India - Nangal Fertilizer Expansion Project : Credit 0357 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 357 IN Development Credit Agreement (Nangal Fertilizer Expansion Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED FEBRUARY 9, 1973 CONFORMED COPY CREDIT NUMBER 357 IN Development Credit Agreement (Nangal Fei'tilizer Expansion Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED FEBRUARY 9, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated February 9, 1973, between INDIA, acting by its President (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 the Fertilizer Corporation of India with the Borrower's assistance and, as part of such assistance, the Borrowur will make available to the Fertilizer Corporation of India, inter alia, the proceeds of the Credit as hereinafter provided; and (C) 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 the Fertilizer Corporation of India; 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) Section 5.01 is deleted; (b) Section 6.02(h) is deleted and Section 6.02(i) becomes 6.02(h); (c) Paragraph 5 of Section 2.01 is amended to read as follows: "5. The term 'Borrower' means India, acting by its President."; 4 (d) The words ", the Project Agreement" are added after the words "Development Credit Agreement" in Section 6.06; and (e) The words "or the Project Agreement" are added after the words "Development Credit Agreement" in Section 8.02. 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) "FCI" means the Fertilizer Corporation of India, a company incorporated in 1961 under the Companies Act, 1956, as amended, of India; (b) "Project Agreement" means the agreement between the Association and FCI of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and FCI pursuant to Section 3.01(b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement, if any- (d) "Rs" means rupees in the currency of the Borrower; (e) "Nangal Unit" means the nitrogen fertilizer factory of FCI which is located in Nangal, Punjab; (f "Uhde" means Friedrich Uhde Gmbh; (g) "Montedison" means Montecatini Edison S.P.A.; (h) "Critical Path Schedule" means the time schedule prepared by FCI, in consulation with Uhde and Montedison, set forth in the drawing dated October 30, 1972 entitled Critical Path Network (Nangal Expansion); and (i) "Nangal Expansion Project Implementation Plan" means the assignment of responsibilities within FCI, including the relationship with FCI's engineering contractors, set forth in the document dated December 8, 1972, so entitled. 5 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 fifty-eight million dollars ($58,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I 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 the Project and to be financed under this 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. The Closing Date shall be March 31, 1977, or such other date as shall be agreed between the Borrower and the Association. Section 2.04. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of I 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.05. Service charges shall be payable semi-annually on February I and August I in each year. Section 2.06. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each February 1 and August I commencing February 1, 1983 and ending August 1, 2022, each installment to and including the installment payable on August 1, 1992 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 (1-1/29) of such principal amount. Section 2.07. 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 this Agreement, the Borrower shall cause FCI to carry out the 6 Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, promptly as needed, the funds (estimated at Rs769 million), facilities, services and other resources required for that purpose. The funds required for the completion of the Project shall be provided by the Borrower to FCI as follows: (i) Funds equivalent to the proceeds of the Credit shall be provided in the form of debt under the Subsidiary Loan Agreement referred to in paragraph (b) of this Section; (ii) The amount of Rs347 million shall be provided in the form of equity; and (iii) Any additional funds, as required, shall be provided with at least 50 per cent in the form of equity, and the remainder in the form of debt on terms and conditions normally applicable to the Borrower's loans to FCI. (b) The Borrower shall lend funds equivalent to the proceeds of the Credit to FCI under a Subsidiary Loan Agreement to be entered into between the Borrower and FCI under terms and conditions which shall include, inter alia, the following: (i) the loan will be repaid by FCI to the Borrower in ten equal annual installments commencing five years from the Effective Date; and (ii) interest, including special charges, if any, shall be paid on the outstanding balance from time to time at the rate of 8.5% per annum. (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, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (d) The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to enable FCI to perform all of its obligations under the Project Agreement and the Subsidiary Loan Agreement and shall not take or permit to be taken any action which might interfere with such performance. Section 3.02. In order to assist FCI in process and engineering design, procurement, supply of proprietary equipment, construction and start-up, the Borrower shall cause FCI to obtain process licenses, plant designs and consultant services acceptable to the Association upon terms and conditions satisfactory to the Association. 7 Section 3.03. The Borrower shall cause FCI to employ competent and experienced contractors as necessary to carry out the Project. Section 3.04. (a) 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. (b) When, with respect to any equipment to be procured under Section 2.04(a) of the Project Agreement: (i) the lowest evaluated bid is a Foreign Bid (as defined in paragraph 3(c) of Schedule I to the Project Agreement), the Borrower shall promptly grant permission to import the necessary goods without reconsideration of the eligibility of the items for importation; and (ii) the lowest evaluated bid is a Preferred or Non-preferred Domestic Bid (as defined in paragraphs 3(a) and (b) of Schedule I to the Project Agreement), the Borrower shall promptly grant permission to import the materials necessary to the performance of the contract, and, with respect to materials which are subject to allocation, make, or cause to be made, allocations of such materials promptly and in such quantities as shall be required for the timely completion of the Project. (c) When FCI needs to import materials to operate the Nangal Plant up to full capacity, the Borrower shall promptly grant permission to import all necessary materials at reasonable prices. (d) With respect to equipment and materials to be imported pursuant to Section 2.04 of the Project Agreement, the Borrower shall: (i) promptly upon receipt of the appropriate applications, issue, or cause to be issued, such import licenses as shall be required for such purposes; and (ii) make available, or cause to be made available, promptly as needed, all foreign exchange which shall be required for such purposes. (e) Whenever it is determined, pursuant to Section 2.04(d) of the Project Agreement, that any equipment or material cannot be delivered on or prior to its scheduled delivery date and that such delay would adversely affect the completion of the Project. the Borrower shall promptly take all necessary action to permit FCI to procure such equipment or material by such procedures as shall be satisfactory to the Association. 8 ARTICLE IV Other Covenants Section 4.01. In addition to the funds required by Section 3.01(a) of this Agreement, the Borrower shall provide FCI with sufficient funds to complete all ongoing projects and such other projects as may be undertaken by FCl, on terms which shall be compatible with FCI's sound financial position. Section 4.02. The Borrower shall maintain FCI in a sound financial position and to that end, for a period of 15 years from the date of this Agreement, the Borrower shall: (a) cause FCI to maintain a ratio of long-term debt-equity (as defined in Section 4.04 of the Project Agreement) not greater than 50:50; and (b) take such action as may be necessary to cause FCI to achieve and maintain a ratio of current assets to current liabilities (as defined in Section 4.05 of the Project Agreement) of at least 1.2:1. ARTICLE V Consultation, Information and Inspection Section 5.01. The Borrower and the Association shall cooperate fully to - assure that the purposes of the Credit will be accomplished. To that end, the 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 this Agreement, the performance by FCI of its obligations under the Project Agreement, the administration, operations and financial condition of FCI 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 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request 9 concerning the operations, management and financial condition of FCI and, 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 this Agreement, the performance by FCI of its obligations under the Project Agreement, or the performance by the Borrower or by FCI of their obligations under the Subsidiary Loan Agreement. Section 5.03. 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 VI Taxes and Restrictions Section 6.01. 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 6.02. This 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 6.03. 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 VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 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 10 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 principal and service charges shall become due and payable immediately, anything to the contrary in this Agreement notwithstanding. Section 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) FCI shall have failed to perform any covenant, agreement or obligation under the Project Agreement. (b) An extraordinary situation shall have arisen which shall make it improbable that FCI will be able to perform its obligations under the Project Agreement. (c) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of FCI or for the suspension of its operations. Section 7.03. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified: the event specified in paragraphs (a) or (c) of Section 7.02 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 FCI. ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of this 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 FCI have been duly authorized or ratified by all necessary corporate and governmental action. (c) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and FCI, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. . 11 (c) FCI has entered into the agreements referred to in Section 2.02 of the Project Agreement. 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, FCI and constitutes a valid and binding obligation of FCI 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 FCI, respectively, and constitutes a valid and binding obligation of the Borrower and FCI in accordance with its terms. Section 8.03. The date May 15, 1973, is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Sections 4.01, 4.02, 7.02 and 7.03 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on a date 16 years after the date of this Agreement, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. Any Secretary, Additional Secretary or Joint Secretary to the Government of India in the Ministry of Finance or a Director or Deputy Secretary of the Department of Economic Affairs in the Ministry of Finance is designated as representative of the Borrower for 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 Government of India Ministry of Finance Department of Economic Affairs New Delhi, India 12 Cable address: ECOFAIRS New Delhi 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 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. INDIA By /s / L. K. Jha Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ I.P.M. Cargill Regional Vice President Asia 13 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Atnount of' the Credit All/oca ted 9% o f (Expressed in Expenditures Category Dollar Equivalent) to be Fiuanced I. Equipment and 100% of total materials procured expenditures by international competition (a) Ammonia plant 23,200,000 (including air separation) (b) Urea plant 7,300,000 (c) Offsite facili- 8,200,000 ties (including steam generation, cooling towers, and construction steel) (d) Spare parts 3,500,000 II. Imported equipment 2,500,000 100, of foreian for standardization expenditures III. Engineering, design, 7,500,000 100% of foreign erection and commis- expenditures and sioning 10% of local expenditures IV. Unallocated 5,800,000 TOTAL 58,000,000 14 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency of, any country other than the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower; and (c) the term "total expenditures" means the aggregate of foreign and local expenditures. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to January 1, 1973; (b) 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. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount p- 'ie net of all such taxes, such percentage shall be reduced to ensure that no piuceeds of the Credit will be withdrawn on account of payments for such taxes; (c) expenditures for freight and insurance within the territories of the Borrower. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amoun;. 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, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and 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, 15 subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; (c) If and to the extent the unallocated amount of the Credit shall exceed the requirement for contingencies in respect of expenditures under Categories I or II, as determined by the Association, the Association may, at the request of the Borrower (i) allocate funds from the unallocated amount of the Credit to Category III, and (ii) to the extent funds allocated to Category III are not needed to cover the estimated foreign expenditures thereunder, increase the percentage of local expenditures to be financed under Category III to a percentage which, in the opinion of the Association, will allow the full disbursement of the proceeds of the Credit, subject to the provision of paragraph 3(b) hereof; and (d) if the Association shall have reasonably determined, after consultation with the Borrower and FCI, 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, the Association shall promptly inform the Borrower and FCI of such determination and of the reasons therefor, and no expenditures for such item shall be financed out of the proceeds of the Credit. The Association may, without in any way restricting or limiting any other right, power or remedy of the Association under this 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. 5. Notwithstanding the percentages st forth in the third column of the tale in paragraph I above, if the estimate of local expenditures under Category III shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 16 SCHEDULE 2 Description of the Project The Project consists of the expansion of FCI's Nangal Unit by construction of the following production capacities: 1. An ammonia unit having a design capacity of 300,000 metric tons per year*; 2. A urea unit having a design capacity of 330,000 metric tons per year; and 3. Supporting facilities (including storage and utilities) for the new ammonia and urea units. Ammonia Unit Ammonia production will be based on the partial oxidation of High Sulfur, Heavy Stock (HSHS)/fuel oil. Overall process design will be the responsibility of Uhde and is expected to include the following process steps: a. Air Separation b. High Pressure, Non-Catalytic Partial Oxidation c. Sulfur Removal and Recovery d. Shift Conversion e. Carbon Dioxide Removal and Recovery f. Synthesis Gas Purification by Nitrogen Wash g. Ammonia Synthesis h. Ammonia Separation and Storage * Year - 330 operating days. 17 The existing ammonia plant, which is based upon electrolytic hydrogen, will be replaced by the new ammonia unit. The design capacity of the new ammonia unit is 300,000 metric tons per year, of which approximately 100,000 metric tons will be used for production of calcium ammonium nitrate (CAN) fertilizer in the existing granulation plant. The rest of the ammonia produced from the new unit will be converted to prilled urea. Urea Unit Urea production will be based on the proprietary designs of Montedison pursuant to the existing license agreement between Montedison and FCI. The plant will be a conventional total recycle, single-train unit which is expected to include the following process steps: a. Ammonia and Carbon Dioxide Compression b. Urea Synthesis c. Separation and Recycling of Unreacted Materials d. Urea Solution Concentration and Prilling e. Prill Storage, Bagging, Despatch The Project will be carried out pursuant to the Nangal Expansion Project Implementation Plan and the Critical Path Schedule and is expected to be completed by March 31, 1976.