Conformed Copy - C2268 - Third Power Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2268 UG (Third Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and UGANDA ELECTRICITY BOARD Dated January 9, 1992 CREDIT NUMBER 2268 UG PROJECT AGREEMENT AGREEMENT, dated January 9, 1992, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and UGANDA ELECTRICITY BOARD (UEB). WHEREAS (A) by the Development Credit Agreement of even date herewith between The Republic of Uganda (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-six million nine hundred thousand Special Drawing Rights (SDR 86,900,000) on the terms and conditions set forth in the Development Credit Agreement, but only on condition that UEB 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 UEB, part of the proceeds of the credit provided for under the Development Credit Agreement will be relent to UEB on the terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS UEB, 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. UEB 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 Parts A and B of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Parts A and B of the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Parts A and 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. UEB 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 Parts A and B of the Project. Section 2.04. UEB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, UEB 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) UEB shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress of Parts A and 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) UEB shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Parts A and B of the Project, the accomplishment of the purposes of the Credit, or the performance by UEB of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of UEB Section 3.01. UEB shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. UEB shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to Page 3 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. UEB 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. UEB shall, on an annual basis, review and make appropriate adjustments to its staff remuneration policy to compensate for inflation and to maintain the competitiveness of the remuneration policy. Section 3.05. UEB shall promptly review its staffing needs and submit to the Association, by December 31, 1991, a comprehensive list of staffing needs, including its proposals for filling such needs. Section 3.06. UEB shall prepare and submit to the Association quarterly progress reports on the implementation of Parts A and B of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) UEB shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) UEB shall: (i) have its records, accounts and financial state- ments (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 Associa- tion; (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 re- quested; and (iii) furnish to the Association such other informa- tion concerning said records, accounts and financial statements as well as the audit there- of, as the Association shall from time to time reasonably request. Section 4.02. UEB shall provide the Association with semi- annual reports of outstanding accounts receivable, including the dates and amounts of arrears by major customer category. Section 4.03. UEB shall undertake a revaluation of its assets in accordance with sound and consistently maintained methods of valuation and revaluation acceptable to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, UEB shall earn, for each of its fiscal years after its fiscal year ending on December 31, 1992, an annual rate of return of not less than 8% of the average current net value of UEB's revalued fixed assets in operation. (b) Not later than June 30, 1992, and thereafter not later than June 30 in each subsequent year, UEB shall, on the basis of Page 4 forecasts prepared by UEB and satisfactory 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 the results of such review upon its completion. (c) If any such review shows that UEB would not meet the requirements set forth in paragraph (a) for UEB's fiscal years covered by such review, UEB shall promptly take all necessary measures (including, without limitation, adjustments of the structure and/or levels of its tariffs) in order to meet such requirements. (d) For the purposes of this Section: (i) The annual return shall be calculated by divid- ing UEB's net operating income for the fiscal year in question by one half of the sum of the current net value of UEB'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 expens- es. (iii) The term "total operating revenues" means reve- nues from all sources related to operations. (iv) The term "total operating expenses" means all expenses related to operations, including admin- istration, 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 2.8% per annum of the average current gross value of UEB'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 UEB's fixed assets in operation shall be calculated as one half of the sum of the gross value of UEB'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 con- sistently maintained methods of valuation satis- factory to the Association. (vi) The term "current net value of UEB's fixed assets in operation" means the gross value of UEB's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistent- ly maintained methods of valuation satisfactory to the Association. (vii) The rate of return shall be calculated on the basis of the United States dollar equivalent of UEB's net revalued assets in operation. Section 4.05. UEB shall, by December 31, 1992, take all measures necessary to increase its tariff by a rate which will result in the average tariff being not less than the Uganda Shillings equivalent of 7.2 cents of a United States Dollar per Kw/hr and starting January 1, 1994, increase the average tariffs, in United States dollar terms, by 5% each year. Section 4.06. (a) Except as the Association shall otherwise agree, UEB shall not incur any debt, unless the net revenues of UEB for the fiscal year immediately preceding the date of such incur- rence or a later twelve-month period ended prior to the date of such Page 5 incurrence, which ever is the greater, shall be at least 1.5 times the estimated maximum debt service requirements of UEB for any succeeding fiscal year on all debt of the UEB, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of UEB maturing by its terms more than one year after the date on which is it 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 UEB'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 relat- ed 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 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 amount of repayment (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 anoth- er 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. 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. Page 6 Section 5.02. (a) This Agreement and all obligations of the Association and of UEB 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 twenty 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 UEB of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For UEB: Uganda Electricity Board P.O. Box 7059 Kampala, Uganda Cable address: Telex: AMBER 61029 AMBER Kampala Kampala 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 UEB may be taken or executed by The Chairman and Managing Director or such other person or persons as The Chairman and Managing Director shall designate in writing, and UEB 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- Page 7 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/ Francis X. Colaco Acting Regional Vice President Africa UGANDA ELECTRICITY BOARD By /s/ Stephen K. Katenta-Apuli Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for civil works under Part A of the Project shall be prequalified as provided in paragraph 2.10 of the Guidelines. 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 Uganda may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A.1 hereof, UEB may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: 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 1 of Appendix 1 to the Guidelines shall apply. 2. The procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply to the review of invitations to bid and of proposed awards and final contracts. 3.The figure of 15% is hereby specified for purposes of Page 8 paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist UEB in carrying out engineering and consultants' services for design and construction supervision and equipment specification and evaluation under Part A of the Project, UEB shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency" published by the Bank in August 1981.