Conformed Copy - L3418 - Gas Infrastructure Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3418 TUN (Gas Infrastructure Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SOCIETE TUNISIENNE DE L'ELECTRICITE ET DU GAZ -- STEG Dated May 5, 1992 LOAN NUMBER 3418 TUN LOAN AGREEMENT AGREEMENT, dated May 5, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and SOCIETE TUNISIENNE DE L'ELECTRICITE ET DU GAZ -- STEG (the Borrower). WHEREAS: (A) The Republic of Tunisia (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project; WHEREAS: (B) By an agreement (the Guarantee Agreement) of even date herewith entered into by and between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan, and to undertake such other obligations as set forth in the Guarantee Agreement; and WHEREAS: (C) The Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement. Page 2 NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted; and (b) In Section 6.02, sub-paragraph (k) is re-lettered as sub-paragraph (l), and a new sub-paragraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Central Bank" means the Guarantors's Central Bank (Banque Centrale de Tunisie), established and operating pursuant to the Guarantor's Law No. 58-90, dated September 19, 1958; (b) "Economic Cost" means cost, insurance and freight at border price plus local transportation and distribution costs; (c) "ETAP" means the Borrower's Tunisian Company for Petroleum Activities (Entreprise Tunisienne d'Activites Petrolicres), established and operating pursuant to the Guarantor's Law No. 72-22, dated March 10, 1972, as supplemented by the Guaran- tor's Decree No. 73-173, dated April 16, 1973; (d) "STEG Performance Plan" means the STEG enterprise performance plan (STEG Contrat Programme), agreed to between the Borrower and the Guarantor, setting forth, inter alia, the Bor- rower's financial action plan for achieving its financial perfor- mance objectives, standards and targets for the period 1992 through 1996, and the Guarantor's related rights and obligations, including the taking of all necessary measures in connection therewith; (e) "Financial Cost" means all of the following costs: fuel costs at border prices plus transportation and distribution costs to power stations, operating costs including depreciation and interest, foreign exchange losses incurred during each Fiscal Year (as such term is defined hereinafter), and provision for unrealized foreign exchange losses on debt service projected for the following five (5) Fiscal Years; (f) "Fiscal Year" means the twelve (12) month period corresponding to any of the Borrower's fiscal years, which period commences on January 1 and ends on December 31 in each calendar year; (g) "Long Run Marginal Cost" means the optimal investment and associated operating and maintenance expenses required per unit of energy output to increase the size of an energy producer's plant, so as to adjust output to the increased energy demand; (h) "PIU" means the Project Implementation Unit established by the Borrower pursuant to its Directorate Instruction No. 26/91, dated October 14, 1991, which Unit shall be maintained by the Borrower in accordance with the provisions of Section 3.06 of this Agreement; (i) "Refined Petroleum Products" means the following Page 3 products manufactured from crude oil: supergrade gasoline, regular grade gasoline, heavy fuel oil and gas oil; (j) "SCADA" means the Borrower's gas supply supervisory control and data acquisition system, referred to in Part B of Schedule 2 to this Agreement; and (k) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, various currencies that shall have an aggregate value equivalent to the amount of sixty million dollars ($60,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in the Central Bank, on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1996, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agree- ment, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and ex- pressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings Page 4 or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989, bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) `Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on February 1 and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate economic, financial, commercial, administrative, engineering, gas industry and environmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 3.02. The Borrower shall: (a) prepare, based on terms of reference satisfactory to the Bank, and furnish to the Bank for its review and comment, not later than December 31, 1992, a manual which shall include the standards, rules and procedures for, inter alia, operational emergency, safety and environmental protection in respect of all of the Borrower's gas operations, including its pipeline construction and gas transmission operations; and (b) promptly thereafter apply said manual with due diligence and efficiency, taking into account the Bank's comments thereon. Section 3.03. The Borrower shall: (a) not later than September 30 in each Fiscal Year, prepare and furnish to the Bank, for its review and comment, a consolidated electricity and gas demand forecast and investment program for the immediately following five (5) Fiscal Years; and (b) promptly thereafter carry out said program with due diligence and efficiency. Section 3.04. The Borrower shall: (a) not later than March 31, Page 5 1992, hire qualified consultants, under terms of reference satisfactory to the Bank, to prepare a gas sector development and rationalization study; (b) not later than March 31, 1993, submit the findings and recommendations of said study to the Bank for its review and comment; and (c) not later than June 30, 1993 implement the recommendations of the study as mutually agreed upon between the Bank and the Borrower. Section 3.05. (a) The Borrower shall enter into contractual arrangements, satisfactory to the Bank, with the Guarantor providing for the Borrower's and Guarantor's respective obligations for the carrying out of the STEG Performance Plan; and (b) The Borrower shall exercise its rights and comply with its obligations under said contractual arrangements in such a manner so as to effectively implement, or cause the implementation of, the provisions of the STEG Performance Plan, and ensure full compliance with its obligations under Sections 5.02 and 5.03 of this Agreement, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive any of the said contractual arrangements. Section 3.06. For the purposes of coordinating, administering and supervising the overall carrying out of the Project, the Borrower shall maintain, until completion of the Project, a Project Implementation Unit (the PIU) within its gas operations directorate, in a form and with such composition and functions as shall at all times be satisfactory to the Bank. Section 3.07. 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 Schedule 4 to this Agreement. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall carry on its operations and conduct its affairs in accordance with sound economic, financial, commercial, engineering, administrative, gas industry and environ- mental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 4.02. The Borrower shall at all times operate and maintain its plants, installations, pipelines, 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 economic, financial, commercial, engineering, administrative, gas industry and environmental practices. Section 4.03. The Borrower 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. Section 4.04. The Borrower shall at all times promptly take any and all action necessary to: (a) maintain its corporate exis- tence and right to carry on its operations; and (b) acquire, maintain, renew and otherwise exercise any and all rights (including, but without limitation, land rights), powers, privileges and franchises which are necessary or useful in the conduct of its operations and its carrying out of its obligations under this Agreement. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain separate records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. Page 6 (b) The Borrower shall: (i) have its records, accounts and financial state- ments (balance sheets, statements of income and expenses and related statements) and the records and accounts for the Special Account 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 six (6) 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. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one (1) year after the Bank has received the audit report for the Fiscal Year in which the last withdrawal from the Loan Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank'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 procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 5.02. (a) Except as the Bank shall otherwise agree, the Borrower shall produce, for each of its Fiscal Years ending on December 31, 1991, December 31, 1992, and December 31, 1993 funds from internal sources equivalent to not less than twenty-five percent (25%), and for each of its Fiscal Years ending after December 31, 1993 funds from internal sources equivalent to not less than thirty percent (30%), of the annual average of the Borrower's capital expenditures incurred, or expected to be incurred, for that year, the previous year and the next following Fiscal Year. (b) Before September 30 in each of its Fiscal Years, the Borrower shall, on the basis of forecasts prepared by the Borrower and satisfactory to the Bank, review whether it would meet the requirements set forth in paragraph (a) above in respect of such year and the next following Fiscal Year and shall furnish to the Bank a copy of such review upon its completion. (c) If any such review shows that the Borrower would not meet the requirements set forth in said paragraph (a) for the Page 7 Borrower's Fiscal Years covered by such review, the Borrower 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, net non-operating income and any reduction in working capital other than cash; and (B) the sum of all expenses related to opera- tions, 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 distribu- tions 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 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 within the next fiscal year. (v) The term "current liabilities" means all liabi- lities which will become due and payable or could under circumstances then existing be called for payment within twelve months, in- cluding 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. (vii) The term "capital expenditures" means all expenditures on account of fixed assets, includ- ing 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 Guarantor, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of Page 8 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. Section 5.03. (a) Except as the Bank shall otherwise agree, commencing with its Fiscal Year ending December 31, 1992, the Borrower shall not incur any debt, unless the net revenues of the Borrower for the Fiscal Year immediately preceding the date of such incurrence, or for a later twelve (12) month period ended prior to the date of such incurrence, whichever is the greater, shall be at least one and one-half (1-1/2) times the estimated maximum debt service requirements of the Borrower for any succeeding fiscal year on all debt of the Borrower, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of the Borrower maturing by its terms more than one (1) 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 the Borrower's rates in effect at the time of the incurrence of debt even though they were not in effect during the twelve (12) month period to which such revenues relate 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 depre- ciation, other non-cash operating charges and interest and other charges on debt. (iv) The terms "net non-operating income" and "debt service requirements" mean the same as set forth in Sections 5.02 (d) (ii) and 5.02 (d) (vi) of this Agreement, respectively. (v) 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 Bank. Section 5.04. Without any limitation or restriction upon the provisions of Section 5.01 of this Agreement, the Borrower shall, not later than September 30 of each Fiscal Year, commencing with its Fiscal Year ending December 31, 1992, furnish to the Bank for its review and comment, in addition to those items required under subparagraphs (b) (ii) and (iii) of said Section 5.01, separate pro Page 9 forma income and sources and application of funds statements for the immediately preceding Fiscal Year in respect of all of the Bor- rower's gas and electricity operations, of such scope and in such detail as the Bank shall reasonably request. Section 5.05. The Borrower shall, not later than December 31, 1994, take all action necessary to ensure that its gas and electricity operations, shall generate sufficient funds so as to cover their respective Financial Cost. ARTICLE VI Effective Date; Termination Section 6.01. The following events is specified as an addi- tional condition to the effectiveness of this Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Borrower and the Guarantor shall have entered into the contractual arrangements referred to in Section 3.05 of this Agreement and Section 3.05 of the Guarantee Agreement, pursuant to the provisions thereof. Section 6.02. The date one hundred and twenty (120) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The President Director General of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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 248423 (RCA), Washington, D.C. 82987 (FTCC), 64145 (WUI) or 197688 (TRT) For the Borrower: Societe Tunisienne de l'Electricite et du Gaz 38 Rue Kemal Attaturk Tunis Republic of Tunisia Cable address:Telex: GAZELEC 12020 Tunis TUN 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 BANK FOR Page 10 RECONSTRUCTION AND DEVELOPMENT By /s/ C.K. Koch-Weser Regional Vice President Middle East and North Africa SOCIETE TUNISIENNE DE L'ELECTRICITE ET DU GAZ -- STEG By /s/ Ismail Khelil Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expendi- tures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Works 11,200,000 100% of foreign expenditures (2) Goods 43,800,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items procured locally (3) Consultants' 700,000 100% services and training (4) Unallocated 4,300,000 TOTAL 60,000,000 ========== 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 Guarantor for goods or services supplied from the territory of any country other than that of the Guarantor; and (b) The term "local expenditures" means expenditures in the currency of the Guarantor or for goods or services supplied from the territory of the Guarantor. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement. Page 11 SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower in developing, inter alia: (a) a least cost energy supply alternative to its traditional gas markets; (b) a gas infrastructure network within the southern part of the Guarantor's territory; (c) an increased natural gas penetration into its industrial and premium fuels markets; and (d) an appropriate gas sector strategy. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Natural Gas Transmission and Distribution System Extensions 1. Construction of a natural gas transmission pipeline of approximately two hundred and forty kilometers (240 km.) in length to connect an existing twenty inch (20 in.) diameter pipeline located in the Guarantor's northern city of M'Saken to the existing industrial natural gas network located in the Guarantor's southern city of Gabes, supplying along its route, through necessary dis- tribution facilities, new natural gas consumers in, inter alia, the Guarantor's cities of Jemmel/Zeramdine, Sfax, Agareb and Skhira. 2. Construction of a twenty inch (20 in.) diameter natural gas pipeline loop of approximately six kilometers (6 km.) in the area of the Guarantor's capital city of Tunis, as part of the future Tunis area gas loop line. 3. Construction of a five kilometer (5 km.) extension to an existing eight inch (8 in.) diameter natural gas pipeline to connect the eastern and western parts of the Tunis city natural gas network. 4. Provision of maintenance equipement and computer software material to improve the Borrower's operational efficiency and gas supply security. Part B: Technical Assistance 1. Carrying out of the following studies, all on the basis of terms of reference and implementation schedules satisfactory to the Bank: (a) a study analyzing the supply of gas by the Borrower throughout the Guarantor's territory, including an examination of gas loads and gas network configurations; (b) a study developing on a nationwide basis the SCADA system; and (c) a study on gas sector development and rationalization. 2. Provision of training of the Borrower's technical staff, including training abroad, inter alia, in the areas of SCADA usage, and related sales engineering and conversion. * * * The Project is expected to be completed by December 31, 1995. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1 Beginning August 1, 1997 Through August 1, 2008 2,500,000 On February 1, 2009 2,500,000 Page 12 _____________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C 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 "Guide- lines 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 shall be grouped into bid packages estimated to cost the equivalent of five million six hundred thousand dollars ($5,600,000) or more. 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 Republic of Tunisia 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 1. Goods and works estimated to cost less than the equivalent of five hundred thousand dollars ($500,000) per contract, up to an aggregate amount not to exceed the equivalent of three million two hundred thousand dollars ($3,200,000), may be procured under Page 13 contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids obtained from at least three (3) qualified suppliers and contractors eligible under the Guidelines and in accordance with procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55, 2.56 thereof). 2. Proprietary and standardization goods estimated to cost less than the equivalent of two hundred and fifty thousand dollars ($250,000) per contract, up to an aggregate amount not to exceed the equivalent of three million two hundred thousand dollars ($3,200,000), may be awarded after direct negotiations with sup- pliers, 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 or works estimated to cost the equivalent of one million dollars ($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 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, said 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 fur- nished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 6 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals on the basis of statements of expenditure. 2. The figure of twenty percent (20%) 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 the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfac- tory 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 Bor- rowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) The term "Eligible Categories" means Categories (1), (2) and (3) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) The term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the Eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and Page 14 (c) The term "Authorized Allocation" means an amount equivalent to five million dollars ($5,000,000) to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for Eligible Expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective Eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reason- ably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for Eligible Expendi- tures. 5. Notwithstanding the provisions of paragraph 3 of thisSchedule, the Bank shall not be required to make further deposits into the Special Account: (a) If, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) Once the total unwithdrawn amount of the Loan allocated to the Eligible Categories, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the Eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and Page 15 to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for Eligible Expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.