Malawi - Second Power Project : Credit 0426 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 426 MAI Development Credit Agreement (Second Power Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 7, 1973 CONFORMED COPY CREDIT NUMBER 426 MAI Development Credit Agreement (Second Power Project) BETWEEN REPUBLIC OF MALAWI AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 7, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated September 7, 1973, between the REPUBLIC OF MALAWI (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) The Project will be carried out by !flectricity Supply Commission of Malawi (hereinafter called ESCOM) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to ESCOM the proceeds of the Credit as hereinafter provided; (C) The Borrower has requested the Commonwealth Development Corporation (hereinafter called CDC) to assist in financing part of the Project by granting a loan to ESCOM in an aggregate principal amount (including interest during construction) of £2,500,000; and (D) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and ESCOM; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions 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, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) The following sub-paragraph is added to Section 2.01: "13. The term "Project Agreement" has the meaning set forth in paragraph (c) of Section 1.02 of the Development Credit Agreement." I 4 (b) Section 5.01 is deleted. (c) Section 6.02(h) is deleted and Section 6.02(i) becomes 6.02(h). (d) In Section 6.06 the words "the Project Agreement" are added after the words "the Development Credit Agreement." (e) In Section 8.02 the words "or the Project Agreement" are added after the words "the Development Credit Agreement." Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Act" means the Electricity Act (Cap. 73:01) of the Borrower providing for the establishment of an Electricity Supply Commission, as such Act may be amended from time to time; (b) "ESCOM" means the Electricity Supply Commission of Malawi established under the provisions of Section 3 of the Act, and any successor or successors thereto; (c) "Project Agreement" means the agreement between the Association and ESCOM of even date herewith, as the same may be amended from time to time by agreement between the Borrower, ESCOM and the Association, and such term includes all schedules to the Project Agreement; (d) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ESCOM, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (e) "CDC" means the Commonwealth Development Corporation; (f) "CDC Loan Agreement" means the loan agreement between ESCOM and CDC providing for a loan by CDC to ESCOM in an aggregate principal amount (including interest during construction) of £2,500,000, as the same may be amended from time to time; (g) "CDC Loan" means the loan provided for in the CDC Loan Agreement; 5 (h) "First Credit Agreement" means the Development Credit Agreement (Malawi Power Project) Credit No. 178 MAI of February 11, 1970 between the Borrower and the Association; (i) "Tedzani I hydroelectric power station" means the first stage (16MW) of a hydroelectric power station at Tedzani Falls on the Shire River in the territory of the Borrower; (j) "cusecs" means cubic feet per second; and (k) "f " means the currency of the United Kingdom of Great Britain and Northern Ireland. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to seven million five hundred thousand dollars ($7,500,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for Parts A, B and D of the Project and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services required for the Project and to be financed out of the proceeds of the Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.04 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1978 or such other date as shall be agreed between the Borrower and the Association. 6 Section 2.05. 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 2.06. Service charges shall be payable semi-annually on June 1 and December 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each June 1 and December 1 commencing December 1, 1983 and ending June 1, 2023, each installment to and including the installment payable on June 1, 1993 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 (1-1/2%) of such principal amount. Section 2.08. 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. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause ESCOM to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable ESCOM to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Crerit to ESCOM under a subsidiary loan agreement to be entered into between the Boriower and ESCOM under terms and conditions which shall have been approved by the Association. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, the Borrower shall ensure that a specific authorization is issued to ESCOM to enable ESCOM 7 to divert water from the Shire River, for a period of fifty years commencing from January 1, 1977, in such amounts as may be necessary (but in any case, not less than 4,400 cusecs) for the purpose of power generation at Nkula and Tedzani Falls. Section 3.03. The Borrower shall exercise its powers under the Act or any other legislation relating to the operations of ESCOM only to the extent necessary to ensure the continued operation and development of ESCOM pursuant to (i) appropriate commercial practices and (ii) the provisions of this Agreement, the Project Agreement, the Subsidiary Loan Agreement and the CDC Loan Agreement. Section 3.04. The Borrower shall take whatever action may be necessary to ensure that ESCOM carries out its obligations under the provisions of Section 4.03 of the Project Agreement. ARTICLE IV Consultation, Information and Inspection Section 4.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the w Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the performance by ESCOM of its obligations under the Project Agreement, the Subsidiary Loan Agreement and the CDC Loan Agreement, the administration, operations and financial condition of ESCOM and, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably 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 conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 4.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of ESCOM and, 8 in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out any part of the Project. (b) The Borrower and the Association 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 maintenance of the service thereof, the performance by either of them of its obligations under the Development Credit Agreement or the performance by ESCOM of its obligations under the Project Agreement, the Subsidiary Loan Agreement and the CDC Loan Agreement. Section 4.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE V Taxes and Restrictions Section 5.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 5.02. The Development Credit Agreement and the Project Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 5.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VI Remedies of the Association Section 6.01. If any event specified in Section 7.01 of the General Conditions or in Section 6.03 of this Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance 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 together with the service charges thereon and upon any such declaration such 9 principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section 6.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) ESCOM shall have failed to perform any covenant, agreement or obligation of ESCOM under the Project Agreement; (b) The Act shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of ESCOM to carry out the covenants, agreements and obligations set forth in the Project Agreement; (c) The right of ESCOM to withdraw the proceeds of the CDC Loan shall not have become effective or shall have been suspended in whole or in part, and ESCOM and the Borrower shall have failed to obtain funds from other sources in substitution therefor; (d) The outstanding principal amount of the CDC Loan shall have been declared, or become, due and payable in advance of the agreed maturity thereof pursuant to the terms of the CDC Loan Agreement; and (e) An extraordinary situation shall have arisen which shall make it improbable that ESCOM will be able to perform its obligations under the Project Agreement. Section 6.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) the event specified in paragraphs (a) and (c) of Section 6.02 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower; and (b) any event specified in paragraphs (b), (d) and (e) of Section 6.02 of this Agreement shall occur. ARTICLE VII Amendment of First Credit Agreement Section 7.01. Sections 4.06 and 4.09 of the First Credit Agreement are hereby amended by deleting said Sections and substituting therefor Sections 3.02 and 3.04 of this Agreement, respectively. I 10 ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of ESCOM have been duly authorized or ratified by all necessary corporate and governmental action; (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and ESCOM, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; and (c) The execution and delivery of the CDC Loan Agreement on behalf of ESCOM and CDC have been duly authorized by all necessary corporate and governmental action, and all conditions precedent to the effectiveness of said Agreement or the right to make withdrawals thereu-- er or to receive goods and services thereunder, except only the effectiveness of said Agreement, shall have been fulfilled. Section 8.02. 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 opinions to be furnished to the Association: (a) That the Project Agreement has been duly authorized 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; and (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and e.ecuted and delivered on behalf of, the Borrower and ESCOM, respectively, and constitutes a valid and binding obligation of the Borrower and ESCOM in accordance with its terms. Section 8.03. The date December 7, 1973 is hereby specified for the purposes of 'ection 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Article III of this Agreement and the provisions of Sections 6.02 and 6.03 of this Agreement shall 'Rw 11 cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 25 years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. 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 9.02. 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 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. 12 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 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/ R. B. Mbaya Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Bernard R. Bell Regional Vice President Eastern Africa 13 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of foreign expenditures to be financed out of the proceeds of the Credit and the allocation of amounts of the Credit to each Category: Amount of the Credit Allocated (Expressed in Category Dollar Equivalent) I. Civil Works 2,900,000 II. Mechanical, Elec- 2,800,000 trical and Trans- mission System Equipment III. Consultants' 50,000 services for Part D of the Project IV. Unallocated 1,750,000 TOTAL 7,500,000 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower; (b) expenditures prior to the date of this Agreement; and (c) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. 14 3. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph 1 above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.04 of the Project Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 15 SCHEDULE 2 Description of the Project The Project is part of ESCOM's power generation development program for the period January 1973 to December 1977. It consists of the following Parts: Part A: Construction of a 20MW hydroelectric power station as an extension to the Tedzani I hydroelectric power station, including related transmission equipment. Part B: Construction of a barrage over the existing submerged weir at Tedzani Falls in order to increase the output of the Tedzani I hydroelectric power station and to achieve the projected output for the hydroelectric power station to be constructed under Part A of the Project. Part C: Installation of a 12MW gas turbine at ESCOM's power station in Blantyre. This. Part of the Project shall be financed out of the proceeds of the CDC Loan. Part D: Study of ESCOM's tariff structure.