19,500,000 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 - 11 - goods or services supplied from the territory of any country other than the Borrower; and (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 com- pliance with the policy of the Association that no proceeds of the Credit 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 Credit decreases or increases, the Association 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 Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to June 19, 1980, except that withdrawals, in an aggregate amount not exceeding the equivalent of $350,000 may be made in respect of Category (4) on account of payments made for such expenditures before that date but after May 1, 1980. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expendi- tures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with - 12 - the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the pro- ceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Associa- tion's reasonable opinion, represents the amount of such expendi- tures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 13 - SCHEDULE 2 Description of the Project The Project consists of the extension of the electricity transmission and distribution system in Sri Lanka and comprises: 1. The extension of the existing 132 kV system by the construction of approximately 222 miles of 132 kV lines and the construction, extension and installation of associated substa- tions, facilities and equipment. 2. The extension of the existing 33 kV system by the construction of: (a) approximately 500 miles of 33 kV subtransmission lines; and (b) approximately 125 miles of 33 kV lines and distribution lines, and the construction and installation of about 250 substations, and asso- ciated facilities and equipment. 3. The extension of the existing Colombo distribution system, including two new 132 kV primary distribution substations, augmentation of existing primary distribution substations, and extensions and alterations to the 11 kV underground cable network, and the installation of associated facilities and equipment. 4. Detailed engineering design and preparation of bid- documents for the Board's future 220 kV transmission project related to the completion of the Mahaweli hydrostations. 5. Technical assistance and training. The Project is expected to be completed by March 31, 1984. - 14 - SCHEDULE 3 Principal Terms and Conditions of the Subsidiary Loan Agreement between the Borrower and the Board Amount $19,500,000 equivalent Repayment period 20 years Grace period 3 years on the principal Interest rate 10% per annum Foreign Exchange risk to be borne by the Borrower INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the 2 day of 1980 FOR SECRETARY