Conformed Copy - C2192 - Second Transport Rehabilitation Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2192 GH (Second Transport Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and GHANA RAILWAY CORPORATION Dated December 21, 1990 CREDIT NUMBER 2192 GH PROJECT AGREEMENT AGREEMENT, dated December 21, 1990, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and GHANA RAILWAY CORPORATION (GRC). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Ghana (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixty-nine million Special Drawing Rights (SDR 69,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that GRC agrees 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 GRC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to GRC on the terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS GRC, 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. GRC 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 Part E of the Project with due diligence and efficiency and in conformity with appro- priate administrative, financial, engineering and railway management practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part E of the Project. 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 3 to the Development Credit Agreement. Section 2.03. GRC 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 acquisi- tion, respectively) in respect of the Project Agreement and Part E of the Project. Section 2.04. GRC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, GRC 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 2.05. (a) GRC shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress of Part E of the Project, the performance of its obliga- tions under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) GRC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part E of the Project, the accomplishment of the purposes of the Credit, or the performance by GRC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. GRC shall complete the strengthening of the bridges on the Western line not later than December 31, 1992. Section 2.07. GRC shall continue to sign annual performance agreements with the Borrower. ARTICLE III Management and Operations of GRC Section 3.01. GRC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, Page 3 engineering and railway management practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. GRC 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 transportation practices. Section 3.03. GRC 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) GRC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) GRC shall: (i) have its records, accounts and financial state- ments (balance sheets, statements of income and expenses and related statements) for each fis- cal year audited, in accordance with appro- priate auditing principles consistently applied, by independent auditors acceptable to the Asso- ciation; (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. Section 4.02. (a) Except as the Association shall otherwise agree, GRC shall maintain, for each of its fiscal years after its fiscal year ending on December 31, 1990, a ratio of total working expenses to total operating revenues not higher than the percentages specified below in respect of the following fiscal years: (i) 161% in fiscal year 1991; (ii) 142% in fiscal year 1992; (iii) 97% in fiscal year 1993; (iv) 81% in fiscal year 1994; and (v) 76% in fiscal year 1995 and each following fiscal year. (b) Before May 31 in each of its fiscal years, GRC shall, on the basis of forecasts prepared by GRC and satisfactory to the Association, ascertain whether it would meet the requirements set forth in paragraph (a) of this Section in respect of such year. Before October 31 in each of its fiscal years, GRC shall on the basis of the said forecasts, ascertain whether it would meet the said requirements in respect of the next following fiscal year. GRC shall furnish to the Association the results of each such review Page 4 upon its completion. (c) If any such review shows that GRC would not meet the requirements set forth in said paragraph (a) for GRC's fiscal year covered by the review, GRC shall promptly take all necessary measures (including adjustments of the structure or levels of its tariffs) in order to meet such requirements. (d) For the purposes of this Section: (i) The term "total working expenses" means all expenses related to operations, including admin- istration, adequate maintenance, taxes and pay- ments in lieu of taxes, but excluding provision for depreciation and interest and other charges on debt. (ii) The term "total operating revenues" means reve- nues from all sources related to operations. Section 4.03. (a) Except as the Association shall otherwise agree, GRC shall not, as from fiscal year 1995, incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 55 to 45. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of GRC 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 "equity" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of GRC not allocated to cover specific liabilities. (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 accept- able to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, GRC shall not incur any debt unless a reasonable forecast of the revenues and expenditures of GRC shows that the estimated net revenues of GRC 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 GRC in such year on all debt of GRC including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of GRC 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 Page 5 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 relat- ed to operations and net non-operating income; and (B) the sum of all expenses related to opera- tions including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreci- ation, 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 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 GRC not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and GRC accept as reasonable and as to which the Association has notified GRC 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 the Association. (vii) 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 accept- able to the Association. Section 4.05. (a) GRC shall observe the financial, operational and traffic targets set out in the Schedule to this Agreement, subject to such modifications as GRC and the Association may agree from time to time. (b) With respect to the staff levels set forth in the Schedule to this Agreement, GRC shall: (i) furnish to the Associa- tion its updated version of the previously prepared manpower study; (ii) prepare not later than June 30, 1991, a staff reduction plan acceptable to the Association; and (iii) implement said plan thereafter. Section 4.06. (a) GRC shall: Page 6 (i) make any adjustments required in its tariffs in order to meet its obligations under Sections 4.02, 4.03 and 4.04 of this Agreement in respect of a fiscal year not later than January 1 of such year; (ii) on the basis of the costs of services and market conditions, revise, as necessary, its tariff structure to the satisfaction of the Association; (iii) ensure that its revised tariffs for passenger traffic on the Western Line cover 100% of its variable costs in 1991 and 1992 (excluding depre- ciation) and, starting in 1993, cover a propor- tion of its fixed costs as well, namely 14% in 1993, 19% in 1994, 26% in 1995 and 30% in 1996 and the years thereafter; and (iv) ensure that its revised tariffs for passenger traffic on the Central and Eastern Lines cover 100% of its variable costs in 1994 and 1995 (excluding depreciation) and, starting in 1996, cover a proportion of its fixed costs as well, namely 14% in 1996, 19% in 1997, 26% in 1998 and 30% in 1999 and the years thereafter. (b) GRC shall, no later than May 31 and October 31 of each year, furnish to the Association, semiannually: (i) GRC's investment plan, financial projections and monitoring targets for the current fiscal year and the next following three fiscal years, together with an explanation of any failure or inability on the part of GRC to attain the said targets; and (ii) details of any measures GRC proposes to take in order to attain the performance and financial targets required by this Agreement. Section 4.07. GRC shall: (i) revalue its fixed assets annually by indexation according to procedures or formula satisfactory to GRC and the Association; and (ii) take a physical inventory whenever the Association or GRC shall consider it necessary. 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 GRC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agree- ment shall terminate in accordance with its terms; or (ii) the date 20 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 paragraph (a) (ii) of this Section, the Association shall promptly notify GRC 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 Page 7 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 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For GRC: The Managing Director Ghana Railway Corporation P.O. Box 251 Takoradi, Ghana Cable address: Telex: RAILCHIEF 2437 RAILTK Takoradi 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 GRC may be taken or executed by the Managing Director or such other person or persons as GRC shall designate in writing, and GRC 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 collec- tively 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 GHANA RAILWAY CORPORATION By /s/ Joseph L. S. Abbey Page 8 Authorized Representative SCHEDULE Financial, Operation and Traffic Targets 1991 1992 1993 1994 1995 1. Staff at end of 6,500 6,375 6,250 6,125 6,000 calendar year 2. Account Receivables 10% 10% 10% 10% 10% (Percentage of total revenues at the end of year)* 3. Mainline Locomotive Availability (a) More than 10 50 63 64 65 65 years old (b) Less than 10 60 73 74 75 75 years old 4. Mainline Locomotives 240 260 275 280 280 (kms/day) 5. Wagons availability (a) More than 20 56 59 62 65 65 years (b) Less than 20 82 83 84 85 85 years 6. Total Traffic Freight ('000 tons) 810 903 1,248 1,470 1,525 Passenger (Millions) 3.0 4.0 6.0 6.6 7.0 Tonne-Kms (Millions) 144 163 252 304 317 Passenger-Kms (Millions) 270 360 540 600 630 ______________________ * No individual account should be more than six months outstanding.