Ghana - Second Water Supply Project : Credit 0499 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 499 GH Project Agreement (Second Water Supply Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND GHANA WATER AND SEWERAGE CORPORATION DATED JULY 26, 1974 CONFORMED COPY CREDIT NUMBER 499 GH Project Agreement (Second Water Supply Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND GHANA WATER AND SEWERAGE CORPORATION DATED JULY 26, 1974 PROJECT AGREEMENT AGREEMENT, dated July 26, 1974, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and GHANA WATER AND SEWERAGE CORPORATION (hereinafter called GWSC). WHEREAS by the Development Credit Agreement of even date herewith between Republic of Ghana (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million four hundred thousand dollars ($10,400,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that GWSC agree to undertake such obligations towards the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and GWSC, the proceeds of the credit provided for under the Development Credit Agreement will be made available to GWSC on the terms and conditions therein set forth; and WHEREAS GWSC, 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. (a) GWSC shall carry out the Project described in Schedule 2 to the Development Credit Agreement through the ATMA Organization with 4 due diligence and efficiency and in conformity with appropriate engineering, financial and public utility practices. (b) GWSC shall consult the Association about any proposed appoinitment to the positions of Manager of the ATMA Organization and of Project Manager within the ATMA Organization sufficiently in advance of any such appointment for the Association to have adequate opportunity to comment on the qualifications, experience and, in the case of the Project Manager, the proposed terms of reference of the person GWSC is considering for the position, and shall make any such appointment only after due consideration of the views expressed by the Association. Section 2.02. In order to assist it in the supervision of the carrying out of Parts A(l) and (6) and of Part B of the Project, GWSC shall employ consultants acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. In carrying out Parts A(1) and (6) and Part B of the Project, GWSC shall employ contractors acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.04. 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 and to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions of the Schedule to this Agreement. Section 2.05. (a) GWSC 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 GWSC to replace or repair such goods. (b) Except as the Association may otherwise agree, GWSC shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) GWSC shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. 5 (b) GWSC: (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 paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine 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. (c) GWSC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of GWSC and any relevant records and documents. Section 2.07. GWSC shall duly perform all its obligations under the Subsidiary Loan Agreement and under the ADB Loan Agreement and, except as the Association shall otherwise agree, GWSC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any such agreement or any provision thereof. Section 2.08. (a) GWSC shall, at the request of the Association: (i) exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement, under the Subsidiary Loan Agreement and under the ADB Loan Agreement, and other matters relating to the purposes of the Credit; and (ii) furnish to the Association all such information as the Association shall reasonably request in respect of the Project. (b) GWSC shall promptly inform the Association of any condition which interferes, or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by GWSC of its obligations under this Agreement, under the Subsidiary Loan Agreement and inder the ADB Loan Agreement. 6 ARTICLE III Management and Operations of GWSC Section 3.01. GWSC shall carry on its business and conduct its affairs under the supervision of qualified and experienced management and shall operate, maintain, renew and repair its plant, equipment and property, including the facilities included in the Project, in each case in accordance with sound financial, engineering and public utility practices. Section 3.02. Without limiting the generality of Section 3.01 hereof, GWSC shall, under arrangements satisfactory to the Association, cause the dam constructed under the Project to be periodically inspected in accordance with sound engineering practice in order to determine whether there are any deficiencies or potential deficiencies in the condition thereof, or in the quality and adequacy of maintenance or methods of operation of such dam, which may endanger the safety thereof. Section 3.03. (a) GWSC shall take all action reasonably required to maintain and renew all rights, powers, privileges and franchises, and to acquire all property, necessary or useful in the conduct of its business. (b) GWSC shall not, without the consent of the Association, sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying on of its business. Section 3.04. GWSC shall maintain a program for the systematic collection and classification of hydrological data in respect of the Densu River basin. Section 3.05. GWSC, utilizing the services of suitably qualified and experienced consultants on terms and conditions satisfactory to the Association, shall carry out a survey of the existing water supply facilities at Kpong to determine the optimum usage of such facilities, including as to the recommissioning, uprating, improvement and application thereof, and shall submit such survey to the Association not later than June 30, 1975. GWSC shall promptly thereafter take such action to implement the recommendations of such survey as may be agreed between GWSC and the Association. Section 3.06. (a) Except as the Association shall otherwise agree, GWSC shall prepare a proposed program for the extension of its water distribution system in the Accra-Tema Metropolitan Area for each of its five financial years commencing July 1, 1975, and shall submit each such program to the Association for its approval by not later than the December 31 preceding the financial year to which it relates. 7 (b) Not later than September 30, 1974, GWSC shall prepare and submit to the Association for approval the proposed training program referred to in Part D of the Project. Section 3.07. (a) Not later than September 1, 1974, GWSC shall (i) submit to the Association for comment the program for the connection and extension of its sewerage system provided for under Part C of the Project; and (ii) prepare, and submit to the Association for comment, a program, with specific water saving targets, for the reduction of water leakage from its facilities, utilizing the waste water meters and other leakage detection facilities, equipment and spares provided under Part A(9) of the Project. (b) GWSC shall take such action as shall be necessary for the implementation of the programs referred to in sub-section (a) hereof as shall be agreed between GWSC and the Association. Section 3.08. GWSC shall take all feasible measures to ensure that the execution of the Project and the operation of the facilities provided thereunder are carried out with due regard to ecological and environmental factors. Section 3.09. GWSC shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amount as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) GWSC shall maintain accounts and financial statements (balance sheets, statements of income and expenses and related statements) adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, and, on a separate basis, the operations and financial condition of the ATMA Organization, such accounts and financial statements being hereinafter respectively referred to as the GWSC Accounts and the ATMA Organization Accounts. (b) GWSC shall: (i) have the GWSC and the ATMA Organization Accounts for each fiscal year separately audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any event, in the case of the GWSC Accounts, not later than six months and, in the case of the ATMA Organization Accounts, not later than four months after the end 8 of each such year, (A) certified copies of the GWSC and the ATMA Organization Accounts for such year as so audited and (B) the report of such audits 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 GWSC and the ATMA Organization Accounts and the audits thereof as the Association shall from time to time reasonably request. Section 4.02. (a) Except as the Association shall otherwise agree, GWSC shall establish and maintain rates and other charges for its water supply and sewerage services in the Accra-Tema Metropolitan Area, in the areas referred to in Part B of the Project and in such other areas for which the ATMA Organization shall from time to time be responsible for the provision of such services, at such levels, and shall take all other action, as shall be necessary to provide revenues from such services sufficient (i) to cover the operating expenses incurred in the provision of such services and (ii) to produce an annual rate of return of not less than 7% for the financial years ending June 30, 1975 through 1977, not less than 3% for the financial years ending June 30, 1978 and 1979 and not less than 7% for the financial year ending June 30, 1980 and for each financial year thereafter on the value of the net fixed assets in operation for its water supply and sewerage services in such areas. (b) For the purposes of this Section: (i) The required annual rate of return shall be calculated by using as the denominator the average of the value of net fixed assets in operation for water supply and sewerage services in such areas at the beginning and at the end of each such year and as the numerator the operating income from such services of that year. (ii) The term "value of net fixed assets in operation" shall mean the gross value of such assets less accumulated depreciation, all determined in accordance with sound valuation, revaluation and depreciation methods, acceptable to the Association. (iii) The term "operating income" shall mean the difference between: (A) gross operating revenue; and (B) operating and administration expenses, including taxes (if any), adequate maintenance and depreciation but excluding interest and other charges on debt. 9 (c) Without limitation to subsection (a) of this Section, GWSC shall, except as the Association shall otherwise agree, establish and maintain rates and other charges for its sewerage services in the areas referred to in subsection (a) hereof at such levels, and shall take all other action, as shall be necessary to provide revenues from such services sufficient to cover, for the financial year ending June 30, 1980 and each financial year thereafter, the operating and administration expenses, including adequate maintenance and depreciation, incurred by GWSC in the provision of such services. Section 4.03. (a) Except as the Association shall otherwise agree, GWSC shall not incur any debt unless the net revenue of GWSC for its financial year next preceding the date of such incurrence or for a later 12 month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum debt service requirements on all debt (including the debt to be incurred) of GWSC in any succeeding financial year (including the financial year in which such debt is to be incurred). (b) For the purposes of this Section: (I) The term "debt" means all debt except (A) debt maturing by its terms on demand or not more than one year after its incurrence and (B) GWSC's obligation to make payments under the arrangements referred to in Section 4.02 of the Development Credit Agreement. (ii) Debt shall be deemed to be incurred on the date of execution and delivery of the contract, agreement or other instrument providing for such debt. (iii) The term "net revenue" shall mean gross operating revenue from the sale of water and provision of sewerage and other services, adjusted to take account of rates and charges in effect at the time of incurrence of debt even though they were not in effect during the financial year or 12 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. (iv) The term "debt service requirements" shall mean the aggregate amount of principal repayments, (including sinking fund payments, if any), interest and other charges on debt. 10 (v) Whenever 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 GWSC, 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, in consultation with the Borrower. Section 4.04. The Association and GWSC agree that, as from the date hereof, Sections 2.09, 2.10 and 2.11 of the First Project Agreement be and they are hereby deleted and that the provisions of Sections 4.02 and 4.03 hereof shall be substituted therefor. Section 4.05. By not later than December 31, 1974, GWSC shall amend the arrangements with the Borrower referred to in Section 4.02 of the Development Credit Agreement in the manner therein provided. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of GWSC 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 (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 GWSC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. 11 ARTICLE VI Miscellaneous Provisions Section 6.01. 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 GWSC: Managing Director Ghana Water and Sewerage Corporation P.O. Box 194 Accra, Ghana Cable address: DIRWAT Accra Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of GWSC may be taken or executed by the Managing Director of GWSC or such other person or persons as GWSC shall designate in writing. 12 Section 6.03. GWSC 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 GWSC, take any action or execute any documents required or permitted to be taken or executed by GWSC pursuant to any of the provisions of this Agreement. Section 6.04. 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 in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ R. Chaufournier Regional Vice President Western Africa GHANA WATER AND SEWERAGE CORPORATION By /s/ Harry Reginald Amonoo Authorized Representathe 13 SCHEDULE Procurement A. General Procedures 1. Except as provided in Part A.2 hereof, contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. The provisions of paragraph I above shall not apply to negotiated purchase of spares or standardized equipment for Parts A(6), A(8) and A(9) of the Project. B. Evaluation and Comparison of Bids for Goods; Preference fbr Domestic Manufactures 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Ghana may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: 'bids offering goods manufactured in Ghana if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in Ghana equal to at least 20% of the ex-factory bid price of such goods. 14 (2) Group B: all other bids offering goods manufactured in Ghana. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. The lowest evaluated bid of each group shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the lowest evaluated bid from group C shall be selected. C. Review of Procurement Decisions by Association With respect to each contract to be financed out of the proceeds of the Credit, the Borrower 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 from the Credit Account in respect of 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 was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination.