Conformed Copy - C1819 - Petroleum Refining and Distribution Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1819 GH (Petroleum Refining and Distribution Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and GHANAIAN ITALIAN PETROLEUM COMPANY LIMITED and GHANA OIL COMPANY LIMITED Dated September 21, 1987 PROJECT AGREEMENT AGREEMENT, dated Septebmer 21, 1987 between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association), GHANAIAN ITALIAN PETROLEUM COMPANY LIMITED (GHAIP) and GHANA OIL COMPANY LIMITED (GOIL). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Ghana (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eleven million seven hundred thousand Special Drawing Rights (SDR 11,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that GHAIP and GOIL agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by two subsidiary loan agreements to be entered into firstly between the Borrower and GHAIP and secondly between the Borrower and GOIL, the proceeds of the credit provided for under the Development Credit Agreement will be made available to GHAIP and GOIL on the terms and conditions set forth in the Subsidiary Page 2 Loan Agreements; and WHEREAS GHAIP and GOIL, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have 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) GHAIP and GOIL declare their 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 with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and petro- leum practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association shall otherwise agree, GHAIP and GOIL shall carry out the Project and conduct their operations in accordance with project monitoring indicators satisfactory 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 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. GHAIP and GOIL 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. GHAIP and GOIL shall duly perform their obliga- tions under the Subsidiary Loan Agreements. Except as the Associa- tion shall otherwise agree, GHAIP and GOIL shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provision thereof. Section 2.05. (a) GHAIP and GOIL shall, at the request of the Association, exchange views with the Association with regard to the progress of their respective Parts of the Project, the per- formance of their respective obligations under this Agreement and under the Subsidiary Loan Agreements, and other matters relating to the purposes of the Credit. (b) GHAIP and GOIL shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of their respective Parts of the Project, the accomplish- ment of the purposes of the Credit, or the performance by GHAIP and GOIL of their respective obligations under this Agreement and under the Subsidiary Loan Agreements. Section 2.06. GHAIP and GOIL shall: (i) prepare jointly with Page 3 the Borrower no later than December 31, 1987 the plan of action referred to in Section 3.08 of the Development Credit Agreement for the carrying out of such of the recommendations of the report of the management improvement study for GHAIP and GOIL as the Association and the Borrower shall have agreed; and (ii) there- after carry out the said recommendations in accordance with the plan of action. Section 2.07. GHAIP shall, beginning with fiscal year 1988, establish its refinery processing margin in accordance with a schedule and criteria satisfactory to the Association, taking into account prevailing comparable international levels for operating costs, international market prices for crude and products and GHAIP's financial viability. Section 2.08. GHAIP shall until its refinery is completely rehabilitated under Part A of the Project continue to maintain in a form and with functions and staffing satisfactory to the Association the Project Unit established under Credit 1446-GH. Section 2.09. GHAIP shall: (i) measure on a regular basis the oil content and the biological oxygen demand (BOD) in the waste- water of its Tema refinery; (ii) take all necessary action to maintain the level of oil content and BOD in such wastewater at normally acceptable industry standards; and (iii) provide quar- terly reports to the Association setting forth data relating to oil content and BOD levels. Section 2.10. GOIL shall: (a) continue to maintain its exist- ing Project Unit until completion of the activities referred to under Parts B and C of the Project; and (b) employ and assign to the said Project Unit for a period of at least 2 years an engineer with qualifications and experience satisfactory to the Associa- tion. Section 2.11. GHAIP and GOIL shall each: (i) prepare and furnish to the Association no later than December 31, 1987 a corporate plan for 1988-90 satisfactory to the Association; (ii) conclude a performance agreement with the Borrower based on the said corporate plan by June 30, 1988; and (iii) promptly thereafter carry out the provisions of the said agreement. ARTICLE III Management and Operations of GHAIP and GOIL Section 3.01. GHAIP and GOIL shall carry on their respective operations and conduct their respective affairs in accordance with sound administrative, financial, engineering and petroleum indus- try practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. GHAIP and GOIL shall at all times operate and maintain their respective 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 petroleum industry practices. Section 3.03. GHAIP and GOIL 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. ARTICLE IV Financial Covenants Section 4.01. (a) GHAIP and GOIL shall maintain records and accounts adequate to reflect in accordance with sound accounting practices their respective operations and financial condition. Page 4 (b) GHAIP and GOIL shall: (i) have their records, accounts and financial state- ments (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate audit- ing 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 their 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 records, accounts and financial statements as well as the audit thereof, 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, GHAIP and GOIL shall: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report 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. (a) Except as the Association shall otherwise agree, GHAIP shall not incur any debt, unless the net revenues of GHAIP 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 1.4 times the estimated maximum debt service requirements of GHAIP for 1988 and at lest 1.5 times the estimated maximum debt service requirements of GHAIP for any succeeding fiscal year on all debt of GHAIP, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of GHAIP 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 agreement providing for such Page 5 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 GHAIP's processing margins 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 operations including administration, adequate main- tenance, taxes and payments 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) 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, GHAIP shall maintain a ratio of current assets to current liabilities of not less than 1.0 through 1988 and not less than 1.1 thereafter. (b) Before October 1 in each of its fiscal years, GHAIP shall, on the basis of forecasts prepared by GHAIP 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 the results of such review upon its completion. (c) If any such review shows that GHAIP would not meet the requirements set forth in paragraph (a) for the GHAIP's fiscal years covered by such review, GHAIP shall promptly take all neces- sary measures in order to meet such requirements. (d) For the purposes of this Section: (i) The term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inven- tories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (ii) The term "current liabilities" means all liabili- Page 6 ties which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service require- ments, taxes and payments in lieu of taxes, and dividends. (iii) 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. (iv) 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 4.04. Except as the Association shall otherwise agree, GHAIP shall not, throughout the period ending December 31, 1990, declare any dividend or make any other distribution with respect to its share capital. Section 4.05. (a) Except as the Association shall otherwise agree, GOIL shall not incur any debt, unless the net revenues of GOIL for fiscal year immediately preceding the date of such incur- rence 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 requirements of GOIL for any succeeding fiscal year on all debt of GOIL, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of GOIL 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 GOIL's distribution margins and 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 operations including administration, adequate mainte- nance, taxes and payments 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 Page 7 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) 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 4.06. (a) Except as the Association shall otherwise agree, GOIL shall maintain a ratio of current assets to current liabilities of not less than 1.1 in 1988 and thereafter. (b) Before October 1 in each of its fiscal years, GOIL shall, on the basis of forecasts prepared by GOIL 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 GOIL would not meet the requirements set forth in paragraph (a) for GOIL's fiscal years covered by such review, GOIL shall promptly take all necessary measures in order to meet such requirements. (d) For the purposes of this Section: (i) The term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inven- tories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (ii) The term "current liabilities" means all liabili- ties which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service require- ments, taxes and payments in lieu of taxes, and dividends. (iii) 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) 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 4.07. GHAIP and GOIL shall review with the Associa- tion their respective three-year rolling investment program no later than March 31 in each year of the Project. Page 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 GHAIP and GOIL 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 20 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 GHAIP and GOIL of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation 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 desig- nated 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 GHAIP: The Managing Director Ghanaian Italian Petroleum Company Limited P.O. Box 599 Tema Ghana Cable address: Telex: GHAIP 2005 Tema 2011 For GOIL Page 9 The Managing Director Ghana Oil Company Limited P.O. Box 3183 Accra Cable address: Telex: GOIL 9742151 Accra 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 GHAIP and GOIL may be taken or executed by the Managing Director or such other person or persons as GHAIP or GOIL, as the case may be, shall designate in writing, and GHAIP and GOIL shall 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. 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 By /s/ Edward V. K. Jaycox Regional Vice President Africa GHANAIAN ITALIAN PETROLEUM COMPANY LIMITED By /s/ Eric Otoo Authorized Representative GHANA OIL COMPANY LIMITED By /s/ Eric Otoo Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part C 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). Page 10 Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Ghana 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: Other Procurement Procedures 1. Works for Parts A and B (1) of the Project and specialized equipment may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with pro- cedures satisfactory to the Association. 2. Items or groups of items estimated to cost an amount equiva- lent to $50,000 or less per contract, up to an aggregate amount not to exceed the equivalent of $500,000, 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. With the prior agreement of the Association and for the purposes of standardization, additional items of equipment or spare parts compatible with existing equipment may be purchased by direct contracting from the original supplier of such existing equipment in accordance with paragraph 3.5 (b) of the Guidelines. 4. Goods of a proprietary nature obtainable from one source may, with the prior agreement of the Association, be procured by direct contracting from that source in accordance with procedures satisfactory to the Association. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for goods estimated to cost the equivalent of $200,000 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 a 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 paragraph 2 (d) of said Appendix 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 a 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 para- graph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 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. 2. The figure of 10% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist GHAIP and GOIL in carrying out the Page 11 Project, GHAIP and GOIL shall employ consultants (including con- sultants for design, engineering, procurement, construction, supervision and project management) whose qualifications, expe- rience and terms and conditions of employment shall be satisfac- tory 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.