Morocco - Sidi Cheho - Al Massira Project : Loan 1299 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1299 MOR PROJECT AGREEMENT (Sidi Cheho - Al Massira Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and OFFICE NATIONAL DE L'ELECTRICITE Dated July 2, 1976 PROJECT AGPEEMENT AGFEEMENT, dated July 2, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and OFFICE NATIONAL DE L'ELECTRICITE (hereinafter called ONE). WHEREAS (A) by the Loan Agreement of even date herewith be- tween the Kingdom of Morocco (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to forty-nine million dollars ($49,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that ONE agree to under- take such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement between the Borrower and ONE, a portion of the nroceeds of the loan provided for under the Loan Agreement will be made available to ONE on the terms and con- ditions therein set forth; and WHEREAS ONE, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. -3- ARTICLE II Execution of the Project Section 2.01. ONE shall carry out Parts B, C and D of the Project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate admin- istrative, financial and engineering practices. Section 2.02. In order to assist ONE in supervising the con- struction included in Part B of the Project and in carrying out Part D thereof, ONE shall employ engineering consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods or for civil works to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. Section 2.04. (a) ONE undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan 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 us- able by ONE to replace or repair such goods. (b) Except as the Bank may otherwise agree, ONE shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the Proj- ect. Section 2.05. (a) ONE shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, con- tract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions there- to, in such detail as the Bank shall reasonably request. (b) ONE: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to iden- tify the goods and services financed out of the proceeds of the Loan relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragranh (c) of this Section, enable the Bank'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 Bank all such information as the Bank shall reasonably request con- cerning the Project, the expenditure of the proceeds of the Loan so relent to it and the goods and services financed out of such proceeds. (c) ONE shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of ONE and any relevant records and documents. Section 2.06. ONE shall duly perform all its obligations un- der the Subsidiary Loan Agreement. Except as the Bank shall other- wise agree, ONE shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) ONE shall, at the request of the Bank, ex- change views with the Bank with regard to the progress of the Proj- ect, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, the administration, opera- tions and financial condition of ONE, and other matters relating to the purposes of the Loan. (b) ONE shall promrtly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the nurposes of the Loan, or the performance by ONE of its obligations under this Agreement and under the Subsidiary Loan Agreement. -6- ARTICLE III Management and Operations of ONE Section 3.01. ONE shall conduct its operations at all times according to appropriate administrative, financial, technical and public utility practices under qualified and experienced manage- ment assisted by adequate staff. Section 3.02. ONE shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be con- sistent with appropriate practice. Section 3.03. ONE shall exchange views with the Bank on proposed measures to improve its accounting procedures and reorgan- ize its financial services and shall implement the final proposals by June 30, 1977. 7 ARTICLE IV Financial Covenants Section 4.01. ONE shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. ONE shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate 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 seven months after the end of each such year, (A) certified copies of its 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 (iii) furnish to the Bank such other information concerning the accounts and fi- nancial statements of ONE and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. Except as the Bank shall otherwise agree: (a) ONE shall from time to time take all such measures (in- cluding but not limited to adjustments in the tariffs for all ser- vices provided by ONE) as shall be required to produce in each of its fiscal years, beginning in 1977, an average level of funds from internal sources in the year in question taken together with the preceding year equal to at least 18 per cent of the average -8- capital expenditures incurred or, on the basis of realistic fore- casts, expected to be incurred, during such two years taken to- gether with the next following year; nrovided, however, that i) any increase in tariffs arnlicable in 1977, other than any such increase adopted to cover increased fuel prices, shall not exceed an average of 10 per cent and (ii) in the year 1980 and subsequent years the percentage of funds from internal resources to be generated shall be at least 20 per cent. (b) Before October 31 in each of its fiscal years, ONE shall (i) on the basis of realistic forecasts prepare a review satis- factory to the Borrower of the adequacy of its tariffs to meet the requirements set forth in paragraph (a) of this Section for the next following fiscal year, and (ii) furnish to the Bank a copy of such review upon its completion. (c) For the purpose of this Section: (i) The term "funds from internal sources" means the difference between: (A) The sum of gross revenues from all sources re- lated to sales of electricity, net non-opera- ting income and any reducticn in non-cash working capital; and (B) The sum of all expenses of operation, including maintenance and administration (excluding -9- depreciation, and other non-cash operating charges), interest and other charges on debt (eycluding interest financed under a loan con- tract), repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, all cash dividends and other cash distributions of surplus, increase in non-cash working capital, and any other cash outflows other than capital expenditures re- lated to electricity operations. (ii) The term "capital expenditures" means all expendi- tures incurred by ONE on account of fixed or capi- tal assets, including interest charged to construc- tion. (d) Steps to be taken by ONE pursuant to paragraph (a) of this Section in respect of the year 1977 shall be implemented by January 1, 1977. (e) The provisions of this Section supersede any prior agree- ment with the Bank concerning the rate of return of ONE. Section 4.04. Except as the Bank shall otherwise agree, ONE shall not incur any debt, other than debt required to finance the carrying out of the Project, unless ONE's net revenue from its operations for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever revenue is the greater, shall be at least 1.5 times the maximum debt service requirement for any succeeding fiscal year on - 10 - all debt incurred by ONE, including the debt rroposed to be in- curred. For the purposes of this Section: (a) "Debt" means any debt maturing by its terms more than one year after the date on which it is originally incurred. (b) Wherever reference is made in this Section to the in- curring of debt, such reference shall include any modification of the terms ol payment of such debt. Debt shall be deemed to be in- curred (i) under a loan contract or agreement on the date and to the extent it is drawn down pursuant to such loan contract or agreement and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (c) "Net revenue from its operations" means gross revenue of ONE from all sources, adjusted to take account of rates for the sale of electric power in effect at the time of incurrence of debt even though such rates were not in effect during the fiscal year or twelve months' period to which such income relates, less all operating and administrative expenses, including provision for any taxes, but before provision for depreciation and interest and other charges on debt. (d) "Debt service requirement" means the aggregate amount of amortization (including sinking fund contributions, if any), in- terest and other charges on debt. (e) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the - 11 - basis of the nrevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable by ONE for the purpose of servicing such debt. (f) The provisions of this Section supersede any prior agree- ment between ONE and the Bank concerning the limitation of ONE's debt. ARTICLE V Effective Date; Terminatior; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. (a) This Agreement and all ob2igations of the Bank and of ONE thereunder shall terminate on the earl.ier ofP the following two lates: (i) the date on which the Loan Agreement shall terminate in accordance with its terms; or (ii) a date 20 years after the date cf this Agreement. (b) If the Loan Agreement terminates in accordance with its terms before the da-.e specified in paragraph (a) (ii) of this Section. the Bank shall promptly notify ONE of this event. Section 5.03. All the provisions cf this Agreement shall con- tinue in full force and effect notwithstanding any cancellation o- suspension under Article VI of the General Conditions. - 13 - 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 desig- nated by notice to the party giving such notice or making such re- auest. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUI) For ONE: Office National de 1'Electricite Botte Postale 498 66 rue Aspirant Lafuente Casablanca Morocco Cable address: Telex: OFELEC 22780 M Casablanca Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed by ONE under this Agreement or the Loan Agreement on behalf of ONE or the Bor- rower may be taken or executed by the Director General of ONE or such other person or persons as he shall designate in writing. Section 6.03. ONE shall furnish to the Bank sufficient evi- dence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ONE, take any ac- tion or execute any documents required or permitted to be taken or executed by ONE pursuant to any of the provisions of this Agree- ment. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. -15 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their resnective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ W. A. Wapenhans Regional Vice President Europe, Middle East and North Africa OFFICE NATIONAL DE L'ELECTRICITE By Is/ Abdelhadi Boutaleb Authorized Representative