Bolivia - Railway Project : Credit 0346 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 346 BO Project Agreement (Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND EMPRESA NACIONAL DE FERROCARRILES DATED DECEMBER 1, 1972 CONFORMED COPY CREDIT NUMBER 346 BO Project Agreement (Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND EMPRESA NACIONAL DE FERROCARRILES DATED DECEMBER 1, 1972 PROJECT AGREEMENT AGREEMENT, dated December 1, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and EMPRESA NACIONAL DE FERROCARRILES (hereinafter called ENFE). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Bolivia (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eight million dollars ($8,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition, inter alia, that ENFE agree to undertake such obligations toward the Association as hereinafter set forth; and WHEREAS ENFE, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit 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. ENFE shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and engineering practices. Section 2.02. Except as the Association shall otherwise agree: 4 (a) ENFE shall procure the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit, on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, and in accordance with, and subject to, the provisions set forth in Schedule 1 to this Agreement; and (b) ENFE shall acquire such goods free and clear of all encumbrances. Section 2.03. (a) ENFE undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ENFE to replace or repair such goods. (b) Except as the Association may otherwise agree, all goods and services financed out of the proceeds of the Credit relent to ENFE by the Borrower shall be used exclusively for the Project until its completion. Section 2.04. (a) ENFE shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ENFE: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon -the provisions of Section 5.03 of this Agreement, enable the Association's representatives to inspect the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.05. ENFE shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ENFE 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. 5 ARTICLE III Management and Operations of ENFE Section 3.01. ENFE shall at all times carry on its operations, manage its affairs, maintain its financial position, and plan the future expansion of the railway services, all in accordance with sound business, financial, engineering and railway practices, under the supervision of experienced and competent management, and with the assistance of adequate, qualified and experienced staff. Section 3.02. ENFE shall at all times operate and maintain the Railways and make all necessary renewals and repairs thereof, in accordance with sound engineering and railway practices. Section 3.03. ENFE shall at all times maintain its right to carry on its operations, and take all steps necessary to acquire, maintain and renew all rights, powers, privileges, concessions and franchises which are necessary or useful in the conduct of its business. Section 3.04. ENFE shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with sound practice. Section 3.05. ENFE shall: (a) carry out the Plan Quinquenal and the Action Program with due diligence and efficiency and in conformity with sound administrative, financial and engineering practices; (b) periodically review the Plan Quinquenal; (c) not make any changes in the Plan Quinquenal without the agreement of the Borrower and the Association; and (d) appoint a qualified senior officer with suitable rank, powers and authority to be solely responsible for the carrying out of the Plan Quinquenal. Section 3.06. Except as the Association shall otherwise agree, ENFE shall: (a) carry out any investment for interconnecting the Eastern and Western Systems only if such investments are justified by economic analysis satisfactory to the Borrower and the Association; 6 (b) carry out investments for extending the Santa Cruz-Mamord line to Trinidad only after the Borrower shall have carried out economic studies thereon and afforded the Association a reasonable opportunity to exchange views; (c) by June 30, 1973, close the Sucre-Tarabuco line; and (d) close the Cochabamba-Aiquile line if the economic study referred to in Section 4.05 of the Development Credit Agreement shows that the road extension is a more economic transportation alternative. Section 3.07. ENFE shall, by December 31, 1973, submit to the Association, for consultation, a revised salary structure for its non-managerial and non-professional staff and, promptly after such consultation and on the basis therof, shall implement a new salary structure for such staff. ARTICLE IV Financial Covenants Section 4.01. ENFE shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. Section 4.02. ENFE shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound 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 the accounts and financial statements of ENFE and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, ENFE shall: (a) by March 31, 1973, carry out a study of its passenger traffic potential, consult the Association on the conclusions thereof and after such consultation, and at any event not later than June 30, 1973, revise its tariff for such traffic on the basis of such conclusions and consultation; and 7 (b) whenever a substantial rise in its cost level shall take place, take promptly all steps necessary to raise its tariffs by an amount sufficient to offset said increase in costs. Section 4.04. Except as the Association shall otherwise agree, ENFE shall take such measures as shall be necessary to achieve by 1977 a working ratio of not more than 79, and an operating ratio of not more than 92. Section 4.05. ENFE shall submit to the Borrower and the Association, for their agreement and sufficiently in advance of each of its fiscal years, its proposed annual budget for both operations and investments. Section 4.06. ENFE shall maintain a separate account to which it shall credit the funds the Borrower shall make available to it in accordance with the provisions of Section 4.02 of the Development Credit Agreement. Section 4.07. Except as the Association shall otherwise agree, ENFE shall not incur any debt unless the amount of ENFE's net cash revenue for ENFE's fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever amount is the greater, shall be not less than 1.25 times the maximum debt service requirements for any succeeding fiscal year on all the debt of ENFE including the debt to be incurred. For the purpose of this Section: (a) "debt" means all debt of ENFE, including debt guaranteed by ENFE, maturing by its terms more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred on the date of execution and delivery of the contract or other document providing for such debt; (c) the term "net cash revenue" means gross operating revenue from all sources, adjusted to take account of ENFE's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve-month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever in connection with this Section it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by ENFE, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and ENFE shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and ENFE shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of ENFE and other matters relating to the purpose of the Credit. Section 5.02. The Association and ENFE shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and ENFE of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. ENFE shall enable the Association's representatives to inspect the Railways and all plants, sites and works of ENFE and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the Effective Date. Section 6.02. (a) This Agreement and all obligations of the Association and of ENFE 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 9 (ii) a 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 ENFE of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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: INDEVAS Washington, D.C. For ENFE: Empresa Nacional de Ferrocarriles Casilla 428 La Paz, Bolivia 10 Cable address: FERROBOL La Paz Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of ENFE may be taken or executed by its Gerente General or such other person or persons as ENFE shall designate in writing. Section 7.03. ENFE shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ENFE, take any action or execute any documents required or permitted to be taken or executed by ENFE pursuant to any of the provisions of this Agreement. Section 7.04. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Gerald Alter Regional ice President. Latin 4merica and the Caribbean EMPRESA NACIONAL DE FERROCARRILES By /s / Juan Jos6 Loria Authori:ed Representative 11 SCHEDULE 1 Procurement 1. Contracts for (i) components to rehabilitate existing diesel locomotives and railcars and to improve existing suitable passenger and freight cars, and (ii) spare parts for existing equipment shall be awarded on a negotiated basis, with the prior approval of the Association. 2. With respect to any contract for equipment and materials other than those referred to in paragraph I hereof, and associated services estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, ENFE shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, ENFE shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.02 of this Agreement, promptly inform ENFE and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 3. With respect to any other contract for such goods and associated services, ENFE shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds 12 from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.02 of this Agreement, promptly inform ENFE and state the reasons for such determination. 4. For the purpose of evaluating bids for goods and materials and associated services included in Category I of the table set out in paragraph I of Schedule I to the Development Credit Agreement, bid prices shall be determined and compared in accordance with the following rules: (a) the term "Local Bid" means a bid submitted by a manufacturer established in the territories of the Borrower for goods manufactured or processed to a substantial extent (as reasonably determined by the Association) in such territories; any other bid shall be deemed to be a "Foreign Bid"; (b) the bid price under a Local Bid shall be the sum of the following amounts: (i) the ex-factory price of such goods; and (ii) inland freight, insurance and other costs of delivery of such goods to the place of their use or installation; (c) for the purpose of comparing any Foreign Bid with any Local Bid, the bid price under a Foreign Bid shall be the sum of the following amounts: (i) the c.i.f. (place of entry) price of such goods; (ii) the amount of any taxes on the importation of such goods into the territories of the Borrower which generally apply to non-exempt importers, or 1.5% of the amount specified in (i) above, whichever shall be the lower; and (iii) inland freight, insurance and other costs of delivery of such goods to the place of their use or installation.