Tunisia - Sixth Water Supply Project : Loan 2134 - Loan Agreement - Conformed

LOAN NUMBER 2134 TUN Loan Agreement (Sixth Water Supply Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTION DES EAUX Dated e L , 1982 LOAN NUMBER 2134 TUN LOAN AGREEMENT AGREEMENT, dated Rf I , 1982, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTION DES EAUX (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; and (B) by agreement (hereinafter called the Guarantee Agree- ment) of even date herewith between the Republic of Tunisia (hereinafter called the Guarantor) and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower under the Loan Agreement; 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: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agre.ment accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions). 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) "Sub-project" means a specific water supply project included in Part A of the Project as described in Schedule 2; (b) "Dinar" and the sign "DT" mean the currency of the Guarantor; - 2 - (c) "Fourth Water Supply Project Loan Agreement" means the loan agreement (1445 TUN, Fourth Water Supply Project) between the Bank and,the Borrower dated July 5, 1977; and (d) "Fifth Water Supply Project Loan Agreement" means the loan agreement (1702 TUN, Fifth Water Supply Project) between the Bank and the Borrower dated May 31, 1979. 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 thirty million five hundred thousand dollars ($30,500,000). 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 and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1986 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. Not later than the Effective Date, the Borrower shall pay to the Bank a fee equivalent to four hundred fifty thousand seven hundred thirty-nine dollars ($450,739). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. -3- Section 2.06. 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 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on thq principal amount of the Loan withdrawn and outstanding from tim to time. Section 2.08. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate engineering, financial and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) Except as the Bank shall otherwise agree, the Borrower shall select Sub-projects to be carried out under Part A of the Project in accordance with the selection criteria set forth in paragraph A of Schedule 5 to this Agreement. (b) The Borrower shall furnish the Bank, for each Sub- project selected to be carried out under Part A of the Project, prior to inviting bids for goods or works in accordance with Schedule 4 to this Agreement for such Sub-project, with an appraisal report prepared in accordance with the outline set forth in paragraph B of Schedule 5 to this Agreement, and with such other information as the Bank shall request. 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 -4- 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 shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for 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 and pro- cedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in 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 at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Prcmptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as the Bank may agree, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. -5- (e) 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. Section 3.05. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.06. The Borrower shall provide credit to rural and low-income urban customers under Part B of the Project on terms satisfactory to the Bank which shall include, inter alia: (i) interest at a rate which shall be equal to the average between the rate for local medium-term credits available to the Borrower and 11.6%; and (ii) repayment within a period not exceeding five (5) years. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall at all times manage its a.fairs, maintain its financial position, plan its future expan- sion and carry on its operations, all in accordance with appro- priate business, financial and public utility practices and to that end shall employ at all times qualified and experienced management and staff. The Borrower shall consult with the Bank prior to making any material modification to its organizational or administrative structure. Section 4.02. 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 4.03. (a) The Borrower shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful *in the conduct of its business. -6- (b) The Borrower shall at all times operate and maintain its plants, equipment and properties, and promptly make all necessary repairs and renewals thereof, in accordance with sound engineering and public utility practices. (c) Except as the Bank may otherwise agree, the Borrower shall obtain title to all goods financed out of the proceeds of the Loan free and clear of all encumbrances. (d) The Borrower shall not, without the prior approval of the Bank, sell, lease, transfer or otherwise dispose of any of its properties or assets required for the efficient operation of its business and undertakings and shall not, without the prior consent of the Guarantor and the Bank, transfer or assign any of its rights for the distribution of water in the Guarantor's territories. Section 4.04. The Borrower: (a) shall furnish to the Bank for its comments, until the completion of the Project, a quarterly report on the progress of the execution of the Project; (b) shall monitor the attainment of the objectives of the Project on the basis of a system of key indicators and targets (including technical, financial and administrative criteria) acceptable to the Bank and shall furnish, starting June, 1983, by June 30 of each year until the completion of the Project and during the five years immediately succeeding such completion, a report in such detail as the Bank shall reason- ably request showing the results of its operations in terms of such key indicators and targets; and (c) shall promptly take all such remedial action as the Bank may reasonably request to ensure that the targets referred to in paragraph (b) of this Section are met. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain records ade- quate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial -7- condition, including, without limitation to the foregoing, separ- ate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and to enable the Bank's representatives to examine such records. 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 applied, by independent auditors 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) certi- fied 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 Bank shall have reason- ably requested, including, without limitation to the foregoing, separate opinion by said auditors: (A) on the separate accounts referred to in Section 5.01 (a) of this Agreement; and (B) in respect of the expenditures and records referred to in Section 5.01 (b) of this Agreement, as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, 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 except as otherwise currently reported to the Bank or stated in writing. (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 -8- 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 satisfac- tory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions 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. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt, other than for money borrowed to finance the Project, unless its net revenues for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum debt service require- ment for any succeeding fiscal year on all debt including the debt to be incurred. For the purposes of this Section: (a) The term "debt" shall mean all indebtedness of the Borrower including debt for the service of which the Borrower is responsible in accordance with Article 22 of Law No. 63-22 of the Guarantor dated July 2, 1968, maturing by its terms more than one year after the date on which it is originally incurred. (b) Debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt. (c) The term "net revenues" shall mean gross revenues from all sources, adjusted to take account of the Borrower's rates in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-month period to which such revenues relate, less all operating and administrative expenses and provision for taxes, if any, but before provision covering depreciation and interest and other charges on debt. (d) The term "debt service requirements" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (e) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, -9- debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt. Section 5.05. Except as the Borrower and the Bank shall otherwise agree, the Borrower shall, for each of its fiscal years, starting in 1982, take all measures as shall be necessary to enable it to earn revenues sufficient to cover, in addition to operating expenses (excluding depreciation), debt service require- ments and increases in working capital other than cash, not less than twenty per cent (20%) of the annual average of the Borrower's estimated capital expenditures to be incurred during each such fiscal year and the two (2) following fiscal years. For the purposes of this Section: (i) The term "revenues" shall mean income from water sales and from the provision of related services, and miscellaneous income including income from non-operating sources, but excluding customer contributions. (ii) The term "operating expenses" shall mean expenses for operation, maintenance and administration and related expenses. (iii) The term "debt service requirements" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (iv) The term "working capital other than cash" means the excess of current assets (accounts receivable, inventories and current maturities of long term advances) less current liabilities (accounts payable, deposits payable and short term ioans). (v) The term "capital expenditures" means all expendi- tures incurred on account of fixed assets. Section 5.06. Before November 30 of each fiscal year, starting in 1982, the Borrower shall, on the basis of forecasts prepared to the satisfaction of the Bank, review the adequacy of its rates in order to adjust, promptly after November 30 of each - 10 - fiscal year, its rates to meet the revenue requirements laid down in Section 5.05 of this Agreement; and the Borrower shall provide the Bank and the Guarantor with a copy of its review report and the proposed rate adju3tments by November 30 of each fiscal year, starting in 1982. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that any provision of the Guar- antor's Law No. 68-22, dated July 2, 1968 (as amended by Law No. 72-37, dated April 27, 1972, and by Law No. 74-73, dated August 3, 1974) establishing the Borrower, shall have been amended, abro- gated, repealed or waived so as to affect materially and adversely the operation or financial condition of the Borrower or the per- formance by the Borrower of its obligations under this Agreement. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Termination Section 7.01. The date Aviv'%3 23 1 , is hereby speci- fied for the purpose of Section 12.04 of the General Conditions. ARTICLE VIII Amendments to the Fourth Water Supply Project Loan Agreement and Fifth Water Supply Project Loan Agreement Section 8.01. The parties to this Agreement hereby agree that the provisions of Sections 5.04 and 5.05 of the Fourth Water Supply Project Loan Agreement and of Sections 5.04 and 5.05 of the Fifth Water Supply Project Loan Agreement shall be deleted and that the provisions of Sections 5.04 and 5.05 of this Agreement shall be applicable to the Fourth Water Supply Project Loan Agree- ment and the Fifth Water Supply Project Loan Agreement with the same force and effect as if they were fully set forth therein. - 11 - ARTICLE IX Addresses Section 9.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Recorstruction 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) For the Borrower: Socifte Nationale d'Exploitation et de Distribution des Eaux 23, Rue J. Nehru Tunis Tunisia Cable address: Telex: SONEDE 12262 Tunis TN SONEDE 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 - 12 - of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By JS) eRc>3ec Ck~ow 4wM'%e Regional Vice President Europe Middle East and North Africa SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTION DES EAUX Authorized Representative - 13 - 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 (a) carried out 4,800,000 40% by contractors (b) carried out 1,000,000 40% through force account (2) Pipes, equipment 8,250,000 100% of foreign and material expenditures and 60% of local expenditures (3) Credits to 14,000,000 50% residential consumers (4) Fee 450,739 Amount due (5) Unallocated 1,999,261 TOTAL 30,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for - 14 - goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor and for goods or services supplied from the territory of 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 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. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expend- itures prior to the date of this Agreement; except that with- drawals in an aggregate amount not exceeding the equivalent of $2,000,000 may be made in respect of Category 3 on account of payments made for such expenditures before that date but after January 1, 1982. 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 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. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the - 15 - Loan and the Bank may, without in any way restricting or ifmiting 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. - 16 - SCHEDULE 2 Description of the Project The purposes of the Project are: (i) to expand on a nation- wide basis the water supply services to Tunisia's rural popula- tion; (ii) to encourage the connection to the piped water supply system, through the extension of credit facilities, of rural and urban low-income population; and (iii) to strengthen the Bor- rower's project preparation and project appraisal capability and its involvement in rural areas. The Project consists of the following Parts: Part A: Sub-projects for the expansion and improvement of the exist- ing water supply system and the construction of new water supply systems, in about 150 rural villages and semi-urban centers. Part B: Provision of credit facilities to the Borrower's rural and urban low-income customers in order to assist such customers in financing the cost of installing individual house connections and related works. Part C: Acquisition and installation of about 85,000 water meters for the house connections referred to in Part B. The Project is expected to be completed by December 31, 1985. - 17 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May 1 and November 1 beginning November 1, 1986 through November 1, 1998 1,175,000 On May 1, 1999 1,125,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 18 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 2.05% More than three years but not more than six years before maturity 4.10% More than six years but not more than eleven years before maturity 7.50% More than eleven years but not more than fifteen years before maturity 10.25% More than fifteen years before maturity 11.60% - 19 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Parts C and E hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For gooe; and works to be procured on the basis of inter- national com-1,titive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating there- to, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Identical or similar items shall, to the extent possible, be consolidated in a single invitation for the purpose of bidding. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. - 20 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in the Republic of Tunisia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in the Republic of Tunisia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in the Republic of Tunisia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In erder to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. 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. 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would - 21 - 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 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures Notwithstanding the provisions of Par: A of this Schedule. (i) contracts for pipes, equipment and materials estimated to cost less than the equivalent of $200,000 each may be awarded after local advertising and on the basis of competitive bidding procedures of the Borrower acceptable to the Bank, provided, however, that the aggregate amount of all contracts to be so awarded shall not exceed the equivalent of $1,000,000; and (ii) contracts for civil works estimated to cost less than the equiva- lent of $800,000 each, may be awarded after local advertising and on the basis of competitive bidding procedures of the Borrower acceptable to the Bank, provided, however, that the aggregate amount of all contracts to be so awarded shall not exceed the equivalent of $14,000,000. 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 for civil works estimated to cost the equivalent of $800,000 or more, and all contracts for pipes, materials and equipment estimated to cost the equivalent of $200,000 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 documents 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 - 22 - 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 on the evaluation and comparison of the bids received, 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. (c) The terms and conditions of the contract shall not, without 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. 3. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the an,lysis of the respective bids, recom- mendations for award and such other intormT iion as the Bank shall reasonably request. The Bank shall, if it --rmines 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 determination. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 30% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. E. Procurement Without Contractors Civil works under Part A of the Project in isolated villages may, with the Bank's approval, be carried out through force - 23 - account by the Borrower or by public services on behalf of the Borrower on the basis of reimbursement by the Borrower of services rendered by such public services; provided, however, that the aggregate amount of civil works so carried out shall not exceed the equivalent of $2,500,000. - 24- SCHEDULE 5 Selection criteria for Sub-projects; Appraisal of Sub-projects A. Selection criteria 1. The selection of Sub-projects under Part A of the Project shall be made in accordance with the following criteria: (i) the marginal cost of water for the village under con- sideration has to be less than $1.50 equivalent per m2 in 1981 values; (ii) the total estimated cost per Sub-project shall not ex- ceed $1.5 million equivalent in 1981 values; (iii) the proposed Sub-project shall be the least-cost solu- tion based on the life cycle of the project; (iv) sufficient water resources to satisfy the demand for the life cycle of the Sub-project shall have been identi- fied; and (v) local cost financing shall have been secured through inclusion of the Sub-project in the Borrower's invest- ment budget. 2. The marginal cost as mentioned in criterion A (i) above shall be the average incremental cost (AIC) of water and is based on the economic cost of supplying additional water to meet the growth of the demand over the next 5 to 10 years. The AIC is used as an approximation of the long run incremental cost. The AIC is calculated by dividing the present value of all incremental capital, operating and other costs by the present value of the incremental consumption, made possible by the added facilities. The present value for both numerator and denominator will be determined, using the opportunity cost of capital at a discount rate of 10%. AIC is defined as: - 25 - N X Cn - S AIC = 0 (1+r)n (1+r)g N Qn 0 (1+r)n Cn = incremental expenditure in a year for capital, operations and other cost, in economic terms, i.e., excluding taxes and customs duties. S = salvage value. Qn = incremental volume of water consumed in a year as a result of the Project. N = lifespan of Sub-project assumed to be 40 years. r = the opportunity cost of capital at a discount rate of 10%. n = runs from year 0 to year N. B. Outiiae ior Sub-project appraisal reports 1. For each Sub-project the Borrower shall prepare an appraisal report which shall include the following aspects: -~ the physical and economic characteristics of the center or rural village where the Sub-project shall be imple- mented, the populations recorded in past censuses and the forecast of future populations i! the Sub-project area; - the condition of the existing water supply facilities, the estimation of per capita consumption, water consumed and number of connections in previous years, and the quality of the services; - the volumes of water consumed for various types of usage (domestic, industrial, commercial, public, tourism), a comparison of these volumes with similar ones in other parts of the country; - 26 - - the determination of the maximum day consumption and the maximum hour consumption; - an estimate of the volume of water unaccounted for in the transmission pipelines and the distribution network, the proposed measures to reduce water losses and any consumption judged to be excessive; - the forecast of future consumption and number of connect- ions; the evaluation of the percentage of population -served per house connection and per public standpipe; - the conditions of the production facilities, the physi- cal, chemical and biologic characteristics of the water, the future demand that can be covered by the existing resources and the measures required to meet the demand in the year 2000; - an investigation of the feasible alternatives to supply the Sub-project area with water, and the ways of improv- ing and expanding the distribution network; - a calculation- of the estimated costs of the selected alternatives, and economic comparison of these alterna- tives; - a justification of the proposed scheme, detailed cost estimates and the phasing of the investment program; - a calculation of future operating expenses, including depreciation of fixed assets and interest payment on debts, evaluation of staff needs, management system and relations with regional offices and headquarters; - a forecast of water sales, related revenues and other revenues; - a calculation of the marginal cost of water for the Sub-project; - a comparison of the Sub-project data with the selection criteria; and - conclusions and recommendations. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this / day of . A , 198 L. FOR SECRETARY