Tanzania - Kidatu Hydroelectric Project-Second Stage : Loan 1306 - Joint Financing Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1306 T-TA JOINT FINANCING AGREE4ENT (Kidatu Hydroelectric Project - Second Stage) between UNITED REPUBLIC OF TANZANIA and KINGDOM OF SWEDEN and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TANZANIA ELECTRIC SUPPLY COMPANY LIMITED Dated August 12, 1976 JOINT FINANCING AGREEMENT AGREEMENT, dated August 12, 1976, between the UNITED REPUB- LIC OF TANZANIA (hereinafter called the Borrower), the KINGDOM OF SWEDEN (hereinafter called Sweden), INTERNATIONAL BANK FOR RECON- STRUCTION AND DEVELOPMENT (hereinafter called the Bank) and TAN- ZANIA ELECTRIC SUPPLY COMPANY LIMITED, a company organized and existing under the laws of Tanzania (hereinafter called TANESCO). WHEREAS by a development co-operation agreement with the Bor- rower of even date herewith (hereinafter called the Swedish Agree- ment), Sweden has agreed to grant to the Borrower eighty million Swedish Kronor (SKr80,O0O,000) (hereinafter called the Swedish Grant), to be made available by the Borrower to TANESCO, for the purpose of assisting in the financing of the Project described in Schedule 1 to this Agreement; WHEREAS by an agreement with the Borrower of even date here- with (hereinafter called the Bank Agreement), the Bank has agreed to make to the Borrower a loan in a principal amount In various currencies equivalent to thirty million dollars ($30,000,000) (hereinafter called the Bank Loan) for the same purpose; WHEREAS the Borrower has requested from Kreditanstalt fur Wiederaufbau a loan in the principal amount of sixty million German Marks (DM60,000,000) (hereinafter called the KfW Loan), for the same purpose; -2- WHEREAS the Project will be carried out by TANESCO with the Borrower's assistance and, as part of such assistance, the Bor- rower will make available to TANESCO the proceeds of the Swedish Grant, the KfW Loan, and the Bank Loan; and WHEREAS the parties hereto have agreed on the allocation, withdrawal and use of the proceeds of the Swedish Grant and the Bank Loan and the execution of the Project to be financed thereby, as well as on other matters, as hereinafter provided; NOW THEREFORE the parties hereto hereby agree as follows: -3- ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the fol- lowing terms wherever used in this Agreement shall have the follow- ing meanings: (a) The terms "Swedish Grant Account" and "Bank Loan Account" mean the respective accounts established under the Swedish Agree- ment and the Bank Agreement. (b) The term "subsidiary" means any company of which a major- ity of the outstanding voting stock shall be owned, or which shall be effectiveiy controlled, by TANESCO or by any one or more subsid- iaries of TANESCO or by TANESCO and one or more of its subsidiar- ies. -4- ARTICLE II Allocation and Withdrawals of Proceeds of Swedish Grant and Bank. Loan Section 2.01. Subject to the rights of suspension and cancel- lation set forth in the Swedish Agreement and the Bank Agreement and subject to the provisions of Section 2.02 of the Bank Agree- ment, the amount of the Swedish Grant and the Bank Loan may be withdrawn from the Swedish Grant Account and the Bank Loan Account, respectively, in accordance with the provisions of this Agreement and with the allocation of the proceeds of the Swedish Grant and Bank Loan set forth in Schedule 2 to this Agreement, as such allo- cation shall be modified from time to time pursuant to the provi- sions of such Schedule or by further agreement between Sweden, the Bank and TANESCO. Section 2.02. (a) TANESCO shall be entitled to withdraw on be- half of the Borrower from the Swedish Grant Account and from the Bank Loan Account such amounts as shall have been paid (or, if the Bank shall so agree, as shall be required to meet payments to be made) in respect of the reasonable cost of goods and services re- quired for the Project and to be financed, respectively, from the Swedish Grant and the Bank Loan as well as in respect of interest and other charges on the Bank Loan. (b) Except with respect to Categories (3) and (4) of Sched- ule 2 to this Agreement, all withdrawal applications shall be ap- portioned by the Bank between the Swedish Grant and the Bank Loan, -5. as nearly as practicable in the circumstances and taking into ac- count the limitations provided for in Article 1, Section 4 of the Swedish Agreement, in the ratio of 7:10 or such other ratio as shall be agreed between the Borrower, Sweden and the Bank. (c) On or before each of the semi-annual interest payment dates specified in Section 2.07 of the Bank Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself such amounts as the Borrower shall be required to pay to the Bank on such date pursuant to Section 2.06 of the Bank Agreement, on account of interest and other charges on the Bank Loan accrued and payable on or before the date set forth, and up to the amount allocated therefor in Schedule 2 to this Agreement, as such Schedule may be amended from time to time. Section 2.03. (a) When TANESCO shall desire to withdraw any amount of the Swedish Grant or the Bank Loan either separately or simultaneously, TANESCO shall deliver to the Bank a written appli- cation in such form and containing such statements and agreements as the Bank shall reasonably request. Applications for withdrawal, with the necessary documentation, as hereinafter provided, shall, except as the Bank and TANESCO shall otherwise agree, be made promptly in relation to expenditures for the Project. (b) TANESCO shall furnish to the Bank such documents and other evidence in support of each withdrawal application as the Bank shall reasonably request, whether before or after the Bank shall have approved any withdrawal requested in the application. -6- (c) Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank that TANESCO is entitled to withdraw from the Swedish Grant Account or the Bank Loan Account or both, either separately or simultaneously, the amount applied for and that such amount is to be used only for the purposes specified in this Agreement. Section 2.04. Each such application by TANESCO for withdrawal, except those under Category (5) of paragraph 1 of Schedule 2 to this Agreement, shall be deemed to be a request to withdraw funds on behalf of the Borrower from the Swedish Grant Account and from the Bank Loan Account. Section 2.05. (a) When the Bank shall have approved an appli- cation by TANESCO for withdrawal, the Bank shall: (i) pay the amount, if any, which TANESCO is entitled to withdraw from the Bank Loan Account to or on the order of TANESCO in accordance with the pro- visions of the Bank Agreement; and (ii) promptly notify the Sveriges Riksbank, acting as agent for Sweden, in the manner and to the ex- tent set forth in this Agreement, that it has re- ceived an application for withdrawal from either the Swedish Grant Account or the Bank Loan Ac- count separately or from the Swedish Grant Account and the Bank Loan Account simultaneously in the -5- as nearly as practicable in the circumstances and taking into ac- count the limitations provided for in Article 1, Section 4 of the Swedish Agreement, in the ratio of 7:10 or such other ratio as shall be agreed between the Borrower, Sweden and the Bank. (c) On or before each of the semi-annual interest payment dates specified in Section 2.07 of the Bank Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself such amounts as the Borrower shall be required to pay to the Bank on such date pursuant to Section 2.06 of the Bank Agreement, on account of interest and other charges on the Bank Loan accrued and payable on or before the date set forth, and up to the amount allocated therefor in Schedule 2 to this Agreement, as such Schedule may be amended from time to time. Section 2.03. (a) When TANESCO shall desire to withdraw any amount of the Swedish Grant or the Bank Loan either separately or simultaneously, TANESCO shall deliver to the Bank a written appli- cation in such form and containing such statements and agreements as the Bank shall reasonably request. Applications for withdrawal, with the necessary documentation, as hereinafter provided, shall, except as the Bank and TANESCO shall otherwise agree, be made promptly in relation to expenditures for the Project. (b) TANESCO shall furnish to the Bank such documents and other evidence in support of each withdrawal application as the Bank shall reasonably request, whether before or after the Bank shall have approved any withdrawal requested in the application. -6- (c) Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank that TANESCO is entitled to withdraw from the Swedish Grant Account or the Bank Loan Account or both, either separately or simultaneously, the amount applied for and that such amount is to be used only for the purposes specified in this Agreement. Section 2.04. Each such application by TANESCO for withdrawal, except those under Category (5) of paragraph 1 of Schedule 2 to this Agreement, shall be deemed to be a request to withdraw funds on behalf of the Borrower from the Swedish Grant Account and from the Bank Loan Account. Section 2.05. (a) When the Bank shall have approved an appli- cation by TANESCO for withdrawal, the Bank shall: (i) pay the amount, if any, which TANESCO is entitled to withdraw from the Bank Loan Account to or on the order of TANESCO in accordance with the pro- visions of the Bank Agreement; and (ii) promptly notify the Sveriges Riksbank, acting as agent for Sweden, in the manner and to the ex- tent set forth in this Agreement, that it has re- ceived an application for withdrawal from either the Swedish Grant Account or the Bank Loan Ac- count separately or from the Swedish Grant Account and the Bank Loan Account simultaneously in the -5- as nearly as practicable in the circumstances and taking into ac- count the limitations provided for in Article 1, Section 4 of the Swedish Agreement, in the ratio of 7:10 or such other ratio as shall be agreed between the Borrower, Sweden and the Bank. (c) On or before each of the semi-annual interest payment dates specified in Section 2.07 of the Bank Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself such amounts as the Borrower shall be required to pay to the Bank on such date pursuant to Section 2.06 of the Bank Agreement, on account of interest and other charges on the Bank Loan accrued and payable on or before the date set forth, and up to the amount allocated therefor in Schedule 2 to this Agreement, as such Schedule may be amended from time to time. Section 2.03. (a) When TMSCO shall desire to withdraw any amount of the Swedish Grant or the Bank Loan either separately or simultaneously, TANESCO shall deliver to the Bank a written appli- cation in such form and containing such statements and agreements as the Bank shall reasonably request. Applications for withdrawal, with the necessary documentation, as hereinafter provided, shall, except as the Bank and TANESCO shall otherwise agree, be made promptly in relation to expenditures for the Project. (b) TANESCO shall furnish to the Bank such documents and other evidence in support of each withdrawal application as the Bank shall reasonably request, whether before or after the Bank shall have approved any withdrawal requested in the application. -6- (c) Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank that TANESCO is entitled to withdraw from the Swedish Grant Account or the Bank Loan Account or both, either separately or simultaneously, the amount applied for and that such amount is to be used only for the purposes specified in this Agreement. Section 2.04. Each such application by TANESCO for withdrawal, except those under Category (5) of paragraph 1 of Schedule 2 to this Agreement, shall be deemed to be a request to withdraw funds on behalf of the Borrower from the Swedish Grant Account and from the Bank Loan Account. Section 2.05. (a) When the Bank shall have approved an appli- cation by TANESCO for withdrawal, the Bank shall: (i) pay the amount, if any, which TANESCO is entitled to withdraw from the Bank Loan Account to or on the order of TANESCO in accordance with the pro- visions of the Bank Agreement; and (ii) promptly notify the Sveriges Riksbank, acting as agent for Sweden, in the manner and to the ex- tent set forth in this Agreement, that it has re- ceived an application for withdrawal from either the Swedish Grant Account or the Bank Loan Ac- count separately or from the Swedish Grant Account and the Bank Loan Account simultaneously in the -7- aggregate amount specified in such notice, that it has approved payment of the portion, if any, to be withdrawn from the Bank Loan Account in the amount set forth in such notice, and that the portion, if any, to be withdrawn from the Swedish Grant Account in the amount set forth in such notice is eligible for payment by the Sveriges Riksbank. (b) Upon receipt of any such notice of the Bank providing for a withdrawal from the Swedish Grant Account, the Sveriges Riksbank shall, subject to the rights of suspension and cancella- tion of the Swedish Grant set forth in the Swedish Grant Agreement, pay the amount to be so withdrawn from the Swedish Grant Account in the currency and to the payee stated in the notice. Section 2.06. If at any time the amount of either the Swedish Grant or of the Bank Loan shall have been fully withdrawn or can- celled, applications by TANESCO for further withdrawals shall be deemed to be requests for withdrawal of the full amount applied for from the Bank Loan Account or the Swedish Grant Account only and the provisions of this Article II shall continue to apply mutatis mutandi until the full amount credited to such Account shall have been withdrawn or cancelled. Section 2.07. Upon TANESCO's request and upon such terms as shall be agreed between the Bank and TANESCO, the Bank may enter into special commitments to pay amounts to TANESCO or others in -8- respect of the cost of goods and services required for the Project. Any such special commitment by the Bank shall, once it shall have been notified to Sweden and the Sveriges Riksbank, constitute an obligation on the part of Sweden to pay, notwithstanding any sub- sequent suspension or cancellation of the Swedish Grant and in conformity with the foregoing Sections 2.05 and 2.06, such portion of the total amount to be disbursed in fulfillment of such special commitment as agreed pursuant to Section 2.02 of this Agreement. Section 2.08. If for purposes of this Agreement any proceeds of the Swedish Grant are to be withdrawn in a currency other than Swedish Kronor, the Sveriges Riksbank shall remit the requested foreign currency amount and shall debit the Swedish Grant Account with the Swedish Kronor equivalent of such amount calculated on the basis of the current market selling rate or, if no such rate applies, such rate as shall be reasonably determined by the Sver- iges Riksbank in consultation with the Bank of Tanzania. - 9 - ARTICLE III Execution of the Project; Use of Proceeds of Swedish Grant and Bank Loan Section 3.01. TANESCO shall carry out the Project with due diligence and efficiency and in conformity with sound engineering, public utility and financial practices. Section 3.02. (a) TANESCO shall apply the proceeds of the Swedish Grant and the Bank Loan to expenditures on the Project to be financed with the proceeds of the Swedish Grant and the Bank Loan in accordance with the provisions of this Agreement. (b) Except as Sweden, the Bank and TANESCO shall otherwise agree, (i) the goods and services (other than consultants' serv- ices) required for the Project and to be financed out of the pro- ceeds of either the Swedish Grant or the Bank Loan or both shall be procured in accordance with the provisions set forth or referred to in Schedule 3 to this Agreement, and (ii) contracts for the procurement of such goods and services shall be subject (except as otherwise provided in such Schedule) to the prior approval of the Bank. (c) TANESCO undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Swedish Grant and the Bank Loan against marine, transit and other hazards incident to the acquisition, transpor- tation and delivery thereof to the place of use or installation - 10 - and for such insurance any indemnity shall be payable in a cur- rency freely usable by TANESCO to replace or repair such goods. (d) Except as the Bank shall otherwise agree, TANESCO shall cause all goods and services financed out of the proceeds of the Swedish Grant and the Bank Loan to be used exclusively in the car- rying out of the Project. Section 3.03. (a) TANESCO shall furnish to the Bank, promptly upon their preparation, the plans and specifications for the Proj- ect and any material modifications or amplifications thereof, in such detail as the Bank shall reasonably request. (b) TANESCO shall: (i) maintain records adequate to record the progress and cost of the Project and to identify the goods and services financed out of the proceeds of either the Swedish Grant or the Bank Loan or both, and to disclose the use thereof in the Project; (ii) enable representatives of Sweden and the Bank to inspect the Project, the goods financed out of the proceeds of the Swedish Grant and the Bank Loan and any relevant records and documents; and (iii) furnish to Sweden and the Bank all reports of the consultants employed for purposes of the Project, and all such other information as Sweden and the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Swedish Grant and the Bank Loan and the goods and services financed out of such proceeds. Section 3.04. TANESCO shall prepare and furnish to the Bank not later than by June 30, 1976 or such later date as the Bank shall agree, detailed plans to carry out Part D of the Project, - 11 - and shall afford the Bank a reasonable opportunity to comment thereon before putting them into effect. Section 3.05. TANESCO shall employ the following consultants and experts acceptable to the Bank upon terms and conditions sat- isfactory to the Bank: (a) consultants to assist TANESCO in carrying out Parts A, B and C of the Project; 86 (b) a construction supervision expert to work full-time in TANESCO's construction supervision unit at the site of the dam included in Part B of the Project; and a project management ex- pert to assist the head of TANESCO's Planning Division; (c) an advisor on contractors' claims; and (d) a panel of experts to be entrusted with the critical re- view of the detailed engineering design of, and the progress of construction of, the facilities included in Parts A, B and C of the Project, as such review shall from time to time be required by the Borrower, the Bank or TANESCO; provided that the experts referred to in paragraph (b) shall be employed by August 1, 1976 or such later date as the Bank and TANESCO shall agree. - 12 - ARTICLE IV Management and Operation of TANESCO Section 4.01. (a) TANESCO shall at all times manage its af- fairs, plan the development of its properties and facilities, and maintain its financial position, all in accordance with sound en- gineering, public utility, financial and business principles and practices and under the supervision of experienced and competent management; and shall cause its plant, equipment, properties and facilities to be maintained and all necessary renewals and repairs thereto to be made, all in accordance with sound engineering and public utility practices. (b) The Borrower and the Bank shall review from time to time the qualifications and experience that will be regarded as appro- priate by the Borrower for appointments to the position of general manager of TANESCO. (c) TANESCO shall continue to appoint, retain or promote sufficient qualified and experienced staff to enable TANESCO to conduct its operations efficiently. Section 4.02. TANESCO shall take out and maintain with the National Insurance Corporation of Tanzania or make other provisions satisfactory to the Bank for insurance against such risks and in such amounts as shall be consistent with sound public utility prac- tice. -13 - Section 4.03. TANESCO shall not, without the consent of the Bank, sell or otherwise dispose of any of its property or assets which shall be required for the efficient carrying on of its busi- ness and undertakings, including the carrying out of the Project. Section 4.04. TANESCO shall at all times maintain its corpo- rate existence and right to carry on its operations, and take all steps necessary to acquire, maintain and renew all rights, powers, privileges, licenses, concessions and franchises which are neces- sary or useful in the conduct of its business. - 14 - ARTICLE V Covenants of the Borrower and TANESCO Section 5.01. Whenever there is reasonable cause to believe that the funds available to TANESCO will be inadequate to meet the estimated expenditures required for the carrying out of the Proj- ect, the Borrower, Sweden and the Bank shall exchange view thereon, and the Borrower shall make arrangements satigiactory to Sweden and the Bank promptly to provide TANESCO or cause TANESCO to be provided with such funds as are needed co meet such expendi- tures. Section 5.02. The Borrower shall discuss with Sweden and the Bank the recommendations of the study of the ecological impact of the construction of the dam included in Part B of the Project and shall take all appropriate measures based on such recommendations and discussion with the Bank. Section 5.03. The Borrower shall not permit substantial ab- straction of water from the Great Ruaha River or its tributaries upstream of Kidatu that would reduce the potential output of the Kidatu generating station. Section 5.04. TANESCO may establish a subsidiary or subsidiar- ies only after prior consultation with the Bank. Section 5.05. TANESCO and all its subsidiaries shall: (i) have their accounts and financial statements (balance sheets, - 15 - statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year, (A) certified copies of their financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (ii) furnish to the Bank such other information concerning the accounts and financial statements of TANESCO and its subsidiaries and the audit thereof as the Bank shall from time to time reasonably request. Section 5.06. Except as the Bank shall otherwise agree, TANESCO and all its subsidiaries shall not incur any debt for purposes other than the Project unless the consolidated net revenue of TANESCO and all its subsidiaries for the fiscal year immediately preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever period shows the greater consolidated net revenue, shall be at least 1.5 times the maximum consolidated debt service requirements for any succeeding fiscal year on all the debt of TANESCO and all its subsidiaries including the debt to be incurred. For the purposes of this Section: (a) the term "debt" means all debt, including debt assumed or guaranteed by TANESCO or a subsidiary, except debt incurred in - 16 - the ordinary course of business and maturing by its terms on de- mand or less than one year after its incurrence; (b) the term "incur" with reference to any debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred on the date on which a contract or loan agreement or guarantee agreement is executed; (c) the term "net revenue" means gross operating revenue of TANESCO, adjusted to take account of tariffs in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve-month period to which such revenue relates, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but be- fore provision for depreciation and interest and other charges on debt; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever 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 TANESCO, at the time such valua- tion is made, for the purposes of servicing such debt, or, if such other currency is not obtainable, at the rate of exchange that will be reasonably determined by the Bank in consultation with the Bank of Tanzania. - 19 - ARTICLE VI Consultation; Information and Inspection Section 6.01. The Borrower and TANESCO shall cooperate fully with Sweden and the Bank to assure that the purposes of the Swedish Grant and the Bank Loan will be accomplished. To that end, the Borrower, Sweden, the Bank and TANESCO shall from time to time, at the request of any party, exchange views through their representa- tives with regard to the performance of their respective obliga- tions under this Agreement as well as the administration, opera- tions and financial condition of TANESCO and other matters relat- ing to the purposes of the Swedish Grant and the Bank Loan. Section 6.02. The Borrower, Sweden, the Bank and TANESCO shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Swedish Grant and the Bank Loan, or the perfor- mance by any party of its obligations under this Agreement, and shall exchange views thereon with all the parties to this Agree- ment. Section 6.03. TANESCO shall enable representatives of Sweden and the Bank to inspect all plants, sites, works, properties and equipment of TANESCO and any relevant records and documents. - 20 - ARTICLE VII Miscellaneous; Amendment of Prior Agreement Section 7.01. Any notice or request required or permitted to be given or made under this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall have been delivered by hand or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at such party's address specified below or at such other address as such party shall have designated by notice to the party giving such notice or making such request: For the Borrower: The Principal Secretary The Ministry of Finance and Planning P.O. Box 9111 Dar es Salaam Tanzania Cable address: TREASURY Dar es Salaam For Sweden: (a) insofar as Sveriges Riksbank acts as agent for Sweden for purposes of this Agreement: Sveriges Riksbank Box 2119 Stockholm 2 Sweden - 17 - Section 5.07. Except as the Bank shall otherwise agree, the Borrower shall take all measures necessary or useful on its part to enable TANESCO to obtain the annual rate of return provided for in Section 5.09 of this Agreement. Section 5.08. Except as the Bank shall otherwise agree, TANESCO shall value, and every two years starting in 1976 revalue, its assets in accordance with sound and consistently maintained methods of valuation acceptable to the Bank. Section 5.09. (a) Except as the Borrower and the Bank shall otherwise agree, TANESCO and all its subsidiaries shall take all necessary steps within their power to establish and maintain tar- iffs for electric power services and such other actions as shall be required to provide in 1977 and thereafter consolidated revenues sufficient to produce an annual rate of return of not less than 7% on the value of the consolidated net fixed assets in operation. (b) For the purposes of this Section: (i) the annual rate of return shall be calculated by relating the consolidated net operating in- come for the year in question to the average of the value of the consolidated net fixed as- sets of TANESCO and all its subsidiaries in operation at the beginning and at the end of that year; (ii) the term "value of the consolidated net fixed assets in operation" shall mean the gross book - 18 - value of such assets, less the amount of accu- mulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Bank and the provision of Section 5.08 of this Agreement; (iii) the term "consolidated net operating income" shall mean the difference between: (A) consolidated gross operating revenue; and (B) the consolidated operating, maintenance and administration expenses, taxes (if any), and depreciation computed in accordance with the rates specified in the license presently held by TANESCO but excluding interest and other charges on debt. Section 5.10. No later than December 1, 1976, or such later date as the Bank shall agree, the Borrower and TANESCO shall (i) review with the Bank the report on the on-going study on the structure of TANESCO's tariffs for its electric power services, and (ii) implement such recommendations contained in the final report on such study as the Borrower, the Bank and TANESCO shall agree. Section 5.11. Except as the Bank shall otherwise agree, TANESCO shall not declare a dividend on its Ordinary Shares in excess of 6-2/3% of their nominal value per annum. - 21 - Cable address: Riksbanken Stockholm (b) for all other purposes: Swedish International Development Authority 10525 Stockholm 1 Sweden Cable address: SIDA Stockholm For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For TANESCO: Tanzania Electric Supply Company Limited P. 0. Box 9024 Dar as Salaam Tanzania Cable address: TANESCO Dar es Salaam - 22 - Section 7.02. The Borrower and TANESCO shall furnish to the Bank sufficient evidence of the authority of the person or persons who will (i) sign the applications provided for under Article II of this Agreement, and (ii) take any other action or execute any other document on behalf of the Borrower or TANESCO, respectively, which are required or permitted to be taken or executed by the Borrower or TANESCO under this Agreement; and shall also furnish to the Bank the authenticated specimen signature of each such per- son. Section 7.03. This Agreement may be executed in several coun- terparts, each of which shall be an original. All such counterparts shall collectively be but one instrument. Section 7.04. (a) Except as shall be otherwise agreed by the parties hereto, this Agreement shall become effective on the ear- liest date upon which the Swedish Agreement and the Bank Agreement shall both be in effect. (b) If the Bank Loan Agreement terminates for failure to be- come effective in accordance with its terms, this Agreement shall forthwith terminate and the Bank shall promptly notify the other parties of such termination. Section 7.05. This Agreement and all obligations of the par- ties thereto thereunder shall terminate on the date upon which both the Swedish Agreement and the Bank Agreement shall have ter- minated. - 23 - Section 7.06. Upon termination of the Swedish Agreement or the Bank Agreement only, Sweden or the Bank, as the case may be, shall promptly notify the other parties hereto and, upon such notification, this Agreement shall continue to remain in force and effect only for the purpose of implementation of the Bank Agreement or the Swedish Agreement and of orderly settlement of matters of mutual interest to the parties hereunder, subject to such modifications of this Agreement as shall be agreed among the parties thereto or as shall be reasonably requested by Sweden or the Bank for such purposes. Section 7.07. Unless the Borrower, the Bank and TANESCO shall be otherwise notified by Sweden, the Bank shall, subject to the provisions of Section 6.02, represent Sweden in all matters relat- ing to the implementation of, including amendments to, this Agree- ment. Section 7.08. Section 4.01(b) of the Joint Financing Agree- ment (Kidatu Hydroelectric Project) between the Borrower, Sweden, the Bank and TANESCO, dated December 14, 1970, as amended on July 12, 1974, is hereby deleted, and Section 4.01(c) thereof will hereafter become Section 4.01(b). Section 7.09. Sections 5.06 and 5.07 of the Joint Financing Agreement (Kidatu Hydroelectric Project) identified in the imme- diately preceding Section hereof are amended to read as Sections 5.06 and 5.09, respectively, of this Agreement. - 24 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. UNITED REPUBLIC OF TANZANIA By /s/ Hamza Aziz Authorized Representative KINGDOM OF SWEDEN By /s/ U. Dinkelspiel Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Michael H. Wiehen Acting Regional Vice President Eastern Africa TANZANIA ELECTRIC SUPPLY COMPANY LIMITED By /s/ Hamza Aziz Authorized Representative - 25 - SCHEDULE 1 Description of the Project The Project consists of the following parts: Part A: Extension of the existing hydroelectric power station at Kidatu by the installation of two additional power generating units of 50-MW each. Part B: Construction of a concrete dam at Mtera (including related mechanical and alectrical works) on the Great Ruaha River designed to form a water reservoir ade- quate for seasonal regulations. Part C: Installation of a 90 MVA transformer station at Morogoro. Part D: A training program for TANESCO's middle level man- agement and professional staff. The Project is expected to be completed by July 31, 1980. - 26 - SCHEDULE 2 Allocation of Proceeds of Swedish Grant and Bank Loan 1. The table below sets forth the categories of goods and serv- ices to be financed out of the proceeds of the Swedish Grant and the Bank Loan, the allocation of amounts of the Swedish Grant and the Bank Loan to each category and the percentage of expenditures for items so to be financed in each Category: Bank Loan (expressed in Swedish Grant % of U.S. Dollar (expressed in Expenditures Category Equivalent) Swedish Kronor) to be Financed (1) Mechani- 3,900,000 11,600,000 100% of foreign cal and expenditures electri- cal equip- ment for Part B of the Project (2) Civil 15,400,000 47,100,000 75% works un- der Part B of the Project (3) Staff 200,000 0 100% of foreign training expenditures under Part D of the Project - 27 - Bank Loan (expressed in Swedish Grant % of U.S. Dollar (expressed in Expenditures Category Equivalent) Swedish Kronor) to be Financed (4) Services 3,200,000 9,500,000 100% of foreign of consul- expenditures tants and experts employed pursuant to this Agreement (5) Interest 3,500,000 0 and other charges on the Bank Loan accrued on or before July 14, 1980 (6) Unallocated 3,800,000 11,800,000 TOTAL 30,000,000 80,000,000 - 28 - 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures in the currency of any country other than the Borrower for goods or services supplied from the terri- tory of any country other than the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no disbursements shall be made on account of payments for taxes levied by, or in the terri- tory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Swedish Grant or the Bank Loan decreases or increases, the Bank may, by notice to TANESCO, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category (4) on account of expenditures incurred after December 1, 1975 in an aggregate amount not exceeding the equiva- lent of $1,100,000. 5. Notwithstanding the allocation of an amount of the Swedish Grant and the Bank Loan or the disbursement percentages set forth in the table in parag7aph 1 above, if the Bank shall have reason- ably estimated that the amount of the Swedish Grant and the Bank Loan then allocated to any Category will be insufficient to finance - 29 - the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Cate- gory, to the extent required to meet the estimated shortfall, pro- ceeds of the Swedish Grant and the Bank Loan which are then allo- cated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such realloca- tion cannot fully meet the estimated shortfall, reduce the dis- bursement 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 Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the pro- cedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Swedish Grant and the Bank Loan and the Bank may, without in any way re- stricting or limiting any other right, power or remedy of Sweden under the Swedish Agreement or of the Bank under the Bank Agree- ment, by notice to the Borrower, cancel such amount of the Loan as, in 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 Swedish Grant and the Bank Loan. - 30 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. The goods and civil works shall be procured under contracts to be awarded in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. (i) Bidders for any works included in Part B of the Project and estimated to cost more than the equivalent of $120,000 shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines; (ii) advertisements shall be also made as described in paragraph 3 of Section 1.2 of the Guidelines; (iii) not less than three months shall be allowed between advertising and submis- sion of bids. B. Review of Procurement Decisions by Bank 1. Review of prequalification. The Borrower shall, before quali- fication is invited, inform the Bank in detail of the procedure to be followed and shall introduce such modifications in said pro- cedure as the Bank shall reasonably request. The list of prequali- fied bidders, together with a statement of their qualifications and, where applicable, of their eligibility for domestic prefer- ence under Part D.1 above and of the reasons for the exclusion of - 31 - any applicant for prequalification and for such eligibility shall be furnished by the Borrower to the Bank for its comments before the applicants are notified, and the Borrower shall make such ad- ditions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $120,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments or procedures as the Bank shall reasonably request. Any fur- ther modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants employed for this purpose, on the evaluation and comparison of the bids received, together with the recommendations for award of the said - 32 - consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan 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 Bank shall reasonably request. The Bank 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. - 31 - any applicant for prequalification and for such eligibility shall be furnished by the Borrower to the Bank for its comments before the applicants are notified, and the Borrower shall make such ad- ditions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $120,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments or procedures as the Bank shall reasonably request. Any fur- ther modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants employed for this purpose, on the evaluation and comparison of the bids received, together with the recommendations for award of the said - 32 - consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan 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 Bank shall reasonably request. The Bank 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. - 31 - any applicant for prequalification and for such eligibility shall be furnished by the Borrower to the Bank for its comments before the applicants are notified, and the Borrower shall make such ad- ditions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $120,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments or procedures as the Bank shall reasonably request. Any fur- ther modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants employed for this purpose, on the evaluation and comparison of the bids received, together with the recommendations for award of the said - 32 - consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such letermination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan 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 Bank shall reasonably request. The Bank 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. - 33 - C. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods except those to be procured in accordance with local procedures: (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 Tanzania may be granted a margin of preference in accordance with, and subject to, the following pro- visions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed 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 Tanzania if the bidder shall have established - 34 - to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Tanzania equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manu- factured in Tanzania. (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 evalu- ated bid of each group. Such lowest evaluated bids 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 of- fered in each group C bid, for the purpose of this further compar- ison 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 al - 35 - 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 bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. D. Evaluation and Comparison of Bids for Civil Works; Preference for Domestic Contractors With respect to any contract for civil works included under Category (2) of the table set forth in Schedule 2 to this Agree- ment, the Borrower may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the fol- lowing provisions: (a) Contractors shall be required to prequalify as provided in Part A.2(i) of this Schedule and applicants for qualification applying also for such preference shall be asked to provide, as part of the information for qualification, such information, in- cluding details of ownership, as shall be required to determine whether, according to the classification established by the Bor- rower and accepted by the Bank, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. (b) After bids have been received and reviewed by the Bor- rower, responsive bids will be classified into the following groups: - 36 - (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal tc- 7-1/2% of the bid amount shall be added to bids received under group (ii) above.