Mali - Biomass And Energy Efficiency Project : Credit 1403 - Project Agreement - 2 - Conformed

OFFICIAL noCUMENTS CREDIT NUMBER 1403 MLI Substitution Project Agreement (Biomass Alcohol and Energy Efficiency Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and COMPLEXE SUCRIER DU KALA SUPERIEUR Dated ,1987 CREDIT NUMBER 1403 MLI SUBSTITUTION PROJECT AGREEMENT AGREEMENT, dated 0'Z /7 1987, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and the COMPLEXE SUCRIER DU KALA SUPERIEUR (herein- after called SUKALA). WHEREAS (A) by the Development Credit Agreement dated November 3, 1983 between the Republic of Mali (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million one hundred thousand Special Drawing Rights (SDP 7,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the Office du Niger agree to undertake such obligations toward the Association as set forth in the Project Agreement dated November 3, 1983 between the Association and the Office du Niger; (B) by the Subsidiary Loan Agreement dated March 5, 1984 between the Borrower and the Office du Niger, a portion of the proceeds of the Credit provided for under the Development Credit Agreement was made available to the Office du Niger on the terms and conditions therein set forth; and (C) by an exchange of letters of even date herewith between SUKALA and the Association, SUKALA has agreed to assume all of the rights and obligations previously undertaken by the Office du Niger in respect of sugarcane operations to be carried out under the Project; and WHEREAS SUKALA, in consideration of the foregoing, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agrce as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. -2- ARTICLE II Execution of the Project Section 2.01. (a) SUKALA shall carry out Parts A through E of the Project described in Schedule 2 to the Development Credit Agreement as amended, with due diligence and efficiency and in conformity with appropriate industrial, administrative, finan- cial, economic, engineering and agricultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) SUKALA shall, for the purposes of Parts A through E of the Project, open and maintain in CFA francs a special account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of the Schedule to this Agreement. (c) For the purposes of carrying out the Project, SUKALA shall: (i) establish PMU and thereafter maintain it with full responsibility satisfactory to the Association for coordinating and supervising the carrying out of all Project operations; and (ii) appoint and thereafter maintain as head of PMU a Project Manager whose qualifications and experience shall be satisfactory to the Association. (d) SUKALA shall by June 30, 1987: (i) for purposes of carrying out Part E of the Project prepare a training program satisfactory to the Association; (ii) make arrangements with the Office du Niger satis- factory to the Association to determine the modalities of their cooperation and the details of their respective responsibilities with respect to the use and maintenance of the irrigation network facilities included in the Project. Such arrange- ments shall provide for a full recovery of the cost of services rendered by them from the bene- ficiaries of said services; and (iii) complete the study referred to in Part E of the Project and take all necessary measures to carry -3- out by October 31, 1987 the recommendations of said study as they shall have been agreed upon with the Association. Section 2.02. In order to assist SUKALA in carrying out Parts A through E of the Project, SUKALA shall employ consultants and experts including, inter alia, a Technical Advisor and a Sugarcane Expert whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, such consultants and experts to be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Develop- ment Credit Agreement. Section 2.04. (a) SUKALA undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transporta- tion and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be pavable in a cur- rency freely usable by SUKALA to replace or repair such goods. (b) SUKALA shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the purposes of Parts A through E of the Project. Section 2.05. (a) SUKALA shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for Parts A through E of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) SUKALA shall: (i) maintain records and procedures ade- quate to record and monitor the progress of Parts A through E of the Project (including their costs and the benefits to be derived from them), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities and construction sites included in such Parts of the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning such Parts of the Project, their costs and, where appropriate, the benefits to be derived from them, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by SUKALA of any contract for goods, works or services to be financed out of the proceeds of the Cre- dit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of Parts A through E of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between SUKALA and the Association, SUKALA shall prepare and fur- nish to the Association a report, of such scope and in such derail as the Association shall reasonably request, on the execu- tion and initial operation of such Parts of the Project, its cost and the benefits derived and to be derived from it, the perform- ance by SUKALA and the Association of their respective obliga- tions under the Project Agreement and the accomplishment of the purposes of the Credit. (e) SUKALA shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of SUKALA and any relevant records and documents. Section 2.06. (a) SUKALA shall duly perform all its obliga- tions under the Subsidiary Loan Agreement. (b) Except as the Association shall otherwise agree, SUKALA shall take no action or concur in any ,ction which would have the effect of amending, abrogating, assigning or waiving the Sub- sidiary Loan Agreement or any provision thereof. Section 2.07. (a) SUKALA shall, at the request of the Asso- ciation, exchange views with the Association with regard to the - 5 - progress of Parts A through E of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) SUKALA shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by SUKALA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SUKALA Section 3.01. SUKALA shall carry on its operations and con- duct its affairs in accordance with sound industrial, administra- tive, financial, economi., engineering and agricultural practices with qualified and experienced management and staff. Section 3.02. SUKALA shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and agricultural practices. Section 3.03. SUKALA shall take out and maintain with res- ponsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. SUKALA shall maintain records adequate to reflect, in accordance with consistently maintained appropriate accounting practices, its operations and financial condition. Section 4.02. SUKALA shall: (a) have its accounts (including the Special Account) 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 Association; -6 - (b) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (i) certified copies of its financial statements for such year as so audited, and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; (c) furnish to the Association such other i2formation con- cerning said accounts and financial statements, as well as the audit thereof, as the Association shall from time to time reason- ably request; and (d) furnish to the Association within four months following the end of each fiscal quarter copies of its financial statements for such quarter as well as progress and procurement reports covering activities under the Project during such period. Section 4.03. (a) SUKALA shall maintain at all times: (i) a Debt/Equity ratio of no more than 60/40; and (ii) a ratio of Current Assets to Current Liabilities of at least 1.5:1. (b) For purposes of this Section, the terms: (i) "Debt Equity RatioI means the ratio of Funded Debt to Equity Capital; (ii) "Funded Debt" means any debt for borrowed funds; (iii) "Equity Capital" means the aggregate of the un- impaired paid-in capital, reserves and retained earnings of SUKALA; (iv) "Current Assets" means the sum of unrestricted cash and bank deposits available for use in cur- rent operations of SUKALA, marketable securities (excluding securities, whether marketable or not, acquired for purposes of control, affiliation, or other continuing business advantage), receivables collectible in the normal course of business with- in one year, inventories (excluding spare parts) valued at the lower of cost or market, and prepaid expenses; and - 7 - (v) "Current Liabilities" means all obligations of SUKALA due on demand or within one year or whose liquidation is reasonably expected to require the use of existing resources classified as Current Assets. Such obligations shall include but shall not be limited to customers' advances, accrued taxes on, or measured by, income, other accrued taxes and current maturities of long-term debt. Section 4.04. (a) Except as the Association shall otherwise agree, SUKALA shall not incur any debt, unless the net revenues of SUKALA for the fiscal year immediately preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be at least 1.5 times the estimated maximum debt service require- ments of SUKALA for any succeeding fiscal year on all debt of SUKALA, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of SUKALA maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations adjusted to take account of SUKALA's prices in effect at the time of the incurrence of debt even though they were not in effect during the twelve-month period to which such revenues relate and net non- operating income; and (B) the sum of all expenses related to opera- tions, including administration, adequate -8- maintenance, taxes and payments in lieu of taxes, but excluding provision for depre- ciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the dif- ference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (v) The average current gross value of SUKALA's fixed assets in operation shall be calculated as one half of the sum of the gross value of SUKALA's fixed assets in operation at the beginning and, at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. (vi) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vii) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, 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, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.05. Before making any new investment aimed at expanding or increasing SUKALA's productive capacity, SUKALA shall prc-pare a feasibility study satisfactory to the Borrower and the Association and proceed with said investment only upon mutual agreement with the Association. -9- Section 4.06. SUKALA shall ensure that first priority be given to the use of the molasses produced at the sugar mills as a raw material for the facilities included in the Project. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Amending Agreement to the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SUKALA thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date eighteen years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SUKALA of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have - 10 - designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For SUKALA: Complexe Sucrier du Kala Superieur a Dougabougou B.P. 119 Segou Republic of Mali Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SUKALA, or under the Development Credit Agreement on behalf of the Borrower by SUKALA, may be taken or executed by its Director General or such other person or persons as he shall designate in writing, and SUKALA shall furnish to the Association sufficient evidence of the authority and the authen- ticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. - 11 - 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By 141t~sd0 7vus Regional Vice President Western Africa COMPLEXE SUCRIER DU KALA SUPERIEUR Byi R ev Authorized Representative - 12 - SCHEDULE Special Account 1. For the purposes of this Schedule: (a) the term "eligible Category" means Category (2) set forth in the table in paragraph 1 of Schedule 1 to the Develop- ment Credit Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Parts A through E of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligi- ble Category in accordance with the provisions of Schedule 1 to the Development Credit Agreement; and (c) the term "Authorized Allocation" means an amount of one hundred million CFA Francs to be withdrawn from the Credit Account and deposited in the Special Account pursuant to para- graph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible - 13 - expenditures. All such deposits shall be withdrawn by the Asso- ciation from the Credit Account under the respective eligible Category, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of the Development Credit Agreement; or (ii) the total unwithdrawn amount of the Credit allocated to the eligible Category for Parts A through E of the Project, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Parts A through E of the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eli- gible Category for Parts A through E of the Project shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. -14 - 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence fur- nished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY