Conformed Copy - C2033 - Urban Household Energy Project - Amendment 1

Page 1 April 7, 1992 His Excellency Adriano A. Maleiane, Governor Bank of Mozambique Maputo, Mozambique Ref.: Urban Household Energy Credit (Cr. 2033-MOZ) The Household Energy Credit was signed in September 1989 but funds for the principal component, relating to EDM, have not been released because EDM has been unable to comply with two of the disbursement conditions relating respectively to preparation of a plan for financial viability, and to adoption of a plan for recovery of accounts receivable. In recent months Government and EDM's have made substantial progress towards meeting these conditions. The January tariff adjustments for EDM and the adoption of an automatic price adjustment mechanism should enable EDM to break even in the current fiscal year. Also EDM has implemented many aspects of a plan for financial viability through various measures to cut costs and improve cash collection. On the second issue, accounts receivable, EDM has a plan of action under implementation for a majority of customers in arrears, but action is still required from Government on the non-payment by a number of Government departments where because of the hardships that might be caused a 'cut off' policy cannot be used as a last resort. So as to enable EDM to start the project implementation and to use consultancy work already completed we would like to help by releasing a part of the Credit funds. Accordingly we suggest breaking Category 1(a) of Schedule 1 to the Credit Agreement into two phases so that 20% of the funds are available immediately, and the remaining 80% remain subject to the conditions of disbursement. This will have the effect of giving an extra year for the disbursement conditions to be met, and I trust that by that time Government will have taken the necessary decisions. If this proposal meets your approval please sign both copies of the enclosed revised Schedule 1 and return one copy to us. Sincerely, Stephen Denning Director Southern Africa Department INTERNATIONAL DEVELOPMENT ASSOCIATION SCHEDULE 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) EDM: Page 2 (a) (i) Power distri- 640,000 100% of foreign bution system expenditures and under Part A.1 70% of local of the Project-Phase I expenditures (a) (ii) Power distribution 2,560,000 100% of foreign system under Part A.1 expenditures and of the Project-Phase II 70% of local expenditures (b) Vehicles, equipment, 150,000 100% of foreign materials, and sup- expenditures and plies under Part A.2(b) 70% of local of the Project expenditures (2) PETROMOC: (a) Vehicles, equipment 950,000 100% of foreign materials, supplies, expenditures and spare parts and civil 70% of local works under Parts B.1, expenditures B.3 (b) and B.4 of the Project (b) Consultants' services 600,000 100% including external audit services under Parts B.3 (a) of the Project (3) MOCACOR: (a) Vehicles, equipment, 450,000 100% of foreign materials, supplies and expenditures and spare parts under 70% of local Part C.1 of the Project expenditures (b) Consultants' services 100,000 100% including external audit services under Part C.2 of the Project (4) DOE: (a) Vehicles, equipment 2,250,000 100% of foreign materials, supplies, expenditures and spare parts and civil 70% of local works under Part D of expenditures the Project (b) Consultant's services, 1,250,000 100% including, external audit services under Parts D.1, D.2, D.3, D.4 and D.6 of the Project (5) (a) Vehicles, equipment 2,800,000 100% of foreign materials, supplies expenditures and and spare parts under 70% of local Part E of the Project expenditures (b) Consultants' services 1,000,000 100% including external audit services under Part E.4 of the Project (6) Vehicles, equipment, 1,600,000 100% of foreign materials, supplies expenditures, and and spare parts 70% of local expenditures Page 3 under Parts F.1, F.2 and F.3 of the Project (7) Refunding of Project 580,000 Amount due pursuant to Advance to Section 2.2(c) of this Agreement (8) Unallocated 2,170,000 TOTAL 17,100,000 2. For the purposes of this Schedule: (a) 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; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory 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 date of this Agreement; (b) expenditures under Category (1) (a) (ii) unless: (i) the Borrower has furnished to the Association a plan satisfactory to the Association to resolve EDM's financial situation; (ii) EDM has implemented a satisfactory tariff increase for the second half of FY 1989; and (iii) the NDF Credit Agreement has been duly signed by the Borrower and NDF; (c) expenditures under Category (1) (a) (ii), (2) (a), (3) (a), unless the Borrower has furnished to the Association satisfactory plans for recovering arrears of account receivables due to EDM, PETROMOC and MOCACOR, respectively, and a satisfactory timetable for their implementation; and (d) expenditures under Category (5) (a): (i) unless the Association has approved the model loan agreement to be entered into by BPD and Beneficiaries; and (ii) unless the Association has received evidence satisfactory to it that the BADEA Loan Agreement has been duly signed by the Borrower and BADEA. Confirmed: REPUBLIC OF MOZAMBIQUE By Authorized Representative Date: September 24, 1992