Sudan - Power Rehabilitation Project : Credit 1624 - Project Agreement - Conformed

FFCI L CREDIT NUMBER 1624 SU Project Agreement (Power Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL ELECTRICITY CORPORATION Dated ,1985 CREDIT NUMBER 1624 SU PROJECT AGREEMENT AGREEMENT, dated Qc\1 it/r % , 1985, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and NATIONAL ELECTRICITY CORPORATION (hereinafter called NEC). WHEREAS (A) by the Development Credit Agreement of even date herewith between The Democratic Republic of Sudan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty million three hundred thousand Special Drawing Rights (SDR 30,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NEC agree to undertake such obligations toward the Association as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and NEC, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to NEC on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS NEC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. NEC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out the Project -2- with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. NEC shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. NEC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, NEC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) NEC shall, at the request of the Association, exchange views with the Association with regard to the progress 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) NEC 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 NEC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. NEC shall prepare and furnish to the Association, not later than December 31, 1986, its updated version of the Long Term Power Plan and the feasibility study carried out under Part H of the Project. Section 2.07. NEC shall: (a) exchange views with the Association with respect to the proposals of the on-going tariff study; - 3 - (b) finalize said study by taking into account the Associa- tion's comments; and (c) implement the agreed upon recommendations of the study within six months of its completion. Section 2.08. Without limitation or restriction upon the provisions of Section 4.03 of this Agreement, NEC shall: (a) continue to review, on a monthly basis, the level of its tariffs relative to the fuel and other operating costs; and (b) adjust the tariffs adequately to cover these cost increases. ARTICLE III Management and Operations of NEC Section 3.01. NEC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management assisted by competent staff in ade- quate numbers. Section 3.02. NEC 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 public utility practices. Section 3.03. NEC shall take out and maintain with respon- sible 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. Section 3.04. NEC shall undertake, until the completion of the Project, new investments only after the preparation of a feasibility study and, with respect to investments exceeding the equivalent of $25,000,000, only in accordance with NEC's Long Term Power Plan, as agreed upon between the Association and NEC. Section 3.05. NEC shall implement the action program designed to strengthen its personnel management, staff develop- ment, corporate planning and management information system, as -4- agreed upon among the Borrower, NEC and the Association, in accordance with an agreed upon timetable. Section 3.06. NEC shall: (a) prepare and furnish to the Association a plan for the gradual reduction of accounts receivable, including a timetable acceptable to the Association; and (b) settle at least 25 percent of its accounts receivable not later than December 31, 1985. ARTICLE IV Financial Covenants Section 4.01. (a) NEC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. (b) Without limitation upon the generality of paragraph (a) above, NEC shall prepare accounts statements and management reports in respect of all of NEC's area offices and consolidate them as of the quarter commencing from the fiscal year starting on or after July 1, 1985 with the head office accounts not less frequently than at quarterly intervals. (c) NEC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association 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 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 Association shall have reasonably requested; -5 - (iii) furnish to the Association such other information concerning said. accounts, financial statements, records and expenditures, as well as the audit thereof, as the Association shall from time to time reasonably request. (d) For all expenditures with respect to which withdrawals are requested from the Credit Account on the basis of statements of expenditure, NEC shall: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (c) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by the said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 4.02. (a) Except as the Association shall otherwise agree, NEC shall not incur any debt unless a reasonable forecast of the revenues and expenditures of NEC shows that the estimated net revenues of NEC for each fiscal year during the term of the debt to be incurred shall be at least 1.5 times the estimated debt service requirements of NEC in such year on all debt of NEC including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt'* means any indebtedness of NEC maturing by its terms more than one year after the date on which it is originally incurred. -6- (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 on 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 and net non-operating income; and (B) the sum of all expenses related to operations including administration, adequate mainten- ance, taxes and pa.ments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the difference 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 term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) The term "reasonable forecast" means a forecast prepared by NEC not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and NEC accept as reasonable and as to which the Association has notified NEC of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the -7- future to have, a material adverse effect on the financial condition or future operating results of NEC. (vii) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, 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 4.03. (a) Except as the Association shall otherwise agree, NEC shall earn, for each of its fiscal years ending on or after June 30, an annual return of not less than 9% of the average current net value of NEC's fixed assets in operation. (b) Within three months after the end of each of its fiscal years, NEC shall, on the basis of forecasts prepared by NEC and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that NEC would not meet the requirements set forth in paragraph (a) for NEC's fiscal years covered by such review, NEC shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its tariffs) in order to meet such requirements. (d) For the purposes of this Section: (i) the annual return shall be calculated by dividing NEC's net operating income for the fiscal year in question by one half of the sum of the current net value of NEC's fixed assets in operation at the beginning and at the end of that fiscal year; (ii) the term "net operating income" means total operating revenues less total operating expenses; -8- (iii) the term "total operating revenues" means revenues from all sources related to operations; (iv) the term "total operating expenses" means all expenses related to operations, including admini- stration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a straight-line basis at a rate of not less than 3% per annum of the average current gross value of NEC's fixed assets in operation, or other basis acceptable to the Association, but excluding interest, and other charges on debt; (v) the average current gross value of NEC's fixed assets in operation shall be calculated as one half of the sum of the gross value of NEC'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; and (vi) the term-"current net value of NEC's fixed assets in operation" means the gross value of NEC's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of NEC 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 -9- (ii) a date twenty years after the date of this Agree- ment. (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 NEC 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 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 NEC: National Electricity Corporation P.O. Box 1380 Khartoum, Sudan - 10 - Cable address: Telex: AMPERE 22628 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 NEC may be taken or executed by the Director General or such other person or persons as the Director General shall designate in writing, and NEC 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 col- lectively but one instrument. 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 JO &C K'~I Regional Vic Pr6l ident Eastern and Southern Africa NATIONAL ELECTRICITY CORPORATION By Re prse na Authorized Representative - 11 - SCHEDULE 1 Procurement and Consultants' Services Section I. Procurement of Goods and Works A. International Competitive Bidding 1. Except as provided in Part B hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. NEC shall require the bidders to prequalify in accordance with the provisions of paragraph 2.10 of the Guidelines. B. Other Procurement Procedures 1. Proprietary items which can only be supplied by the original manufacturer may -be procured through direct contracting in accordance with paragraph 3.5 of the Guidelines. 2. Items estimated to cost less than the equivalent of $100,000 per contract, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. The aggregate cost of the goods acquired pursuant to paragraphs B.l and B.2 shall not exceed $4,000,000 equivalent. C. Review by the Bank of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 of this Schedule, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $250,000 or more, the procedures set forth in - 12 - paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association purzuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 (the Special Account Schedule) to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (d) (ii) of this Agree- ment. 3. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist NEC in the carrying out of engineering design for the Project, the preparation of bidding documents and the evaluation of bids, and the supervision of the construction of the Project and its coordination, NEC shall employ engineering consultants. 2. In order to assist NEC in carrying out the studies under Part H of the Project, NEC shall employ appropriate consultants. 3. In order to assist NEC in carrying out Part G of the Project, NEC shall continue to employ management and training consultants. - 13 - 4. The qualifications, experience and terms and conditions of employment of the consultants referred to in paragraphs 1, 2, and 3 of this Section shall be satisfactory to the Association, such consultants 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. 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 day of FOR SECRETARY