Conformed Copy - L3154 - Third Telecommunications Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3154 PNG (Third Telecommunications Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and POST AND TELECOMMUNICATION CORPORATION Dated June 29, 1990 LOAN NUMBER 3154 PNG PROJECT AGREEMENT AGREEMENT, dated June 29, 1990, 1990, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and POST AND TELECOMMUNICATION CORPORATION (PTC). WHEREAS (A) by the Loan Agreement of even date herewith between the Independent State of Papua New Guinea (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to seventeen million two hundred thousand dollars ($17,200,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that PTC agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and PTC, part of the proceeds of the loan provided for under the Loan Agreement will be made available to PTC on the terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS PTC, in consideration of the Bank's entering into the Loan 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 Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. PTC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out Parts B and C of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utilities practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project. Section 2.02. Except as the Bank 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 Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. PTC shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 B and C of the Project. Section 2.04. PTC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, PTC 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) PTC shall, at the request of the Bank, exchange views with the Bank with regard to progress of Parts B and C of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) PTC shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts B and C of the Project, the accomplishment of the purposes of Loan, or the performance by PTC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. PTC shall carry out Part C of the Project in accordance with an institutional action plan agreed with the Bank. ARTICLE III Management and Operations of PTC Section 3.01. (a) PTC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utilities practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Page 3 (b) Without limitation upon the provisions of paragraph (a) of this Section, PTC shall carry on its operations in accordance with performance indicators acceptable to the Bank. Section 3.02. PTC 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 utilities practices. Section 3.03. PTC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) PTC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) PTC shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than nine 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, PTC shall earn, for each of its fiscal years after its fiscal year ending on December 31, 1989, an annual return of not less than 13% of the average current net value of PTC's fixed assets in operation. (b) Before September 30 in each of its fiscal years, PTC shall, on the basis of forecasts prepared by PTC and satisfactory to the Bank, 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 Bank the results of such review upon its completion. (c) If any such review shows that PTC would not meet the requirements set forth in paragraph (a) for PTC's fiscal years covered by such review, PTC shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (d) For purposes of this Section: (i) The annual return shall be calculated by dividing PTC's net operating income for the fiscal year in question by one half of the sum of the current net value of PTC's fixed assets in operation at the beginning and at the end of that fiscal year. Page 4 (ii) The term "net operating income" means total operat- ing revenues less total operating expenses. (iii) The term "total operating revenues" means revenues from all sources related to operations. (iv) The term "total operating expenses" means all expenses related to operations, including admini- stration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a straight-line basis at a rate of not less than 5% per annum of the average current gross value of PTC's fixed assets in operation, or other basis acceptable to the Bank, but excluding interest and other charges on debt. (v) The average current gross value of PTC's fixed assets in operation shall be calculated as one-half of the sum of the gross value of PTC's fixed assets in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Bank. (vi) The term "current net value of PTC's fixed assets in operation" means the gross value of PTC's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Bank. Section 4.03. (a) Except as the Bank shall otherwise agree, PTC shall maintain, for each of its fiscal years 1990, 1991 and 1992, a ratio of total operating expenses to total operating revenues not higher than 85%, and for each of its fiscal years after its fiscal year ending on December 31, 1992, a ratio of total operating expenses to total operating revenues not higher than 80%. (b) Before September 30 in each of its fiscal years, PTC shall, on the basis of forecasts prepared by PTC and satisfactory to the Bank, ascertain 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 Bank the results of such review upon its completion. (c) If any review shows that PTC would not meet the requirements set forth in paragraph (a) for PTC's fiscal years covered by such review, PTC shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (d) For the purposes of this Section: (i) The term "total operating expenses" means all expenses related to operations, including admini- stration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a straight-line basis at a rate of not less than 5% per annum of the average current gross value of PTC's fixed assets in operation, or other basis acceptable to the Bank, excluding interest and other charges on debt. (ii) The term "total operating revenues" means revenues from all sources related to operations. (iii) The average current gross value of PTC's fixed assets in operation shall be calculated as one half of the sum of the gross value of PTC's fixed assets Page 5 in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Bank. Section 4.04. (a) Except as the Bank shall otherwise agree, PTC shall not incur any debt, unless the net revenues of PTC 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 2 times the estimated maximum debt service requirements of PTC for any succeeding fiscal year on all debt of PTC, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of PTC 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 PTC's rates 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 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 Bank. ARTICLE V Page 6 Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of PTC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify PTC thereof. 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For PTC: Post and Telecommunication Corporation P.O. Box 1349 Boroko, NCD Papua New Guinea Telex: NE 22372 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 PTC, or by PTC on behalf of the Borrower under the Loan Agreement, may be taken or executed by the Managing Director or such other person or persons as the Managing Director shall designate in writing, and PTC shall furnish to the Bank 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, Page 7 United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Gautam Kaji Acting Regional Vice President Asia POST AND TELECOMMUNICATION CORPORATION By /s/ Margaret Taylor 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 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). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Papua New Guinea 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 Management information systems equipment and software up to an aggregate amount not to exceed the equivalent of $2,500,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from at least two different countries eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank 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 $1,000,000 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 Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank 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 Page 8 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 Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Loan Agreement. 2. The figure of 10% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Borrower in carrying out Part A of the Project and PTC in carrying out Part B.3 of the Project, the Borrower and PTC, respectively, shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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.