Tanzania - Kilombero Sugar Project : Credit 0513 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 513 TA Development Credit Agreement (Kilombero Sugar Project) BETWEEN UNITED REPUBLIC OF TANZANIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 27, 1974 CONFORMED COPY CREDIT NUMBER 513 TA Development Credit Agreement (Kilombero Sugar Project) BETWEEN UNITED REPUBLIC OF TANZANIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 27, 1974 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated September 27, 1974, between the UNITED REPUBLIC OF TANZANIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the Association to assist in the financing of Part I of the Project described in Schedule 2 to this Agreement; (B) The Borrower and the Kingdom of Denmark (hereinafter called Denmark) have entered into, or propose to enter into, the agreements referred to hereinafter providing for Denmark to make three loans to the Borrower (hereinafter collectively called the Danish Loans) for purposes which, at the option of the Borrower, may include the financing of Part II of the Project, namely (i) an agreement dated July 8, 1971, providing for a loan in the amount of forty million Danish Kroner (DKr40,000,000), (ii) an agreement dated March 26, 1974, providing for a loan in the amount of thirty-five million Danish Kroner (DKr35,000,000), and (iii) an agreement dated June 30, 1974, providing for a loan in the amount of sixty million Danish Kroner (DKr60,000,000); (C) The Borrower and the Nederlandse Investeringsbank voor Ontwikkelingslanden N.V. (hereinafter called the Investment Bank) have entered into or propose to enter into, the agreements referred to hereinafter providing for the Investment Bank to make two loans to the Borrower (hereinafter collectively called the Dutch Loans) for purposes which at the option of the Borrower, may include the financing of Part II of the Project, namely (i) an agreement dated July 30, 1973 providing for a loan in the amount of eleven million Netherlands Guilders (fl. 11,000,000) and (ii) an agreement proposed to be entered into providing for a loan in the amount of thirteen million Netherlands Guilders (fl.13,000,000); (D) The Kingdom of the Netherlands (hereinafter called the Netherlands) proposes to enter into an advance commitment to the Borrower (hereinafter called the Dutch Advance Commitment) providing for the Netherlands to make available in 1975 to the Borrower, through the Investment Bank, an additional loan in the amount of fourteen million Netherlands Guilders (fl.14,000,000) for purposes which, at the option of the Borrower, may include the financing of Part II of the project; 4 (E) The Project will be carried out by Kilombero Sugar Company Limited (hereinafter called Kilombero) and Sugar Development Corporation with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Kilombero, pursuant to the provisions of a subsidiary loan agreement, part of the proceeds of a Credit extended by the Association as hereinafter provided and the proceeds of a loan to be provided under a Loan Agreement of even date herewith between the Borrower and the Bank; and (F) 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 Bank, the Association and Kilombero; 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 March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). 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) "Project Agreement" means the agreement between the Bank, the Association and Kilombero of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and Kilombero 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; and (c) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the purpose of financing Part I of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Loan and Guarantee Agreements 5 of the Bank, dated March 15, 1974, as made applicable to such agreement, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to nine million dollars ($9,000,000). 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 may 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 o be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1979 or such other date as shall be agreed between the Borrower and the Association. 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 1l%) 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 May I and November I in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May I and November I commencing November 1, 1984 and ending May 1, 2024, each installment to and including the installment payable on May 1, 1994 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. 6 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 Kilombero 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 Kilombero 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 part of the proceeds of the Credit and the proceeds of the loan under the Loan Agreement to Kilombero tinder a subsidiary loan agreement to be entered into between the Boriower and Kilombero under terms and conditions which shall have been approved by the Bank and 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. To the extent the outgrowers mentioned in Part L.B and C of the Project are unable to cultivate the land cleared and prepared for them for cultivation, the Borrower shall cause Kilombero to cultivate such land during the outgrowers' incapacity to do so. Section 3.03. The Borrower shall cause Sugar Development Corporation (a) to carry out Part I.G of the Project with due diligence and efficiency and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose, including the provision of a grant from the proceeds of the Credit of about the equivalent of three hundred thousand dollars ($300,000) and (b) to employ a team of consultants for such purpose on terms and conditions acceptable to the Association. 7 Section 3.04. (a) Without limitation on the generality of Section 3.01(a), and except as the Borrower and the Association shall otherwise agree, the Borrower shall make available to Kilombero so much of the proceeds of the Danish Loans, the Dutch Loans, and the Dutch Advance Commitment as shall be required for the financing of the foreign expenditures arising in Part II of the Project. (b) Except as the Borrower and the Association shall otherwise agree, the Borrower shall take all necessary action to ensure that, of the proceeds of the Credit, the loan under the Loan Agreement, the Danish Loans, the Dutch Loans, the Dutch Advance Commitment and the contribution of the Borrower made available to Kilomebero for the purpose of the Project, not less than 30 per cent and not more than 50 per cent of such proceeds shall be made available to Kilombero in the form of equity capital. Section 3.05. (a) Using as a basis for calculation total cane crops to be expected under normal weather conditions and sugar yields from efficient operation of Kilombero's facilities, the Borrower shall take all necessary action to ensure that prices for sugar produced by Kilombero are such that, taking one year with another, the return on all capital employed by Kilombero, whether evidenced by shares or otherwise, shall normally be about 9 per cent per annum to reflect the economic cost of that capital. (b) The Borrower shall regularly review domestic retail prices of sugar in light of such factors as production costs and import prices. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) the right of the Borrower to withdraw the proceeds of any of the loans referred to in Recitals (B), (C) and (D) to meet expenditures for Part II of the Project shall have been suspended or terminated in whole or in part; (b) any of the loans to the Borrower referred to in Recitals (B), (C) and (D) shall have become due and payable prior to its agreed maturity pursuant to the terms thereof and the Borrower shall have failed to make alternative arrangements for additional financing satisfactory to the Association within 60 days thereafter; 8 (c) Kilombero shall have failed to perform any of its covenants, agreements, or obligations under the Project Agreement; (d) an extraordinary situation shall have arisen which makes it improbable that Kilombero will be able to perform its obligations under the Project Agreement; and (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of Kilombero or for the suspension of its operations. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) the suspension of the Borrower's right to withdraw the proceeds of any of the loans referred to in Section 4.01(a) of this Agreement to meet expenditures for Part II of the Project shall occur and shall continue for a period of 120 days after notice thereof shall have been given by the Association to the Borrower; (b) the termination of the Borrower's right to withdraw the proceeds of any of the loans referred to in Section 4.01(a) to meet expenditures for Part II of the Project; (c) any event s-pecified in paragraph (b) of Section 4.01 of this Agreement shall occur; and (d) any event specified in paragraphs (c) or (e) of Section 4.0 1 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. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of Kilombero have been duly authorized or ratified by all necessary corporate and governmental action; 9 (b) the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and Kilombero, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (c) the agreements referred to in Recitals (B) and (C) and the instrument establishing the Dutch Advance Commitment referred to in Recital (D), all in form and substance satisfactory to the Bank and the Association, have been duly executed and delivered by the parties thereto and authorized or ratified by all necessary governmental and corporate action and are in full force and effect; and (d) the execution and delivery of a managing agency agreement on behalf of Kilombero concluded upon terms and conditions satisfactory to the Association. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02(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, Kilombero, and constitutes a legally binding obligation of Kilombero in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and Kilombero, respectively, and constitutes a legally binding obligation of the Borrower and Kilombero in accordance with its terms. Section 5.03. The date December 31, 1974 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Section 3.02 and Section 3.05 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty-five years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of the Borrower at the time responsible for Finance is designated as representative of the Borrower for the purposes of Section 1 1.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 10 For the Borrower: The Principal Secretary The Treasury P.O. Box 9111 Dar es Salaam United Republic of Tanzania Cable address: TREASURY Dar es Salaam 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 in the District of Columbia, United States of America, as of the day and year first above written. UNITED REPUBLIC OF TANZANIA By /s/ Paul Bomani Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / S. Shahid Husain Regional Vice President Eastern Africa 11 SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Land develop- 8,400,000 100% of foreign ment, transport, expenditures or irrigation and 85% of local other equipment expenditures (2) Civil works 4,200,000 75% (including land clearance and preparation) (3) Cost of research 1,100,000 100% of foreign and training per- expenditures or sonnel, other 75%A of local training costs, expenditures and consultant services (4) Unallocated 4,300,000 TOTAL 18,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods or services supplied from the territory, and in the currency, of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower, and for goods or services supplied from, the territory of the Borrower. 12 3. The disbursement percentages have been calculated in compliance with the policy of the Association and the Bank that no proceeds of the Credit and of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if any event occurs which shall affect the amount of any such taxes included in the cost of any item to be financed out of the proceeds of the Credit and of the Loan, the Association or the Bank may, by notice to the Borrower, correspondingly adjust the disbursement percentage then applicable to such item. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Categories I and 2 on account of expenditures incurred after May 1, 1974 in an aggregate amount not exceeding the equivalent of $700,000. In addition, except as the Borrower, the Association and the Bank shall otherwise agree, and until all amounts of the Credit shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 5. Notwithstanding the allocation of an amount of the Credit and of the Loan or the disbursement percentages set forth in the table in paragraph I above, if the Association and the Bank have, or after full withdrawal of the entire amount of the Credit, the Bank has reasonably estimated that the amount of the Credit and of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association and the Bank may, by notice to the Borrower: (i) reallocate to such Category to the extent required to meet the estimated shortfall proceeds of the Credit and of the Loan which are then allocated to another Category and which in the opinion of the Association and of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association and the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and of the Loan and the Association and the Bank may, without in any way restricting or limiting any other right, 13 power or remedy of the Association and of the Bank under the Development Credit Agreement and the Loan Agreement, by notice to the Borrower, cancel such amount of the Credit and of the Loan as in the Association's and the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit and of the Loan. 14 SCHEDULE 2 Description of the Project The Project consists of two Parts. Part I (Sugar Plantation): A. The establishment of a sugar estate of about 7,300 acres, north of the Great Ruaha River in Kilombero Valley, partly under irrigation, including clearing, preparation and first planting, construction of roads and bridges, improvement and construction of drainage, construction of an irrigation pressure pump station, and acquisition of cane transport equipment; B. The clearing and preparation for cane production (including first planting) of about 2400 acres of land north of the Great Ruaha River for cane outgrowers, and acquisition of cane transport equipment; C. The clearing and preparation for cane production (including first planting) of additional land for cane outgrowers in Msolwa south of the Great Ruaha River so as to increase cane outgrower acreage in that area to about 2200 acres, and acquisition of cane transport equipment;- D. The construction of a factory access road, staff housing, water supply and power transmission facilities, community facilities, and necessary rail links; E. On-the-job and domestic and overseas technical training of factory and field personnel of Kilombero; F. The acquisition of additional equipment and the employment of additional qualified personnel to increase crop research at Kilombero; and G. The identification of areas for, and preparation of feasibility studies on, further sugar development in Tanzania. Part II (Sugar Factory): The construction of a sugar factory having the initial capacity to process 2400 metric tons of cane per day, with ancillary equipment, located at the southwest corner of the estate referred to in Part I.A. The Project is expected to be completed by December 31, 1978.