Tanzania - Power Rehabilitation Project : Credit 1687 - Credit Agreement - Conformed

CREDITNUMER 1687 TA Development Credit Agreement (Power Rehabilitation Project) between UNITED REPUBLIC OF TANZANIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 1986 CREDIT NUMBER 1687 TA DEVELOPMENT DIT AGREEMENT AGREEMENT, dated , 1986, between UNITED REPUBLIC OF TANZANIA the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) Part of the Project will be carried out by the Tanzania Electric Supply Company Limited (hereinafter called TANESCO) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to TANESCO the proceeds of the Credit as provided in this Agreement; (C) the Borrower intends to contract from the European Investment Bank (EIB) a loan (the EIB Loan) in an amount approxi- mately equivalent to six million dollars ($6,000,000) to assist in financing the Project on the terms and conditions to be set forth in an agreement (the EIB Loan Agreement) to be entered into between the Borrower and EIB; (D) the Borrower has requested from the Kingdom of Norway (Norway) a grant in an amount approximately equivalent to eight million three hundred thousand dollars ($8,300,000) (the Norwegian Grant) to assist in financing part of the Project; (E) the Borrower has requested from the Canadian Inter- national Development Agency (hereinafter called CIDA) a loan in an amount approximately equivalent to ten million two hundred thousand dollars ($10,200,000) (hereinafter called the CIDA Loan) to assist in financing part of the Project; (F) the Borrower has requested from the Finnish Inter- national Development Agency (hereinafter called FINNIDA) a grant in an amount approximately equivalent to two million three hundred thousand dollars (2,300,000) (hereinafter called the FINNIDA Grant) to assist in financing part of the Project; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and TANESCO; -2- NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "Project Agreement" means the agreement between the Association and TANESCO of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and TANESCO pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "TANESCO Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (d) "MEM Special Account" means the accou . referred to in Section 2.02 (c) of this Agreement; (e) "MEM" means the Borrower's Ministry of Energy and Minerals; (f) "TANESCO" means the Tanzania Electric Company Limited, a company registered under the Laws of the Borrower; (g) "NUWA" means the National Urban Water Authority established under the laws of the Borrower; and (h) "T SH" means Tanzanian shilling the currency of the Borrower. -3- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to thirty-four million seven hundred thousand Special Drawing Rights (SDR 34,700,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Asso- ciation, for expenditures made (or, if the Association shall so agree, to be made) in respect -f the reasonable cost of goods .nd services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of Parts A and C.3 of the Project, open and maintain in dollars a special account (the TANESCO Special Account) in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the TANESCO Special Account shall be made in accordance with the provisions of Schedule 3 to this Agreement. (c) The Borrower shall, for purposes of Parts C.1 and 2 of the Project, open and maintain in dollars a special account (the MEM Special Account) in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the MEM Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1990, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty (60) days after the date of the Development Credit Agreement to the respective dates on which amounts shall be -4- withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreemer for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each April 1 and October 1 commencing October 1, 1996, and ending April 1, 2036. Each installment to and including the installment payable on April 1, 2006, shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half percent (1-1/2%) of such principal amount. Section 2.08. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. TANESCO is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 (a) and (b) of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this -5- Agreement, and, to this end, without any limitation or restric- tion upon any of its other obligations under the Development Credit Agreement, shall: (i) carry out Parts C.1 and C.2 of the Project through its Ministry of Energy and Minerals; (ii) carry out Part B of the Project through NUWA; and (iii) cause TANESCO to carry out Parts A and C.3 of the Project and to perform in accordance with the provisions of the Project Agreement all the obligations of TANESCO therein set forth, shall take and cause to be taken all action, including the provision of funds, facili- ties, services and other resources, necessary or appropriate to enable TANESCO to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit for Parts A and C.3 of the Project to TANESCO under a subsidiary loan agreement to be entered into between the Borrower and TANESCO, under terms and conditions which shall have been approved by the Association which shall provide, inter alia, that: (i) the proceeds of the Credit shall be relent at an interest rate of nine percent (9%) per annum for a term of twenty years including a grace period not exceeding four years; and (ii) TANESCO shall bear the risk resulting from fluctuations in the value of the currencies relent to it. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. 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 I to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that 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 insur- ance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Parts A and C.3 of the Project shall be carried out by TANESCO pursuant to Section 2.03 of the Project Agreement. - 6 - Section 3.04. The Borrower shall, until completion of the Project: (i) consult with the Association and TANESCO annually on TANESCO's investment program; and (ii) consult with the Associa- tion prior to undertaking any capital investment, not included in TANESCO's investment program, in excess of $5 million equivalent for any individual project or an aggregate amount of capital investments in excess of $5 million equivalent in any financial year. Section 3.05. The Borrower shall, for purposes of carrying out Parts C.1 and 2, establish an organization satisfactory to the Association. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of Parts B, C.1, and C.2 of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section including the MEM 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 copy of 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 the said accounts and the audit thereof and said records as the Association shall from time to time reasonably request. -7- (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower 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. Section 4.02. The Borrower shall, in order to enable TANESCO to meet the requirements of Section 4.03 of the Project Agree- ment, review TANESCO's tariffs and take appropriate action thereon within sixty days of receiving TANESCO's recommendations on such tariffs. Section 4.03. (a) The Borrower shall ensure the prompt payment to TANESCO of electricity bills, outstanding for more than forty-five days, of those departments and agencies of the Borrower that the Borrower specifies cannot be disconnected for safety or humanitarian reasons. (b) The Borrower shall furnish to the Association a plan of action, satisfactory to the Association, for the reduction of the outstanding electricity accounts of NUWA. -8- ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) TANESCO shall have failed to perform any of its obliga- tions under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situa- tion shall have arisen which shall make it improbable that TANESCO will be able to perform its obligations under the Project Agreement. (c) The Electricity (Tanganyika Electric Supply Company Limited) License, 1957, shall have been amended, suspended, abro- gated, repealed or waived so as to affect materially and adverse- ly the ability of TANESCO to perform any of its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of TANESCO or for the suspension of its operations. (e) A change shall have been made in TANESCO's Memorandum of Agreement or Articles of Association which will adversely affect the operations or financial condition of TANESCO or the carrying out of the Project. (f) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower or TANESCO to with- draw the proceeds of any grant, loan or credit made to the Borrower or TANESCO for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan or credit_ shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if: -9- (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower or TANESCO to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower or TANESCO from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement or of TANESCO under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a), (c), (d) and (e) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower; and (b) any event specified in paragraph (f) (i) (B) of Sec- tion 5.01 of this Agreement shall occur subject to paragraph (f) (ii) of Section 5.01 of this Agreement. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, that: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and TANESCO; (b) TANESCO has, in accordance with Schedule 2 paragraph 2 of the Project Agreement, established a Rehabilitation Depart- ment; (c) TANESCO has reduced its accounts receivable, except that of NUWA, to be more than 90 days of sales; (d) the Borrower has furnished to the Association the plan of action referred to in Section 4.03 (b) of this Agreement; - 10 - (e) the Association has been notified that all conditions precedent to the initial disbursement of the EIB Loan and the FINNIDA Grant, other than the effectiveness of this Agreement, have been fulfilled; and (f) the Association has been furnished with evidence satis- factory to the Association showing that the Norwegian Grant has been made available. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the 2roject Agreement has been duly authorized or ratified by TANESCO and is legally binding upon TANESCO in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and TANESCO and is legally binding upon the Borrower ard TANESCO in accordance with its terms, Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Sec- tion 12.04 of the General Conditions. Section 6.04. The provisions of paragraph (a) of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date 20 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the minister of the Borrower at the time responsible for finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: - 11 - For the Borrower: Ministry of Finance, Economic Affairs and Planning P. 0. Box 9111 Dar es Salaam United Republic of Tanzania Cable address: Telex: TREASURY 41329 Dar es Salaam 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) - 12 - 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. UNITED REPUBLIC OF TANZANIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Eastern and Southern Africa - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Generation 1,540,000 100% of foreign rehabilitation expenditures and 50% of local expenditures (2) Transmission and 15,880,000 100% of foreign distribution expenditures and rehabilitation 50% of local expenditures (3) Workshops and 7,800,000 100% of foreign communications expenditures and 50% of local expenditures (4) Vehicles and 2,615,000 100% of foreign associated expenditures and spare parts 50% of local for Part A of expenditures the Project (5) Vehicles, equip- 415,000 100% ment, materials and supplies for Parts C.1 and C.2 of the Project - 14 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (6) Consultants' services and training: (a) for Part A of 2,235,000 100% of foreign the Project expenditures and 50% of local expenditures (b) for Part B of 260,000 100% the Project (c) for Parts C.1 840,000 100% and C.2 of the Project (7) Operating costs 660,000 100% for Parts C.1 and C.2 of the Project (8) Unallocated 2,455,000 TOTAL 34,700,000 2. For the purposes of this Schedule, the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) payments made for expenditures under Category (3) (b) until the Borrower has made satisfactory arrangements for the implementation of Parts C.1 and C.2 of the Project. - 15 - SCHEDULE 2 Description of the Project The main objective of the Project is to improve the reli- ability of the Borrower's power system. The Project will in addi- tion provide assistance to TANESCO in personnel training and its financial performance; and assistance to pilot activities to assure improved household fuel supplies. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Power 1. Power Stations Rehabilitation Rehabilitation of the Mwanza-Nyakato diesel station, Mwanza South diesel station, Ubungo gas turbine and diesel station; and other isolated diesel power plants. 2. Transmission Network Rehabilitation: (a) Rehabilitation of existing 220 kv, 132 kv and 66 kv transmission lines with a total length of about 1215 kilometers except Kidatu-Mbeya and Iringa-Dodoma. (b) Rehabilitation of transmission substations. 3. Distribution Network Rehabilitation Rehabilitation of about 3,600 kilometers of 33 kv and 11 kv main distribution lines and related low voltage lines, through the installation of protective devices, new distribution transformers and supply of new hardware. 4. Communications Provision and installation of pilot cables, radio and telephone equipment. 5. Transport, Spares and Tools: (a) Provision of about 285 vehicles for generation, transmission and distribution maintenance, billing and collec- tion services and student transportation at Kidatu. - 16 - (b) Provision of spare parts. (c) Provision of tools and equipment for the electrical, mechanical, meter testing, telecommunications and transport workshops. (d) Provision of meters and accessories. 6. Project Supervision and Training: (a) Supervision of rehabilitation work and on-the-job training of supervisory staff, operators and technicians for electrical and mechanical maintenance, protection and control, and line maintenance through the provision of about eleven engineers/technicians. (b) Training and Technical Assistance. Training of technicians and tradesmen at the TTI in Kidatu by the provisions of about five technicians/operator-instructors. (c) Provision of about 27 man-months of specialized train- ing at recognized overseas power utilities. 7. Assistance to TANESCO Strengthening of TANESCO's Finance Directorate, through the provicton of: (i) a financial adviser and a computer systems specialist; and (ii) computer hardware and software. Part B: Assistance to NUWA Development of an improved accounting, billing and collec- tion system in NUWA through the provision of technical assistance. Part C: Energy: 1. Charcoal Production Program Establishment of about three efficient, commercially-sized pilot charcoal production operations, including the provision of technical asssistance to the program's management unit in MEM's Energy Department. - 17 - 2. Charcoal Cookers Training of charcoal cooker manufacturers and artisans; provision of tools; materials and equipment; and the promotion of cookers, including provision of technical assistance to the program's management unit in MEM's Energy Department. 3. Electric Cookers A study to evaluate the feasibility of manufacturing or importing about 35,000 to 50,000 low-cost, two-burner electric cookers for supply to existing power consumers within TANESCO's Interconnected System. The Project is expected to be completed by June 30, 1990. - 18 - SCHEDULE 3 TANESCO Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3), (4) and (6) (a) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Parts A and C.3 of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $1,000,000 to be withdrawn from the Credit Account and deposited into TANESCO Special Account pursuant to para- graph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the TANESCO 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 TANESCO Special Account has been duly opened, with- drawals of the Authorized Allocation and subsequent withdrawals to replenish the TANESCO 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 into the TANESCO Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the TANESCO Special Account at such inter- vals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the TANESCO Special Account such amounts as shall be required to replenish the TANESCO Special Account with - 19 - amounts not exceeding the amount of payments made out of the TANESCO Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposits furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the TANESCO 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 other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the TANESCO 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 this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories for Parts A and C.3 of the Project, minus the amount of any out- standing special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions, with respect to Parts A and C.3 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 Categories for Parts A and C.3 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 TANESCO Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. - 20 - 6. (a) If the Association shall have determined at any time that any payment out of the TANESCO 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 furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the TANESCO 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 TANESCO 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 TANESCO Special Account will not be required to cover further payments for eligible expendi- tures, the Borrower shall, promptly upon notice from the Associa- tion, refund to the Association such oatstanding amount for crediting to the Credit Account. - 21 - SCHEDULE 4 ME14 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" mean Categories (5), (6) (c) and (7) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Parts C.1 and C.2 of the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eli- gible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $500,000 to be withdrawn from the Credit Account and deposited into the MEM Special Account pursuant to para- graph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the MEM 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 MEM Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the MEM 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 into the MEM Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the MEM 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 MEM Special Account such amounts as shall be required to replenit he MEM Special Account with amounts not exceeding the - 22 - amount of payments made out of the MEM Special Account for eli- gible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, 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 MEM 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 expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the MEM Special Account shall be made by the Association when either of the following situa- tions first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accor- dance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories for Parts C.1 and C.2 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 C.1 and C.2 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 eligible Categories for Parts C.1 and C.2 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 MEM Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. - 23 - 6. (a) If the Association shall have determined at any time that any payment out of the MEM Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the MEM 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 MEM 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 MEM 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 Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the 2 5 day of 198 L. FOR SECRETARY