Senegal - First Energy Sector Rehabilitation Project : Credit 1710 - Project Agreement - Conformed

CREDIT MTMBER 1710 SE Project Agreement (First Energy Sector Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NATIONALE D'ELECTRICITE Dated O,i :7 9 1986 CREDIT NUMBER 1710 SE PROJECT AGREEMENT AGREEMENT, dated Odt6'r D'1 , 1986, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SOCIETE NATIONALE D'ELECTRICITE (SENELEC). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Senegal (the Borrower) and the Association, the Association has agreed to make avail- able to the Borrower an amount in various currencies equivalent to eighteen million three hundred thousand Special Drawing Rights (SDR 18,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SENELEC agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary financing agreement to be entered into between the Borrower and SENELEC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to SENELEC on the terms and conditions set forth in said Subsidiary Financing Agreement; and WHEREAS SENELEC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; 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. (a) SENELEC 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 -2- out the Project, with the exception of Part E thereof, 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 Parts A through D, F and G of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section SENELEC shall carry out Parts A through D, F and G of the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement, as such Schedule may be amended from time to time by agreement between the Association and SENELEC. (c) SENELEC shall maintain its Project implementation unit with such powers, responsibilities and staff as shall be accept- able to the Association. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project, with the exception of Part E thereof 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. SENELEC 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 and Parts A through D, F and G of the Project. Section 2.04. SENELEC shall duly perform all its obligations under the Subsidiary 1inancing Agreement. Except as the Associa- tion shall otherwise agree, SENELEC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Financing Agreement or any provision thereof. Section 2.05. (a) SENELEC shall, at the request of the Association, exchange views with the Association with regard to the progress of Parts A through D, F and G of the Project, the performance of its obligations under this Agreement and under the Subsidiary Financing Agreement, ane other matters relating to the purposes of the Credit. (b) SENELEC shall promptly inform the Association of any condition which interferes or threatens to interfere with the -3- progress of Parts A through D, F and G of the Project, the accomplishment of the purposes of the Credit, or the performance by SENELEC of its obligations under this Agreement and under the Subsidiary Financing Agreement. ARTICLE III Management and Operations of SENELEC Section 3.01. SENELEC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, management and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SENELEC shall carry out the Contrat Plan and the Rehabilitation Program in a manner and in accordance with a timetable acceptable to the Association. Section 3.03. SENELEC shall at all times operate and main- tain 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 and financial management practices. Section 3.04. SENELEC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.05. SENELEC shall consult the Association not later than November 30 in each year on its proposed investment program for the following year. ARTICLE IV Financial Covenants Section 4.01. (a) SENELEC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SENELEC shall: (i) have its accounts and financial statements (balance sheets, statements of income and -4- expenses, fund flow statement and related statements) and the Special Account for each fiscal year audited, in accordance with appro- priate 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; and (iii) furnish to the Association such other information concerning said accounts and financial statements as well as the audit thereof and said records, as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, SENELEC shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the comple- tion of the audit for the fiscal year in which the last withdrawal from the Credit Account was made, 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 (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. -5- Section 4.02 SENELEC shall take all necessary measures to ensure that at all times its receivables shall be paid within 90 days of the billing date. Section 4.03 (a) Except as the Association shall other- wise agree, SENELEC shall produce: (i) for its fiscal year end- ing on December 31, 1987, and each fiscal year thereafter, funds from internal sources equivalent to not less than 30% of SENELEC's average capital expenditures incurred, or expected to be incurred over three consecutive fiscal years, for each such fiscal year. (b) Before November 30 in each of its fiscal years, SENELEC shall, on the basis of forecasts prepared by SENELEC and satis- factory 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 a copy of such review upon its completion. (c) If any such review shows that SENELEC would not meet the requirements set forth in paragraph (a) for SENELEC's fiscal years covered by such review, SENELEC shall promptly take all necessary measures in order to meet such requirements. Section 4.04. Except as the Association shall otherwise agree, SENELEC shall not incur any debt unless a reasonable forecast of the revenues and expenditures of SENELEC shows that the estimated net revenues of SENELEC 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 SENELEC in such year on all debt of SENELEC including the debt to be incurred. Section 4.05. For the purposes of this Article: (a) The term "funds from internal sources" means the difference between: (i) the sum of revenues from all sources related to operations, consumer deposits and consumer contri- butions in aid of construction, net non-operating income and any reduction in working capital other than cash; and (ii) the sum of all expenses related to operations, including administration, adequate maintenance and -6- taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash distributions of surplus, increase in working capital other than cash and other cash outflows other than capital expenditures. (b) The terms "net non-operating income" means the dif- ference between: (i) revenues from all sources other than those related to operations; and (ii) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in subparagraph (i) above. (c) The term "working capital other than cash" means the difference between current assets excluding cash and current liabilities at the end of each fiscal year. (d) The term "current assets excluding cash" means all assets other than cash which conId in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inventories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (e) The term "current liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, includ- ing accounts payable, customer advances, debt service require- ments, taxes and payments in lieu of taxes, and dividends. (f) The term "debt service requirements" means the aggre- gate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (g) The term "capital expenditures" means all expenditures incurred on account of fixed assets, including interest charged to construction, related to operations. -7- (h) The term "three consecutive fiscal years" means the current fiscal year as well as the preceding and the following fiscal year. (i) 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. (j) The term "debt" means any indebtedness of SENELEC maturing by its terms more than one year after the date on which it is originally incurred. (k) Debt shall be deemed to be incurred: (i) 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 (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (1) The term "net revenues" means the difference between: (i) the sum of revenues from all sources related to operations and net non-operating income; and (ii) the sum of all expenses related to operations, including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (m) The term "reasonable forecast" means a forecast pre- pared by SENELEC not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and SENELEC accept as reasonable and as to which the Association has notified SENELEC of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of SENELEC. -8- 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 SENELEC 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) the date 15 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 para- graph (a) (ii) of this Section, the Association shall promptly notify SENELEC 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 -9 - 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 SENELEC: Socift6 Nationale d'Electricit6 28, Rue Vincens Dakar Rpublique du S6n6gal Cable address: Telex: KARELECK 661 KARELEC SG 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 SENELEC, or by SENELEC on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by SENELEC's Director-General or such other person or persons as SENELEC shall designate in writing, and SENELEC furnish to the Association sufficient evidence of the authority and the authenticated 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 collectively but one instrument. - 10 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 ' Regional Vice President Western Africa SOCIETE NATIONALE D'ELECTRICITE y1 Auhrz Represe nta4At' Authorized Representative - 11 - SCHEDULE 1 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A. International Competitive Bidding 1. Except as provided in Part D 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. Bidders for the works included in Part A.1 of the Project shall be prequalified as described in paragraph 2.10 of the Guidelines. Part B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A.1 hereof, goods manufactured in the West African Economic Community may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C. Preference for Domestic Contractors In the procurement of works in accordance with the pro- cedures described in Part A.1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereof. Part D. Other Procurement Procedures 1. Materials and equipment estimated to cost less than the equivalent of 50,000 dollars per contract up to an aggregate amount not to exceed the equivalent of 500,000 dollars, 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. - 12 - 2. Civil works estimated to cost less than the equivalent of 500,000 dollars per contract may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. Part E. Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph I 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 equivalfnt of $250,000 or more, the procedures set forth in 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 pursuant 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 4 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 Associa- tion 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 (c) (ii) of this Agree- ment. - 13 - 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 In order to assist SENELEC in carrying out Parts D and F of the Project, SENELEC shall employ engineering and other consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall 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. - 14 - SCHEDULE 2 Implementation Program 1. Within SENELEC, the Project shall be managed by its Project implementation unit under the authority of SENELEC's General Manager who shall have at his disposal the resources required to carry out monitoring of Project execution and preparation activities of quarterly reports on SENELEC's activities (project, investment program and financial position), with the assistance of consultants provided for under Part F of the Project. 2. Within one month after the end of each calendar quarter the Project is executed SENELEC shall provide the Association with a report on the Project's progress during said quarter. The progress report shall address, inter alia: (a) progress and status of the execution of the physical component of the Project (generation, transmission, Dakar distri- bution), documented with all necessary information concerning work schedules, procurement, disbursement and cost data; (b) progress and status on the Rehabilitation Program, with particular emphasis on financial indicators, including those related to the collection of receivables; and (c) the status of the Borrower's power sector in general and SENELEC's performance in particular using the key indicators set forth in the Contrat Plan. 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