Guinea - Second Power Project : Credit 2416 - Project Agreement - Conformed

CREDIT NUMBER 2416 GUI Project Agreement (Second Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and ENTREPRISE NATIONALE D'ELECTRICITE DE GUINEE Dated , 1992 CREDIT NUMBER 2416 GUI PROJECT AGREEMENT AGREEMENT, dated CA , 1992, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and ENTREPRISE NATIONALE D'ELECTRICITE DE GUINEE (ENELGUI). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Guinea (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty-six million five hundred thousand Special Drawing Rights (SDR 36,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ENELGUI 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 ENELGUI, a portion of the proceeds of the credit provided for under the Development Credit Agreement will be relent to ENELGUI on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS ENELGUI, 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. (a) ENELGUI 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 B of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering -2- and public utilities practices, and shall-provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part B of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and ENELGUI shall otherwise agree, ENELGUI shall carry out Part B of the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Part B of 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. ENELGUI 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 Part B of the Project. Section 2.04. ENELGUI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ENELGUI 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) ENELGUI shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B 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 Credit. (b) ENELGUI shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Credit, or the performance by ENELGUI of its obligations under this Agreement and under the Subsidiary Loan Agreement. -3- - ARTICLE III Management and Operations of ENELGUI Section 3.01. ENELGUI shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. ENELGUI 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. ENELGUI 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. Section 3.04. (a) ENELGUI shall at all times take all steps necessary to maintain its existence and its rights to carry on operations, to acquire and retain ownership of all land, and to maintain and renew all real property rights and all other rights, powers, privileges and franchises necessary or useful in the carrying out of the Project or in the conduct of its business. (b) Except as the Association shall otherwise agree, ENELGUI shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operations of its business and undertaking. Section 3.05. ENELGUI shall: (a) submit its draft annual investment plan to the Association for review and comments by October 31 of each year; (b) undertake any investment required to rehabilitate power networks in provincial cities or any other investment estimated to cost the equivalent of $1,000,000 or more only if the economic, technical and financial justification of such an investment is satisfactory to the Association; and (c) (i) adopt a tariff structure satisfactory to the Association, and (ii) from time to time revise such tariff structure as required to ensure adequate revenues from its operations, in agreement with the Association. -4- Section 3.06. ENELGUI shall take all appropriate measures (including a prompt disconnection of service with a service reinstatement penalty) required to: (a) improve the collection of electricity bill payments due to it by any public entity or private consumer; and (b) reduce the outstanding arrears due by public entities to a three-month billing average and by private consumers to a two-month billing average. Section 3.07. (a) ENELGUI shall at all times cooperate with BCRG to ensure that the Disposition Fund is maintained and managed in accordance with the provisions of Section 3.04 (a) of the Development Credit Agreement; (b) on the basis of withdrawal requests submitted by ENELGUI to the Association for reimbursements of amounts actually spent for eligible expenditures, ENELGUI shall deposit into the Disposition Fund amounts so reimbursed by the Association; (c) reimbursements made by the Association and deposited by ENELGUI into the Disposition Fund shall no longer be so deposited when the level of funds in the Disposition Fund is equivalent to $10,000,000; (d) unless otherwise agreed with the Association, the Disposition Fund shall be established for a period of 10 years; this period may be renewed; and (e) amounts deposited in the Disposition Fund shall be withdrawn only pursuant to withdrawal requests signed jointly by BCRG and ENELGUI, and shall be used solely in case of necessity, to finance the costs of: (i) services provided by ENEGLUI's technical operator, and (ii) essential spare parts required for plant maintenance and repairs. Section 3.08. ENELGUI shall: (a) implement by December 31, 1992 all measures recommended in the 1990 audit report to improve its accounting, bookkeeping and records maintenance systems; (b) (i) adopt an action plan, satisfactory to the Association, based on the recommendations of the environment impact assessment, and (ii) implement said action plan, no later than December 31, 1993; and (c) (i) carry out a mid-term review with the Association and the Borrower no later than June 30, 1995 to assess the progress achieved in the execution of the Project, and (ii) promptly implement the recommendations resulting from the mid-term review as they shall have been agreed upon with the Association and the Borrower. -5- ARTICLE IV Financial Covenants Section 4.01. (a) ENELGUI shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) ENELGUI shall: (i) have its records, accounts (including those related to the use of the Disposition Fund) 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than four 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, ENELGUI shall eara, for each of its fiscal years after its fiscal year ending on December 31, 1994, an annual return of not less than 7% of the average current net value of ENELGUI's fixed assets in operation during that fiscal year. (b) Before October 31 in each of its fiscal years, ENELGUI shall, on the basis of forecasts prepared by ENELGUI and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and -6- 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 ENELGUI would not meet the requirements set forth in paragraph (a) for ENELGUI's fiscal years covered by such review, ENELGUI 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 annual return shall be calculated by dividing ENELGUI's net operating income for the fiscal year in question by one half of the sum of ths current net value of ENELGUI's fixed assets in operation at the beginning and at the end of that fiscal year. (ii) The term "net operating income" means total operating 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 administration, 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 ENELGUI's fixed assets in operation, or other basis acceptable to the Association, but 'excluding interest and other charges on debt. (v) The average current gross value of ENELGUI's fixed assets in operation shall be calculated as one half of the sum of the gross value of ENELGUI'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 Association. -7- (vi) The term "current net value of ENELGUI's fixed assets in operation" means the gross value of ENELGUI'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 Association. Section 4.03. (a) Except as the Association shall otherwise agree, ENELGUI shall produce, for each of its fiscal years after its fiscal year ending on December 31, 1994, funds from internal sources equivalent to not less than 26% of the annual average of ENELGUI's capital expenditures incurred, or expected to be incurred, for that year, the previous fiscal year and the next following fiscal year. (b) Before October 31 in each of its fiscal years, ENELGUI shall, on the basis of forecasts prepared by ENELGUI 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 a copy of such review upon its completion. (c) If any such review shows that ENELGUI would not meet the requirements set forth in paragraph (a) for ENELGUI's fiscal years covered by such review, ENELGUI 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 "funds from internal sources" means the difference between: (A) the sum of revenues from all sources related to 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 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 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. (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 all assets other than cash which could 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 or fixed assets 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, debt service requirements, 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. -9- (vii) The term "capital expenditures" means all expenditures on account of fixed assets, including interest charged to construction, related to operations. (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 basis of a rate of exchange acceptable to the Association. 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 ENELGUI 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 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 paragraph (a) (ii) of this Section, the Association shall promptly notify ENELGUI 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. - 10 - 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For ENELGUI: B.P. 322 Conakry Guinea Telex: 2181 GE 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 ENELGUI, or by ENELGUI on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by Director General or such other person or persons as the Director General shall designate in writing, and ENELGUI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. - 11 - 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 A &kX-c\' Regional Vice President Africa ENTREPRISE NATIONALE D'ELECTRICITE DE GUINEE By [ c c- Authorized Representative - 12 - SCHEDULE 1 Procurenent and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part B hereof, goods and works, including the management services contract for ENELGUI, 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. Bidders for the construction and equipping of the new power house (Tombo III), including the management services contract for ENELGUI, shall be prequalified as provided in paragraph 2.10 of the Guidelines. 3. To the extent practicable, contracts for equipment, materials and spare parts shall be grouped into bid packages estimated to cost the equivalent of $200,000 or more. Part B: Other Procurement Procedures 1. Items or groups of items for equipment, spare parts and materials estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount equivalent to $3,200,000, may be procured under contracts awarded through: (i) limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list, approved by the Association, of at least three qualified suppliers eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof); and (ii) contracts for the acquisition of proprietary goods may be procured through direct order from the holder of proprietary rights or by direct shopping. - 13 - Part C: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph I of Appen- dix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $150,000 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 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 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 subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist ENELGUI in carrying out Part B of the Project, ENELGUI shall employ consultants whose qualifications, experience and terms and conditions of employment shall be - 14 - 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. - 15 - SCHEDULE 2 Implementation Program INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY