Malawi - Power Project : Credit 0178 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 178 MAI Development Credit Agreement (Malawi Power Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED FEBRUARY 11, 1970 CONFORMED COPY CREDIT NUMBER 178 MAI Development Credit Agreement (Malawi Power Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED FEBRUARY 11, 1970 0 Dnlopment TrMhit Agrerment AGREEMENT, dated February 11, 1970 between REPUB- LIC OF MALAWI (hereinafter called the Borrower) and INTER- NATIONAL DEVELOPMENT AssOCIATION (hereinafter called the Association). (A) WHEREAS the Borrower has requested the Associa- tioi to assist in financing a part of the development pro- gramme of Electricity Supply Commission of Malawi (here- inafter called ESCOM) by granting a credit to it in an aggregate principal amount equivalent to $5,250,000; (B) WHEREAS the Borrower has requested the African Development Bank to assist in financing the other part of the said development programme by granting a loan to it in an aggregate principal amount equivalent to $3,000,000, for relending to ESCOM; (C) WHEREAS ESCOM is an entity established under Electricity Act Cap. 73:01 of the Republic of Malawi and is entrusted inter alia with powers and functions relating to the generation and supply of electricity; (D) WHEREAs by agreement of even date herewith (here- inafter called the Project Agreement) between the Asso- ciation and ESCOM, ESCOM has undertaken certain obli- gations regarding the use of the proceeds of the Credit, as provided in such Project Agreement; (E) WHEREAS by agreement of even date herewith (here- inafter called the Subsidiary Agreement) between the Bor- rower a.d ESCOM, the Borrower has agreed to relend the proceeds of the Credit as provided in such Subsidiary Agreement; and (F) WHEREAS the Association, on the basis of the fore- going, has agreed to make a credit to the Borrower upon the terms and conditions hereinafter set forth; 4 Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions SECTION 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Con- (1itions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, sub- ject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being here- inafter called the General Conditions) : (a) The following subparagraph is added to Section 2.01: "13. The term 'Project Agreement' shall have the meaning set forth in the Development Credit Agree- ment." (b) Section 6.06 is amended by inserting the words ", the Project Agreement" after the words "the Development Credit Agreement", (c) Section 8.02 is amended by inserting the words "or under the Project Agreement" after the words "the Devel- opment Credit Agreement". SECTION 1.02. Wherever used in this Development Credit Agreement, unless the context otherwise requires, the sev- eral terms defined in the General Conditions have the re- spective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "Act" means the Electricity Act Cap. 73:01 of the Republic of Malawi providing for the establishment of an Electricity Supply Commission and as such Act may be amended from time to time. 5 (b) "ESCOM" means the Electricity Supply Commis- sion of Malawi established under the provisions of Section 3 of the Act. (c) "Project Agreement" means the project agreement between the Association and ESCOM of even date herewith, providing for the carrying out of the Project, as the same shall be amended from time to time by agreement between the Borrower, the Association and ESCOM. (d) "Subsidiary Loan Agreement" me9xs the Agree- ment entered into between the Borrower aid ESCOM re- ferred to in Section 4.03 of the Development Credit Agree- ment, as the same may be amended from time to time with the approval of the Association. (e) " ADB" means African Development Bank. (f) " ADB Loan Agreement" means the loan agreement between the Borrower and the ADB providing for a loan by the ADB to the Borrower in an aggregate principal amount equivalent to three million dollars, as the same may be amended from time to time. (g) "ADB Loan" means the loan provided for in the ADB Loan Agreement. ARTICLE II The Credit SECTION 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to five million two hundred and fifty thousand dollars ($5,250,000). SECTION 2.02. (a) The Association shall open a Credit Account on its books in the name of the Borrower and shall credit to such Account the amount of the Credit. 6 (b) The amount of the Credit may be withdrawn from the Credit Account as provided in, and subject to the rights of cancellation and suspension set forth in, this Develop- ment Credit Agreement and in accordance with the allo- cation of the proceeds of the Credit set forth in Schedule I to this Agreement, as such allocation shall be modified from time to time pursuant to the provisions of such schedule or by further agreement between the Borrower and the Association. SECTION 2.03. The Borrower shall be entitled to with- draw from the Credit Account such amounts as shall have been paid (or, if the Association shall so agree, shall be required to meet payments to be made) in respect of the reasonable cost of goods or services required for Part A of the Project and to be financed under this Development Credit Agreement. SECTION 2.04. Except as the Association shall otherwiie agree, no withdrawals from the Credit Account shall be made on acccunt of payments in the currency of the Bor- rower, or for goods produced in, or services supplied from the territories of the Borrower. SECTION 2.05. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. SECTION 2.06. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. SECTION 2.07. Service charges shall be payable semi- annually on May 15 and November 15 in each year. SECTION 2.08. The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each May 15 and 7 November 15 commencing May 15, 1980, and ending Novem- ber 15, 2019, each installment to and including the install- ment payable on November 15, 1989, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1/2 %) of such principal amount. ARTICLE III Use of Proceeds of the Credit SECTION 3.01. The Borrower shall cause the proceeds of the Credit to be applied in accordance with the provisions of this Development Credit Agreement to expenditures on Part A of the Project, described in Schedule 2 to this Agreement. SECTION 3.02. Except as the Association shall otherwise agree, (i) the Borrower shall cause the goods and services to be financed out of the proceeds of the Credit to be pro- cured on the basis of international competitive bidding in accordance with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969, and in accordance with such other procedures supplementary thereto as are set forth in Sched- ule 3 to this Agreement or as shall be agreed between the Borrower and the Association, and (ii) contracts for the procurement of such goods and services shall be subject to the prior approval of the Association. SECTION 3.03. Except as the Association may otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclu- sively in carrying out Part A of the Project. ARTICLE IV Particular Covenants SECTION 4.01. The Borrower shall cause the Project to be carried out with due diligence and efficiency and in 8 conformity with sound administrative, financial, engineer- ing, economic and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. SECTION 4.02. The Borrower shall take all action which shall be necessary on its part to enable ESCOM to perform all its obligations under the Project Agreement and the Subsidiary Loan Agreement and shall not take any action, or, issue any directions under: (i) Statutory Bodies (Control of Contracts) Act Cap. 18:07 with respect to procurement of goods and services out of the proceeds of the Credit, and (ii) any other existing or future legislation, that would interfere with the performance of such obliga- tions by ESCOM. SECTION 4.03. (a) The Borrower shall relend the pro- ceeds of the Credit, or the equivalent thereof, to ESCOM on terms and conditions and pursuant to a subsidiary loan agreement satisfactory to the Association. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the F.arrower and the Association, and, except as the Association shall otherwise agree, the Bor- rower shall not amend, assign, abrogate or waive any pro- vision of the Subsidiary Loan Agreement. SECTION 4.04. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reason- ably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic condi- tions in the territories of the Borrower and ti e international balance of payments position of the Borrower. 9 (b) The Borrower and the Association shall from time to time, at the request of either party, exchange views through their representatives with regard to ratters re- lating to the purposes of the Credit, the mairtenance of the service thereof, the Project Agreement and the Sub- sidiary Loan Agreement, and the performance by the Bor- rower of its obligations under the Development Credit Agreement and under the Subsidiary Loan Agreement. (c) The Borrower shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof, the per- formance by the Borrower of its obligations under the Development Credit Agreement and the Subsidiary Loan Agreement and the performance by ESCOM of its obliga- tions under the Project Agreement and under the Sub- sidiary Loan Agreement. (d) The Borrower shall afford all reasonable opportu- nity for accredited representatives of the Association to visit any part of the territories of the Borrower for pur- poses related to the Credit. SECTION 4.05. (a) The Borrower shall make a study of the resources of water from Lake Malawi and Upper Shire River for irrigation, power production and other uses, with a view to determining the most economic usage of water for irrigation, power and other sectors of the economy, and except as the Association shall otherwise agree, complete such study within three years from the date of this Agree- ment. Copies of the study shall, within three months of its completion, be made available to the Association. (b) The Borrower shall, promptly upon the completion of the study referred to in Section 4.05(a) above, make a decision as to the allocation of water for the generation of power and communicate its decision to the Association and ESCOM. 10 SECTION 4.06. The Borrower shall promptly issue an authorization in favor of ESCOM to enable it to divert water for a period of 50 years commencing from January 1, 1973, up to 2,100 cusec and shall increase such authoriza- lion from time to time to amounts agreed between the Bor- rower and ESCOM consistent with the allocation of water referred to in Section 4.05(b) of this Agreement. SECTION 4.07. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes, and free from all restrictions, imposed under the laws of the Borrower or laws in effect in its territories. SECTION 4.08. The Development Credit Agreement and the Project Agreement shall be free from any taxes that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the exe- cution, delivery or registration thereof. SECTION 4.09. Except as the Association shall otherwise agree the Borrower shall ensure that ESCOM: (A) levies a development surcharge equivalent to 3% of its basic tariff level, not later than February 1, 1970, on consumers in ESCOM's existing inter-connected system excluding high density areas. (B) makes no reductions in the level of: (i) basic tariffs including surcharge levied in ac- cordance with paragraph (A), and (ii) basic tariffs and surcharges in respect of any other operating region of ESCOM prior to January 1, 1974; and (C) after January 1, 1974, takes from time to time all steps necessary or desirable to obtain such adjustments in its tariffs as will provide revenues sufficient to yield an operating income of at least 9o on ESCOM's average net 11 fixed assets in operation in order to (i) meet ESCOM's operating expenses, including provisions for maintenance, depreciation and interest; (ii) meet repayments of indebted- ness to the extent that such repayments exceed provision for depreciation; and (iii) finance a reasonable portion of ESCOM's capital expansion. For the purposes of this Section: 1. the term "operating income" shall mean the difference between operating revenues and operating expenses including adequate maintenance and provision for de- preciation on a straight-line basis and taxes, if any, but excluding interest and other charges on debt; 2. the term "value of the average net fixed assets in operation" shall mean for each financial year the aver- age of the gross fixed assets in operation less accumu- lated depreciation at the beginning and at the end of the financial year, based on realistic valuations of such assets; and 3. If, at any time, the Borrower, Association or ESCOM considers that circumstances have arisen as a result of which the valuations of such assets have ceased to be realistic for the purposes of this Section, the parties shall consult together about what action is necessary to revalue such assets. SECTION 4.10. The Borrower shall exe-cise its powers under the Act or any other legislation relating to the oper- ations of ESCOM only to the extent necessary to ensure the continued operation and development oi ESCOM on sound commercial lines and in accordance with this Agree- ment, the Project Agreement and the Subsidiary Loan Agreement. ARTICLE V Remedies of the Association SECTION 5.01. If any event specified in Section 7.01 of the General Conditions or in Section 5.02 of this Agreement 01 12 shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the con- tinuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately to- gether with the service charges thereon and upon any such declaration such principal, together with such charges, shall become due and payable immediately, anything in this Development Credit Agreement to the contrary not- withstanding. SECTION 5.02. For the purpose of Section 7.01 of the General Conditions, the following additional events are specified: (a) The Project Agreement, the Subsidiary Loan Agree- ment or any material provision thereof shall have been amended, suspended, abrogated or waived without the prior approval of the Association; (b) ESCOM shall have failed to perform any of its obligations under the Project Agreement or under the Subsidiary Loan Agreement and such event shall continue for a period of sixty days; (c) Any amendment, suspension or repeal of the Act or of any provisions thereof which materially and adversely affects the operations or financial condition of ESCOM or performance by ESCOM of its obligations under the Proj- ect Agreement and Subsidiary Loan Agreement shall have been brought into force and effect. (d) The right of the Borrower to withdraw the proceeds of the ADB Loan shall not have become effective or shall have been suspended in whole or in part, and the Borrower shall have failed to obtain funds from other sources in sub- stitution therefor; and (e) The outstanding principal of the ADB Loan shall have been declared, or become, due and payable in advance 13 of the agreed maturity thereof in accordance with the terms of the ADB Loan Agreement. ARTICLE VI Effective Date; Termination SECTION 6.01. The following events are specified as ad- ditional conditions to the effectiveness of this Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) That all the conditions precedent to the first disburse- ment as provided for in the ADB Loan Agreement shall have been fulfilled in accordance with its terms; (b) That the execution and delivery of the Project Agree- ment on behalf of ESCOM have been duly authorized or ratified by all necessary corporate and governmental action; (c) That the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and ESCOM have been duly authorized or ratified by all necessary cor- porate and governmental action; and (d) That the development surcharge referred to in Sec- tion 4.09 (A) of this Agreement shall have been levied. SECTION 6.02. The following are specified as additional matters, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opin- ions to be furnished to the Association: (a) That the Project Agreement has been duly author- ized or ratified by, and executed and delivered on behalf of, ESCOM and constitutes a valid and binding obligation of ESCOM in accordance with its terms; (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and ESCOM in accordance with its terms; and 0 14 (c) That the development surcharge referred to in Sec- tion 4.09 (A) of this Agreement has been duly and validly levied and is in full force and effect. SECTION 6.03. The date of June 1, 1970, is hereby spec- ified for the purposes of Section 10.04 of the General Con- ditions. SECTION 6.04. The obligations of the Borrower under Sections 4.06, 4.09 and 4.10 of this Agreement shall termi- nate on the date on which this Development Credit Agree- ment shall terminate or on a date twenty-five years after the date of this Development Credit Agreement, whichever shall be the earlier. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be June 30, 1974 or such other date as shall be agreed between the Borrower and the Association. SECTION 7.02. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. SECTION 7.03. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: The Secretary to the Treasury Ministry of Finance P.O. Box 53 Zomba, Malawi Cable address: Finance Zomba, Malawi 15 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Development Credit Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF MALAWI By /s/ NYEMBA WALES MBEKEANI Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. BURKE KNAPP Vice President 16 SCHEDULE 1 Allocation of Proceeds of the Credit Amounts Expressed Category in Dollar Equivalent I. Hydrostation and Civil Works 1,541,000 II. Electrical and Mechanical Works 1,882,000 III. Substations 559,000 IV. Engineering and other services 512,000 V. Three MW Diesel 377,000 VI. Training 48,000 VII. Unallocated 331,000 TOTAL 5,250,000 Reallocation Upon Change in Cost Estimates 1. If the estimate of the cost of the items included in any of the Categories I to VI shall decrease, the amount of the Credit then allocated to, and no longer required for, such Category will be reallocated by the Association to Category VII. 2. If the estimate of the cost of the items included in any of the Categories I to VI shall increase, an amount equal to the portion, if any, of such increase to be financed out of the proceeds of the Credit will be allocated by the Association, at the request of the Borrower, to such Category from Category VII, subject, however, to the requirements for contingencies, as determined by the Association, in respect of the cost of the items in the other Categories. 17 SCHEDULE 2 Description of the Project The Project consists of the development program of ESCOM for the three-year period 1970 through 1972, Part A and Part B of the Project being financed respectively by the Association and the ADB. Part A 1. Addition of a 3MW diesel unit at Lilongwe. 2. Construction of first stage (16MW) of a hydroelectric station at Tedzani Falls on Shire River. 3. Training of personnel. Part B 1. Construction of 66 kv lines from: (a) Tedzani to Nkula Falls-4.5 miles. (b) Tedzani to Blantyre-28 miles. (c) Nkula Falls to Lilongwe-165 miles. 2. Extensions and improvements to mains and substations; and 3. Procurement of equipment and materials including ac- cessories required for general development, such as serv- ice line materials, meters, special transport equipment and office machines. The Project is expected to be completed by March 31, 1973. 18 SCHEDULE 3 Procurement 1. With respect to goods and services in Categories I to VI of the allocation of the proceeds of the Credit, set forth in Schedule 1 to the Development Credit Agreement, and required to be procured on the basis of international com- petitive bidding under Section 3.02 of the Development Credit Agreement, identical or similar items to be procured shall be grouped together wherever practicable for the pur- poses of bidding and procurement, and such grouping of items shall be subject to the approval of the Association. 2. With respect to contracts of (i) civil works of $50,000 equivalent or more, and (ii) contracts for supply of equip- ment of $25,000 equivalent or more, the following proce- dures shall apply: (a) Invitations to bid, specifications, the text of proposed bid advertisements to be published and all other tender documents will be submitted to the Association for review and approval prior to the issuance of invitations to bid, together with a description of the advertising procedures to be followed. (b) After bids have been received and analyzed, the analyses of bids, recommendations of the consultants where applicable and ESCOM's proposals for awards, together with the reasons for such proposals, will be submitted to the. Association for review and approval prior to any award of contract or issuance of any letter of intent. (c) If the proposed final contract differs materially from the terms and conditions contained in the respective docu- ments approved by the Association under sub-paragraph (a), then the text of the proposed changes will be submitted to the Association for its review and approval prior to the execution of such contract or issuance of any letter of intent. 19 (d) One conformed copy of any letter of intent issued and of any contract executed under this paragraph 2 will be sent to the Association promptly after its issuance or execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 3. In respect of (i) civil works contracts of less than $50,000 equivalent, and (ii) contracts for the supply of equipment of less than $25,000 equivalent, the Borrower will submit to the Association, at the time the award is made, a summary of bids or quotations, the bid analysis reports and the recommendations, together with a copy of the record of the public opening of the tenders. The Bor- rower will also send a copy of any such contract to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawals in respect thereof.