Conformed Copy - C2456 - Energy Sector Rehabilitation Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2456 RW Project Agreement (Energy Sector Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and ETABLISSEMENT PUBLIC DE PRODUCTION, DE TRANSPORT ET DE DISTRIBUTION D'ELECTRICITE, D'EAU ET DE GAZ Dated April 21, 1993 CREDIT NUMBER 2456 RW PROJECT AGREEMENT AGREEMENT, dated April 21, 1993, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and ETABLISSEMENT PUBLIC DE PRODUCTION, DE TRANSPORT ET DE DISTRIBUTION D'ELECTRICITE, D'EAU ET DE GAZ (ELECTR0GAZ). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Rwandese Republic (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighteen million five hundred thousand Special Drawing Rights (SDR 18,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ELECTR0GAZ 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 ELECTR0GAZ, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to ELECTR0GAZ on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS ELECTR0GAZ, 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: Page 2 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) ELECTR0GAZ 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.1 and B.5 of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, environmental and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part B.1 and B.5 of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and ELECTR0GAZ shall otherwise agree, ELECTR0GAZ shall carry out Parts B.1 and B.5 of the Project in accordance with this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Part B.1 and B.5 of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.03. ELECTR0GAZ shall carry out the obligations set forth in Sections 9.03 through 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 this Agreement and Part B.1 and B.5 of the Project. Section 2.04. ELECTR0GAZ shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ELECTR0GAZ 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) ELECTR0GAZ shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B.1 and B.5 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) ELECTR0GAZ shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B.1 and B.5 of the Project, the accomplishment of the purposes of the Credit, or the performance by ELECTR0GAZ of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of ELECTR0GAZ Section 3.01. ELECTR0GAZ 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. Page 3 Section 3.02. ELECTR0GAZ shall at all times operate and maintain its plants, 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. ELECTR0GAZ 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. ELECTROGAZ shall no later than August 31, 1993, and in consultation with the Association, complete the selection of the professional private operator to operate as SPE, and shall, no later than November 30, 1993, sign a lease-contract, with SPE under terms and conditions satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) ELECTR0GAZ shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) ELECTR0GAZ 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 Association; (ii) furnish to the Association 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 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. Except as the Association shall otherwise agree, all investments including those related to rural electrification undertaken by ELECTROGAZ shall have an economic rate of return of not less than ten percent (10%) and all investments above one million dollars ($1,000,000) shall be made with prior approval by the Association. Section 4.03. (a) ELECTROGAZ shall ensure that: (i) except for small domestic consumers using up to 40 kWh/month, tariff is maintained at such levels as would provide to the asset holding company revenues to meet its objectives; (ii) tariff is automatically adjusted to take into account changes in the rate of exchange between the currency of the Borrower and the dollar; and (iii) no later than December 31 each year, an annual report on the adequacy of tariff is prepared and submitted to the Association. (b) For the purpose of paragraph (a) (ii) above, the modifications in the exchange rate between the currency of the Borrower and the dollar, the price of electricity purchased with the Societe Internationale d'Electricite des Pays des Grands Lacs (SINELAC) and the salary increase, shall also be considered. Page 4 Section 4.04. (a) ELECTROGAZ shall increase average tariffs: (i) for electricity, by at least 10%, each year, effective October 1, 1993, so as to reach the long run marginal cost (LRMC) in a phased manner by June 1995; (ii) for water, at least by 8%, effective October 1, 1993, and by at least 7.5% each year thereafter, until December 31, 1998. (b) Except as the Association shall otherwise agree, the SNP shall earn an after tax rate of return on revalued net fixed assets of 2.48% in 1993, 5.27% in 1994 and 6% in 1995 and thereafter. (c) The SNP shall maintain a debt service ratio of at least 1:5 and shall not incur any debt unless forecasts show that the debt service coverage ratio in all succeeding years is at least 1:5. (d) For the purposes of paragraph (b) above, the rate of return shall be calculated by dividing the net operating income for ELECTROGAZ for the year in question by one-half of the sum of the current net revalued fixed assets of ELECTROGAZ in operation at the beginning and at the end of that year. (e) For the purpose of paragraph (c) above: (i) the term "debt" means any indebtedness of SNP 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 contract or other instrument providing for such debt or for the modification of its terms of payments 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; and (iii) the term "debt service ratio" means the ratio of the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges, on debt. Section 4.05. ELECTROGAZ shall take or cause to be taken, no later than March 31, 1993, all necessary measures for: (i) reducing to sixty days of sales, after reception of bills, the average age of receivables; and (ii) ensuring power cuts for customers with arrears over the target. 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 ELECTROGAZ 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 ELECTROGAZ of this event. Page 5 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 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For ELECTROGAZ: Etablissement Public de Production, de Transport et de Distribution d'Electricite, d'Eau et de Gaz: Bocte Postale 537 Kigali Rwanda Cable address: Telex: ________________ 22591 ELGZ RW ________________ Facsimile: 250 73 802 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 ELECTROGAZ, may be taken or executed by the Director or such other person or persons as the Director shall designate in writing, and the Director 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 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 Page 6 By /s/ Francisco Aguirre-Sacasa Acting Regional Vice President Africa ETABLISSEMENT PUBLIC DE PRODUCTION, DE TRANSPORT ET DE DISTRIBUTION D'ELECTRICITE, D'EAU ET DE GAZ By /s/ Aloys Uwimana Authorized Representative