Conformed Copy - C1998 - Second Power Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1998 MLI (Second Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE ENERGIE DU MALI Dated May 30, 1989 CREDIT NUMBER 1998 MLI PROJECT AGREEMENT AGREEMENT, dated May 30, 1989 between INTERNATIONAL DEVELOPMENT ASSOCIATION (the "Association") and Societe Energie du Mali ("EDM"). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Mali (the "Borrower") and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty-four million two hundred thousand Special Drawing Rights (SDR 24,200,000) on the terms and conditions set forth in the Development Credit Agreement, but only on condition that EDM agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and EDM, part of the proceeds of the credit provided for under the Development Credit Agreement will be made Page 2 available to EDM on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS EDM, 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, in the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the term "Fiscal Year" means EDM's fiscal year which runs from January 1 to December 31. ARTICLE II Execution of the Project Section 2.01. (a) EDM 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 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. (b) For the purposes of paragraph (a) of this Section EDM shall establish PMU with the necessary staff. Section 2.02. EDM shall: (a) execute a program to strengthen EDM's organization; (b) execute a plan to reduce power losses and improve bill collections; and (c) take such steps as shall be necessary to reduce consumer arrears to not more than the equivalent of: (i) by the end of 1989, the amount billed for the previous four months; (ii) by the end of 1990, the amount billed for the previous three months; and (iii) thereafter, the amount billed for the previous three months. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the parts of the Project to be carried out by EDM and to be financed out of the proceeds of the Credit, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. EDM 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 F of the Project (with the exclusion of Parts E (e) and E (f)). Section 2.05. EDM shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, EDM 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 2.06. (a) EDM shall from time to time exchange views with the Association with regard to the progress of the Parts of the Project carried out by EDM, the performance of its obligations Page 3 under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. Such exchange of views shall take place: (i) for the first time not later than March 31, 1990; (ii) for the second time not later than September 30, 1990; (iii) not later than March 31 and September 30 of each year thereafter; and (iv) at such other times as the Association shall reasonably request. (b) Prior to such exchange of views EDM shall furnish to the Association: (i) a project performance review for the preceding six months of Project implementation, carried out under terms of reference satisfactory to the Association; and (ii) a project implementation plan for the following six months of Project implementation, in such detail as the Association shall reasonably request. (c) EDM 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 EDM of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of EDM Section 3.01. EDM shall carry out its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. EDM 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. EDM shall: (a) take out and maintain with responsible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice; and (b) carry out periodically a proforma revaluation of its fixed assets, in accordance with sound and consistent methods of evaluation satisfactory to the Association, for the purpose of reviewing and updating its insurance coverage in the light of current real values of insured assets. ARTICLE IV Financial Covenants Section 4.01. (a) EDM shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) EDM shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year Page 4 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; 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, EDM shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associa- tion has received 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 records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the proce- dures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) Except as the Association shall otherwise agree, EDM shall not incur any debt, unless a reasonable forecast of the revenues and expenditures of EDM shows that the estimated net revenues of EDM 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 EDM in such year on all debt of EDM including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means any indebtedness of EDM 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 Page 5 (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 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; (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 reve- nues in (A) above; (v) the term "debt service requirements" means the aggregate 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 EDM not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and EDM accept as reasonable and as to which the Association has notified EDM 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 EDM; and (vii) whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the guarantor, 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, EDM shall generate, for each of its Fiscal Years after its Fiscal Year ending on December 31, 1989, funds from internal sources equivalent to not less than twenty percent (20%) of the annual average of the capital expenditures incurred, or expected to be incurred, for that year, the previous Fiscal Year and next following Fiscal Year. (b) Before November 30 in each of its Fiscal Years, EDM shall, on the basis of forecasts prepared by EDM and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such Fiscal 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 EDM would not meet the requirements set forth in paragraph (a) for EDM's Fiscal Years covered by such review, EDM shall promtply take all necessary measures in order to meet such requirements. Page 6 (d) For the purposes of this Section: (i) the term "funds from internal sources" means the difference between: (A) the sum of revenues from all sources related to electric power operations, consumer deposits and consumer contributions in aid of construction, net non-operating income and any reduction in working capital other than cash; and (B) the sum of all expenses related to electric power operations, including administration, adequate maintenance and 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; (ii) the terms "net non-operating income" means the difference between: (A) revenues from all sources other than those related to electric power operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above; (iii) 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; (iv) the term "current assets excluding cash" means assets other than cash which would 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; (v) 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, including accounts payable, customer advances, taxes and payments in lieu of taxes, and dividends; (vi) 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; (vii) the term "capital expenditures" means all expenditures incurred on account of fixed assets, including interest charged to construction, related to electric power operations; and (viii) 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 Page 7 basis of a rate of exchange acceptable to the Association. Section 4.04. EDM shall at all times make adequate annual provisions for depreciation and renewals of its fixed assets in accordance with sound accounting practices. 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 EDM 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 twenty-five (25) years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in sub- paragraph (a) (ii) of this Section, the Association shall promptly notify EDM 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 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 Societe Energie du Mali: B.P. 69 Bamako Republic of Mali Cable address: Telex: ENERMA 2587 ENERMALI Page 8 Bamako 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 EDM, or by EDM on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by EDM's Chairman of the Board of Directors or such other person or persons as the EDM's Chairman of the Board of Directors shall designate in writing, and EDM 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/ Sven Sandstrom Acting Regional Vice President Africa SOCIETE ENERGIE DU MALI By /s/ Nouhoum Samassekou Authorized Representative SCHEDULE 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. To the extent practicable, contracts for goods and works shall be grouped in bid packages estimated to cost the equivalent of $150,000 or more each. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in the Borrower's territory 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 procedures Page 9 described in Part A.1 hereof, EDM 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 thereto. Part D: Other Procurement Procedures 1. Buildings contracts estimated to cost less than the equi- valent of $200,000 may be procured on the basis of competitive bidding, advertised locally, in accordance with procedures satis- factory to the Association and paragraph 3.3 of the Guidelines. 2. Items or groups of items estimated to cost less than the equivalent of $150,000 per contract, up to an aggregate amount not to exceed the equivalent of $1,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Association and paragraph 3.4 of the Guidelines. Part E: Review by the Association of Procurement Decisions 1. (a) With respect to each contract estimated to cost the equivalent of $100,000 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 preceding 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 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 (a) (ii) of the Development Credit Agreement. 3. The figure of 20% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to carry out the Project, EDM shall employ consultants 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.