Agreement Amending Credit AGreement - Conformed

CONFORMED COPY CREDIT NUMBER 3247-1MOZ (Amendment) Agreement Amending Development Credit Agreement (SecondNationalWaterDevelopmentProject) between REPUBLIC OF MOZAMBIQUE and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated April15, 2004  CREDIT NUMBER 3247-1 MOZ (Amendment) AGREEMENT AMENDING DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated April 15, 2004, between (the REPUBLIC Borrower) and OF MOZAMBIQUE INTERNATIONAL DEVELOPMENT Association). ASSOCIATION (the WHEREAS (A) the Borrower and the Development Association Credit Agreement have entered dated October into a Credit 6, 1999, Agreement), as amended for the (the Development financing ofthe Second National described in Schedule Water Development 2 to the Project Development as Credit Agreement (the Project); (B) the Borrower has requested assistance the Association towards to provide financing additional of the Project, by increasing the Development the amount Credit made available Agreement under by an amount million in various two hundred currencies equivalent thousand Special to ten Drawing Rights (SDR 10,200,000); and WHEREAS the Association has agreed provide on the basis, such additional interalia, ofthe assistance foregoing, to the Borrower to in this upon the Agreement terms and Amending conditions Development set forth Credit Agreement (as hereinafter defined); NOW THEREFORE the partieshereto hereby agree as follows: ARTICLE I Section 1.01. The "General Conditions Agreements" Applicable of the Association, to Development Credit dated January 1999) (the 1, 1985 (as amended General Conditions), through October constitute 6, an integral part ofthis Agreement. Section 1.02. Section 1.02 of the Development follows: Credit Agreement is amended as (a) sub-section (p) is amended to readas follows:  -2- "(p) "Special Accounts" means the accounts referred (b) of thisAgreement; to in Section 2.02 "; (b) the "." atthe end of sub-section (q) is replaced with ";and" ;and (c) a new sub-section (r) is added to read as follows: "(r) "Agreement Amending Development Credit the Agreement Agreement" Amending means Development Credit Agreement Borrower between and the Association, the dated April 15,2004." Section 1.03. Section 2.01 of the Development read as Credit follows: Agreement is amended to "Section 2.01. The Association agrees to terms and lend to conditions the Borrower, set forth on the or referred to in the Development an amount in various Credit Agreement, currencies equivalent to sixty thousand five million Special Drawing six hundred Rights (SDR 65,600,000) (a) an original (the Credit), amount which includes: in various currencies equivalent hundred to fifty thousand five million Special four Drawing Rights (SDR Financing); 55,400,000) and (b) a supplemental (the Initial amount in various million currencies two hundred equivalent thousand to ten Special Drawing Rights Supplemental (SDR 10,200,000) Financing)." (the Section 1.04. Section 2.02 (b) of the Development to read Credit as follows: Agreement is amended "(b) The Borrower may, for the purposes C, respectively of Parts of the A and B, Project, and Part open and maintain accounts, in dollars (Special two special Account deposit A and B) in a commercial conditions satisfactory bank on to the Association, terms and Special Account name of FIPAG A to be opened and Special in the Account B to be opened including in the appropriate name protection of CRA, against set-off, seizure into, and or attachment. payments Deposits out of, each respective Special accordance Account with the shall be provisions made in of Schedule 5 to this Agreement." Section 1.05. In Section 2.03 of the Development Date isamended Credit Agreement, to read "September the Closing 30, 2007". Section 1.06. Section 2.04 (b) (i) of amended the Development by adding, Credit after the Agreement term "cancelled", is the following proviso:  -3- "provided however, that any commitment charge Financing on the Supplemental shall accrue from a date sixty (60) days Agreement after the Amending date of the Development Credit Agreement." Section 1.07. Section 2.07 of the Development read as Credit Agreement follows: is amended to "(a) Subject to paragraphs (b), (c)and (d) below, the Borrower shall: (A) repay the principal amount of the Initial Financing in semiannual installments payable on each March September 1 and 1, commencing September 1, 2009 ending and March 1, 2039. Each installment to and including the installment payable on Maroh 1, 2019, shall be percent one (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount; and (B) repay the principal amount of the Supplemental Financing in semiannual installments payable on each March 1 and September 1, commencing March 1, 2014 and ending September 1, 2043. Each installment including to and the installment payable on September 1, 2023 shall be one percent (1%) of such principal amount, and each installment thereafter shall betwo percent such principal (2%) of amount." (b) Whenever: (i) the Borrower's per capita (GNP), as determined gross national product by the Association, shall have consecutive exceeded years the for three level established annually determining by the Association eligibility for to access the Association's Association resources; shall consider and (ii) the the Borrower creditworthy Association for Bank may, subsequent lending, the to the review and approval Directors thereof of the Association by the Executive and after due consideration development by the Association of the Borrower's of the economy, modify under paragraph the repayment of installments (a) above by: (A) requiring the Borrower to repay twice the amount each such of installment not yet due until the principal amount of the Credit shall have been repaid; and  -4- (B) requiring the Borrower to commence repayment of the principal amount of the Credit as of the first semiannual payment date referred to in paragraph (a) above falling six months or more after the date on which the Association notifies the Borrower that the events set out in this paragraph (b) have occurred, provided, however, that there shall be a grace period of a minimum of five years on such repayment of principal. (c) If so requested by the Borrower, the Association modification referred may revise the to in paragraph (b) above to include, the increase in lieu of in the amounts some or all of of such installments, the payment annual rate agreed of interest with the at an Association on the principal withdrawn amount and outstanding of the Credit from time to time, provided Association, that, in thejudgment such revision ofthe shall not change the grant element above-mentioned obtained repayment under the modification. (d) If, at any time after a modification paragraph of terms (b) above, pursuant the Association to determines that the condition Borrower's has deteriorated economic significantly, the Association the Borrower, may, if so requested further modify by the terms of repayment of installments to conform as provided to the schedule in paragraph (a) above." Section 1.08. Section 3.03 (a) of the Development amended Credit to read as Agreement follows: is "Section 3.03. (a) For the purposes of Parts Borrower A and shall relend B of the Project, the the proceeds of the Credit allocated Category (1) of from time the table to time to in paragraph 1 of Schedule FIPAG I to this under a Agreement subsidiary to loan agreement Borrower to be entered and FIPAG into between the (the Subsidiary Loan Agreement) conditions under which shall terms and have been approved by the Association, include that the and which proceeds shall of the Credit be onlent in United repayment States dollars, period of 22 years with a including a grace rate of 2% period of 5 years per annum." and an interest Section 1.09. Section 3.08 (a) of the Development amendedto read as Credit Agreement follows: is "(a) ensure that the tariffs charged on water of cost will reflect recovery the principles and be sufficient to cover operating cost of capital expenses, depreciation over time;" and  -5- Section 1.10. Section. 4.01 (b) (ii) of amended the Development to read as follows: Credit Agreement is "(ii) furnish to the Association as soon as available, not later but in than six any case months after the end of report each such of such year, the audit by said auditors, of such detail as scope and the Association in such shall have reasonably requested; and" Section 1.11. The table set forth inparagraph Credit 1of Schedule Agreement is deleted 1to the Development and replaced with the Agreement table set Amending forth in Attachment Development I to this Credit Agreement. Section 1.12. In Paragraph 2 (c) of Schedule the definition 1 to the Development of "Operating Agreement Costs" is amended to read as follows "(c) the term "Operating Costs" means incurred incremental on account local expenditures of Project implementation, (including including office communication consumables expenses), utility costs, subsistence staff travel allowances, and associated office rental, office supplies maintenance and maintenance, for vehicles and equipment. fuel and and reasonable the operation bank charges of the Special related to Accounts, but excluding civil servants." salaries of the Borrower's Section 1.13. Paragraph 4 of Schedule is amended 1to the Development to read as follows: Credit Agreement "4. The Association may require withdrawals made on from the Credit the basis Account of statements to be of expenditure and works for expenditures under contracts for: (a) goods costing less than $200,000 services equivalent of consulting each; firms (b) under contracts equivalent costing each; (c) less than services $100,000 of individual consultants costing less than and audits under $50,000 contracts equivalent each; and under (d) training such terms and operating and conditions costs, as the Association Borrower." shall specify by notice to the Section 1.14. The last line in Schedule Agreement is deleted 2 to the Development and replaced Credit by the words: "The Project is expected to be completed by March 31, 2007". Section 1.15. Schedule 5 (Special Account) forth inAttachment is replaced II to this in its entirety Agreement as set Amending Development Credit Agreement.  Section 1.16. Schedule 6 (Performance Indicators) Agreement is replaced of the Development as set Credit forth in Attachment Development III to this Agreement Credit Amending Agreement. ARTICLE II Effective Date; Termination Section 2.01. This Agreement Amending Development become effective Credit Agreement until evidence shall not satisfactory to the Association the Association shall have that: been fumished to (a) the execution and delivery of this Agreement Credit Agreement Amending on behalf Development of the Borrower has been necessary duly authorized governmental or ratified action, and this by all Agreement Agreement Amending is legally Development binding Credit upon the Borrower in accordance with its terms. (b) the execution and delivery ofthe Agreement has been Amending duly authorized Project Agreement or ratified by FIPAG, accordance and is legally binding with its terms. upon FIPAG in (c) the Project Implementation Manual satisfactory has been to the amended Bank, to incorporate in a manner the environmental, and involuntary water resources resettlement management recommendations Project's made by mid-term the Association review. during the Section 2.02. As part of the evidence to be furnished this Agreement pursuant Amending to Section Development 2.01 of Credit Agreement, Association there shall an opinion be furnished or opinions to the satisfactory to the Association Borrower and FIPAG, showing, on behalf respectively, of the that this Agreement Agreement Amending and the Development Agreement Credit Amending Project Agreement, authorized respectively, or ratified by, and have been executed duly and delivered respectively, on behalf and is of the Borrower legally or FIPAG, binding upon the Borrower accordance and FIPAG, with their respectively, respective terms. in Section 2.03. This Agreement Amending Development come into force and Credit Agreement effect on the date shall upon which Borrower the Association notice of its shall dispatch acceptance to the of the evidence Agreement required Amending by Section Development 2.01 of this Credit Agreement.  -7- Section 2.04. If thisAgreement Amending Development not come into force Credit Agreement and effect shall by a date ninety (90) days after Amending the date Development of this Agreement Credit Agreement, this Agreement Credit Agreement Amending Development and all obligations of the partieshereunder Association shall terminate, establishes unless the a later date for the purposes Amending of this Section. Development If this Agreement Credit Agreement shall terminate Section, under the the Development provisions of this Credit Agreement shall continue Agreement in full force Amending and effect, Development as if this Credit Agreement had not been executed.  -8- IN WITNESS WHEREOF, the parties hereto, acting representatives, through have caused their dulyauthorized this Agreement Amending Development be signed in theirrespective Credit Agreement names to in the Districtof Columbia, as of the United day and year first States ofAmerica, above written. REPUBLIC OF MOZAMBIQUE By /I/ Armando Panguene Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ NilsTcheyan Authorized Representative  Attachment I SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The tablebelow sets forth the Categories of items proceeds to be financed of the Credit, out of the the allocation of the amounts of the Credit the percentage to eachCategory of expenditures and for items to be financedin each Category: Supplemental Initial Financing Financing Amount of the % of Amount of the Credit Allocated Expenditures Credit Allocated (Expressed Category in to be (Expressed in SDR Financed SDR Equivalent) (1) Equivalent! Civil works 18,684,000 100% of foreign expenditure s and 90% of local expenditure s (2) Consultants' services, including audits 24,140,000 (a) For Parts 100% A and 5,800,000 B 3,100,000 100% (b) For PartC (3) Goods 100% of (a) For Parts foreign A and 3,406,000 B expenditure (including vehicles) s and 90% 2,200,000 of local 360,000 (b) For Part expenditure C (including s vehicles)  -10- Initial Financing Supplemental Amount of the Financing Amount Credit Allocated of the Credit % of (Expressed in Category Allocated Expenditures SDR Equivalent) (Expressedin SDR to be Equivalent) Financed (4 Training 100% (a) For Parts A and 590,000 B (b) For Part C 200,000 (5 Operating Costs ) 100% of (a) ForParts A and B ~~~~~~~~~~~~~~~~~~~~~~ 3,249,000 expenditures (b) ForPart C 370,000 2,200,000 until 31, 2005, and 70% of local expenditures thereafter (6 Unallocated 1,301,000 TOTAL 55,400,Q000 1OQ 00  -11- Attachment II SCHEDULE 5 Special Accounts 1. For the purposes of this Schedule: (a) the term "eligible Categories" means 5(a) set Categories forth in 1, 2(a), the table in paragraph 3(a), 4(a) and 1 of Schedule Special 1 to this Account Agreement A and in respect Categories of 2(b), 3(b), respect 4(b) and of Special 5(b) set Account forth in B; said table in (b) the term "eligible expenditures" means reasonable expenditures cost of goods, in respect works and of the services required out of for the the proceeds Project of the Credit and to be financed allocated from time accordance to time with the to the eligible provisions Categories of Schedule in 1to this Agreement; and (c) the term "Authorized Allocation" means $3,000,000 an amount in respect equivalent of Special to Account A and respect an amount of Special equivalent Account to $350,000 B to be in withdrawn from the into the Special Credit Account Accounts and deposited pursuant to paragraph 3 (a) ofthis Schedule. 2. Payments out of the respective Special Account eligibleexpenditures shall be made exclusively in accordance for with the provisions of this Schedule. 3. After the Association has received evidence satisfactory Special Account to it that has been the respective duly opened, withdrawals subsequent of the Authorized withdrawals Allocation to replenish and the respective Special follows: Account shall be made as (a) For withdrawals of the Authorized Allocation, to the Association the Borrower a request or requests shall furnish for deposit an amount into the respective or amounts Special Account which do not of exceed the aggregate Allocation. amount On the basis of of the Authorized such request or requests, the Borrower, the Association withdraw shall, on from the Credit behalf of Account Account and deposit such amount into the respective or amounts Special as the Borrower shall have requested. (b) (i) For replenishment of the respective Special Account, Borrower the shall furnish to the Association requests into the for deposits respective Special Account at such intervals Association as the shall specify. (ii) Prior to or at the time of each such request, the Borrower furnish to the shall Association the documents and other required evidence pursuant to paragraph 4 of this Schedule for the  -12- payment or payments in respect of which replenishment requested. is On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Account Credit and deposit into the respective Special Account amount such as the Borrower shall have requested and as been shown shall have by said documents and other evidence to have paid out been of the respective Special Account expenditures. for eligible All such deposits shall be withdrawn Association by the from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, shall have as been justified by said documents and other evidence. 4. For each payment made by the Borrower the Borrower out of the respective shall, at Special such time Account, as the Association Association shall reasonably such documents request, furnish to and other the evidence showing exclusively that such for eligible payment expenditures. was made 5. Notwithstanding the provisions of paragraph shall not 3 of this Schedule, be required to make the Association further deposits into any Special Account: (a) if, at any time, the Association shall have withdrawals determined should be made that all further by the Borrower directly accordance from the with the Credit provisions Account of Article in V of the General of Section Conditions 2.02 of this and paragraph Agreement; (a) (b) if the Borrower shall have failed to period of time furnish to the Association, specified in Section within the 4.01 (b) (ii) of this Agreement, required to be furnished any of the to the Association audit reports pursuant to said of the records Section in respect and accounts ofthe audit for the Special Accounts; (c) if, at any time, the Association intention shall have notified to suspend the Borrower in whole or in part of its the right from the of the Borrower Credit Account to make withdrawals pursuant to the provisions Conditions; of Section or 6.02 of the General (d) once the total unwithdrawn amount Categories of the Credit allocated for the respective to the eligible Special Account, minus the special commitments total amount entered of all outstanding into by the Association General pursuant Conditions to Section with respect 5.02 of the to the Project, amount shall equal of the Authorized the equivalent of twice Allocation. the Thereafter, withdrawal from the Credit Account the Credit of the remaining unwithdrawn allocated to the amount eligible of Categories Association shall follow shall specify such procedures by notice as the to the Borrower. made only Such further after and withdrawals to the extent that the shall be Association shall have been satisfied that all  -13- such amounts remaining on deposit in the respective such notice Special Account will be utilized as of the in making date of payments for eligible expenditures. 6. (a) If the Association shall have determined out of any at any Special time that Account: any payment (i) was made for an expenditure pursuant to paragraph or in an amount 2 of this not eligible Schedule; or (ii) furnished was not justified to the by the Association, evidence the Borrower Association: shall, promptly (A) provide upon notice such additional from the evidence (B) deposit as the Association into the respective may request; or Special Account refund (or, if the Association to the Association) shall so request, an amount equal to the amount thereof of such not so payment eligible or justified. or the portion Unless the Association further deposit shall otherwise by the Association agree, no into any Special Account Borrower has provided shall be such evidence made until the or made such deposit or refund, as the case may be. (b) If the Association shall have determined outstanding at any in any time that Special any amount Account will not be required eligible to cover expenditures, further payments the Borrower for shall, promptly refund upon notice to the Association from the Association, such outstanding amount. (c) The Borrower may, upon notice to Association the Association, all or any refund portion ofthe funds to the on deposit in the Special Accounts. (d) Refunds to the Association made pursuant of this Schedule to paragraphs shall be 6 (a), (b) credited and (c) to the CreditAccount cancellation for subsequent in accordance withdrawal with the or for relevant provisions General of this Agreement, Conditions. including the  -14- Attachment m SCHEDULE 6 Performance Indicators (Applicable to Each City Benefiting from the Project: Maputo, Beira, Quelimane , Nampula and Pemba) Population (by each city in 000 and in % where applicable) Total Connected (Refers to population served Connections(YC) by House Connections (HC) and Yard Served by Standpipes (SP) Unserved (Totalpopulation less population served Average by HC, per capita YC and SP) production (served population) divided - (refers by population to volume served of water expressed produced in literper capita Average per capita per day) production (total population) divided refers by total to volume population of water expressed produced in liter per capita perday) Water produced million m3/year Water billed million m3/year Unaccounted for Water % Total number of connections (include HC, YC and SP) Number of un-metered connections Number of broken meters Staff numbers per 1000 connections Broken pipes repaired (refers to number of pipes during the period) in the distribution network repaired Broken services repaired (refers tothe number of connections repaired during the period) Cost/m3 water billed Operating costs (monthly) refers to the expenditures wages, related repair & maintenance, with chemicals, electricity, taxes) Samples failing faecal coliforms (refers to a percentage network not complying of samples with bacteriological in distribution standards Samples with regard failing coliforms to feacal coliforms) ((refers to a percentage complying of samples with bacteriological in distribution network standards not with regard Samples to total failing coliforms) iron standard Number of samples taken biological (samples analysis) taken in distribution network for biological Number of samples taken chemical (samples analysis) taken in distribution network for chemical  CONFORMED COPY CREDIT NUMBER 3247-1MOZ (Amendment) Agreement Amending Project Agreement (SecondNationalWater DevelopmentProject) between INTERNATIONAL DEVELOPMENT ASSOCIATION and FUNDO DE INVESTIMENTO E PATRIMONIO DO ABASTECIMENTO DE AGUA Dated April 15,2004  CREDIT NUMBER 3247-1 MOZ (Amendment) AGREEMENT AMENDING PROJECTAGREEMENT AGREEMENT dated April 15, 2004, DEVELOPMENT between INTERNATIONAL ASSOCIATION (the Association) INVESTIMENTO and the FUNDO E PATRIMONIO DE DO ABASTECIMENTO DE AGUA (FIPAG). WHEREAS (A) by the Development Credit Agreement as amended to date dated October (the Development 6, 1999, Credit Agreement), Amending including Development the Agreement Credit Agreement of this date, Association, between the Association the Borrower and the agreed to make available various currencies to the Borrower a total equivalent amount to sixty in five million six hundred Rights (SDR thousand 65,600,000) Special Drawing to assist in financing the Project Development described Credit Agreement; in Schedule 2 to the (B) by the Project Agreement dated October between 6, 1999 the Association (the Project Agreement), and the FIPAG, FIPAG agreed with respect to undertake to the carrying certain obligations out of theProject; NOW THEREFORE the parties hereto hereby Agreement agree to as follows: amend the Project ARTICLE I Section 1.01. Article IV (Financial Covenants) as follows: is amended in its entiretyto read "ARTICLE IV Financial Covenants Section 4.01. (a) FIPAG shall maintain records in accordance and accounts adequate with sound to reflect accounting practices its operations and financial condition. (b) FIPAG shall: (i) have its records, accounts and financial statements sheets, (balance statements of income and expenses statements) and related for each fiscal year audited, in accordance with  -2 - 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 months after the end of each such year: (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors; of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof as the Association shall from time to time reasonably request. Section 4.02. (a) Except as the Association shall otherwise produce, beginning agree, FIPAG shall for its fiscal year ending on 2007, equivalent funds from to not less internal sources than 1.10 times its debt service requirements, thereafter, a ratio which be maintained shall, at such level or above in respectof the subsequent fiscal years. (b) In each of itsfiscal years, FIPAG shall, on the basis by FIPAG of forecasts and satisfactory prepared to the Association, review whether requirements it would set forth meet the in paragraph (a) and furnish to the Association review upon its completion. a copy of such (c) If any such review shows that FIPAG would not set forth in paragraph meet the requirements (a) for FIPAG's fiscal years covered promptly by such review, take all necessary FIPAG shall measures in order to meet such requirements. (d) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: (A) the sum of revenues from all sources related to operations, consumer deposits and consumer contributions in aid of construction, net non-operating income and any reduction in working capital other than cash; and (B) the sum of all expenses related to operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash  -3- distributions of surplus, increase in working capital other than cash and other cash outflows other than capital expenditures. (ii) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation ofrevenues in (A) above. (iii) The term "working capital other than cash" means the difference between current assets excluding cash and current liabilities the end at of each fiscal year. (iv) The term "current assets excluding cash" means all assets than cash other which could in the ordinary course of business converted be into cash within twelve months, including accounts receivable, inventories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (v) The term "current liabilities" means all liabilities become which will due and payable or could under circumstances existing then be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes. (vi) The term "debt service requirements" means the aggregate amount of repayments of, and interest and other charges debt. on, (vii) The term "capital expenditures" means all expenditures incurred on account of fixed assets, including interest charged construction, to related to operations. (viii) Whenever for the purposes of this Section it shall be necessary value, in to terms of the currency of the Borrower, debt payable another in currency, such valuation shall be made on the basis the prevailing of lawful rate of exchange at which currency such other is, at the time of such valuation, obtainable purposes for the of servicing such debt, or, in the absence of such on the basis rate, of a rateof exchange acceptable to the Association.  -4 - Section 4.03. (a) Except as the Association not incur shall otherwise any debt agree, unless FIPAG a reasonable shall forecast FIPAG of the revenues shows that the and expenditures estimated net revenues of of FIPAG term of the debt for each to be incurred fiscal year during shall be the at least requirements 1.5 times the estimated of FIPAG in such debt service year on all debt incurred. of FIPAG including the debt to be (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of FIPAG its terms maturing more by than one year after the date originally on which incurred. it is (ii) Debt shall be deemed to be incurred: (A) under agreement a loan contract or other or instrument providing for such modification debt orfor the ofits terms ofpayment on the date of such agreement contract, or instrument; and (B) under a guarantee on the agreement, date the agreement providing for such guarantee entered has been into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related operations to and net non-operating income, and (B) the sum of all expenses related to operations including administration, adequate maintenance, taxes payments and in lieu of taxes, but excluding provision depreciation, for other non-cash operating charges interest and and other charges on debt. (iv) The term "net non-operating income" means between: the difference (A) revenues from all sources other than those related operations; to and (B) expenses, including taxes and payments in lieu incurred of taxes, in the generation of revenues in (A) above. (v) The term "debt service requirements" means amount the aggregate of repayments of, and interest and other debt. charges on,  -5- (vi) The term "reasonable forecast" means a forecast prepared FIPAG not earlier by than twelve months prior to the incurrence the debt of in question, which both the Association accept as and FIPAG reasonable and as to which the Association FIPAG has notified of its acceptability, provided that no event has since such occurred notification which has, or may reasonably in the future be expected to have, a material adverse effect on the financial condition or future operating resultsof FIPAG. (vii) Whenever for the purposes of this Section it shallbe necessary value, in to terms of the currency of the Borrower, debt payable another in currency, such valuation shall be made on the basis the prevailing of lawful rate of exchange at which currency such other is, at the time of such valuation, obtainable purposes for the of servicing such debt, or, in the absence on the basis of such rate, of a rate of exchange acceptable to the Association." ARTICLE II The Agreement Amending Project Agreement the date shall come upon which into force the Agreement and effect on Amending Development effective. Credit Agreement becomes  -6 - IN WnTNESS WHEREOF, the partieshereto, representatives, acting through have caused their duly authorized this Agreement Amending their respective Project Agreement names in to be signed the District in of Columbia, and year United States first above ofAmerica, written. as of theday INTERNATIONAL DEVELOPMENT ASSOCIATION By Isl NilsTcheyan Authorized Representative FUNDO DE INVESTIMENTO E PATRIMONIO DE ABASTECIMENTO DE AGUA By Isl Armando Panguene Authorized Representative