Sierra Leone - Third Power Project : Credit 0734 - Development Credit Agreement - Conformed

 CONFORMED COPY CREDIT NUMBER 734 SL Development Credit Agreement (Third Power Project) between SIERRA LEONE and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated September 29, 1977  CREDIT NO. 734-SL DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated September 29, 1977, between SIERRA LEONE (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) part of the Project will be carried out by Sierra Leone Electricity Corporation (hereinafter called SLEC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to SLEC part of the proceeds of the Credit in an amount equivalent to seven million one hundred thousand dollars ($7,100,000) as hereinafter provided; (C) the Borrower intends to contract from Banque Arabe du Developpement Economique en Afrique (hereinafter called BADEA) a loan (hereinafter called the BADEA Loan) in an amount equivalent to five million dollars ($5,000,000) to assist in financing part of the Project on the terms and conditions set forth in an agreement (hereinafter called the BADEA Loan Agreement) to be entered into between the Borrower and BADEA; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and SLEC; NOW THEREFORE the parties hereto hereby agree as follows:  -2- 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 Agree- ments 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 Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Asso- ciation and SLEC of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and SLEC pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time; and  -3- (c) "Ministry of Finance" means the Ministry of the Borrower responsible for Finance.  ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to eight million two hundred thousand dollars ($8,200,000). 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 by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed 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 civil works to be fi- nanced out of the proceeds of the Credit, shall be procured in accordance with the provisions set forth or referred to in Section 2.05 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1979 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. 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  -5- of 1%) 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 March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each March 15 and September 15 commencing September 15, 1987, and ending March 15, 2027, each installment to and including the installment payable on March 15, 1997 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. 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) The Borrower shall carry out Part F of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and technical assistance practices, and shall provide, promptly as needed, the funds, facil- ities, services and other resources required for the purpose. (b) For the purposes of Parts A through E of the Project, the Borrower shall relend the equivalent of seven million one hundred thousand dollars ($7,100,000) out of the proceeds of the Credit to SLEC under a subsidiary loan agreement to be entered into between the Borrower and SLEC under terms and conditions which shall have been approved by the Association. (c) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Bor- rower shall cause SLEC 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 SLEC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performan.e. (d) The Borrower shall exercise its rights under the Sub- sidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes  -7- 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. Without limitation or restriction upon the pro- visions of Section 3.01 of this Agreement, the Borrower shall: (a) continue to provide SLEC with such annual subsidy as shall compensate SLEC for the actual financial losses, if any, on its provincial operations calculated in accordance with appro- priate accounting procedures acceptable to the Association, said subsidy to be paid not later than four months after the end of SLEC's fiscal year; and (b) except as the Association shall otherwise agree, provide SLEC, promptly as required, on terms acceptable to the Association, with financing in foreign currency equivalent to approximately seven hundred thousand dollars ($700,000) to assist SLEC in the execution of its investment program other than the Project during the period FY 77-80. Section 3.03. In carrying out Part F of the Project, the Bor- rower shall: (a) until alternative arrangements satisfactory to the Asso- ciation shall have been made, establish a Bumbuna Development Com- mittee, with powers and functions acceptable to the Association, which shall include the Vice-President of Sierra Leone, as Chairman, and representatives from Ministries of Energy and Power, Labour, Works and Finance and from SLEC and the Chamber of Commerce, as members, to give general directions for the proper implementation of such Part of the Project;  - 8 - (b) appoint an executive engineer, with qualifications, ex- perience and terms and conditions of employment, and with powers and functions, satisfactory to the Association, to supervise, under the general direction of the said Bumbuna Development Commit- tee, the planning and execution of such Part of the Project; and (c) select and employ consultants referred to in Part F of the Project, with qualifications, experience and terms and condi- tions of employment satisfactory to the Association, in accordance with the guidelines set forth in the "Uses of Consultants of the World Bank and its Borrowers", dated April 1974.  -9- ARTICLE IV Other Covenants Section 4.01. The Borrower shall ensure that the General Manager who is the Chief Executive Officer of SLEC may fully and effectively exercise his executive and management respon- sibilities. Section 4.02. The Borrower shall not require SLEC to increase the number of SLEC's employees until an appropriate staffing and training plan referred to in Section 3.02 of the Project Agreement shall have been agreed upon between the Borrower, the Association and SLEC. Section 4.03. (a) The Borrower shall cause its Ministry of Finance to pay directly, promptly and fully to SLEC all future electricity bills for all of its Ministries, departments and agencies. (b) The Borrower shall permit SLEC to disconnect electri- city to any autonomous agency if such agency shall have failed to pay any electricity bill within sixty days after issue thereof. Provided, however, that the Borrower may agree with SLEC on a list of selected autonomous agencies for which the foregoing provision shall not apply; in which case the Borrower shall assume the res- ponsibility for, and cause its Ministry of Finance to pay directly, promptly and fully to SLEC, any electricity bill any of such se- lected autonomous agency shall have failed to pay within sixty days after issue thereof.  - 10 - Section 4.04. Not later than September 30, 1977, or such other date as may be agreed upon by the Borrower, the Association and SLEC, the Borrower shall take all steps necessary to convert all of SLEC's Loan Stock "A" held by the Borrower to equity in SLEC. Section 4.05. Except as the Association shall otherwise agree, the Borrower shall not require SLEC to assume the financial obliga- tions of the Guma hydroplant. Section .4.06. Without limitation or restriction upon the pro- visions of Section 4.01 of this Agreement, the Borrower shall per- mit SLEC to revise electricity tariffs from time to time so as to achieve annual rates of return as specified in Section 4.03 of the Project Agreement. Section 4.07. The Borrower shall: (i) maintain unchanged, or cause to be maintained unchanged, until December 31, 1977 or a later date, the price SLEC pays for fuel; and (ii) thereafter take all necessary measures to ensure that fuel price increases to SLEC, if any, shall not exceed increases in the world market price of fuel. For the purposes of this Section, the computation of such increases shall be made on a basis to be agreed between the Borrower and the Association.  - 11 - ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) the Borrower shall have taken any action for the dis- solution or disestablishment of SLEC or for the suspension of its operations; (b) a default shall have occurred in the performance of any obligation on the part of SLEC under the Project Agreement; (c) a default shall have occurred in the performance of any obligation on the part of the Borrower or SLEC under the Subsidiary Loan Agreement; and (d) (i) subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds the BADEA Loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the BADEA Loan Agreement, or (B) the BADEA Loan shall have become due and pay- able prior to the agreed maturity thereof.  - 12 - (ii) subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obli- gations under such agreement, and (B) adequate funds for the Project are available to the Borrower or SLEC from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement and of SLEC under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) and (d) of Section 5.01 of this Agreement shall occur; and (b) any event specified in paragraphs (b) and (c) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and SLEC.  - 13 - ARTICLE VI Effective Date; Termination Section 6.01. 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 SLEC have been duly authorized or ratified by all nec- essary corporate and governmental action; (b) the execution and delivery of the Subsidiary Loan Agree- ment on behalf of the Borrower and SLEC, respectively, have been duly authorized or ratified by all necessary corporate and govern- mental action; (c) the execution and delivery of the BADEA Loan Agreement on behalf of the Borrower and BADEA, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (d) the local counterpart referred to in Section 2.04 of the Project Agreement has been duly appointed; (e) the financial consultants have been appointed in accordance with the provisions of Section 2.03 of the Project Agreement; and (f) the Borrower has paid SLEC an annual subsidy to compensate SLEC fully for actual financial losses incurred by SLEC on its pro- vincial operations for the fiscal year ended March 31, 1977 in accor- dance with the provisions of Section 3.02 (a) of this Agreement.  - 14 - Section 6.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (b) of the General Con- ditions, 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 SLEC, and is legally binding upon SLEC in accor- dance with its terms; (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and SLEC, and is legally binding upon the Borrower and SLEC in accordance with its terms; (c) that the BADEA Loan Agreement has been duly authorized or ratified by the Borrower, and is legally binding upon the Bor- rower in accordance with its terms. Section 6.03. The date December 28, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions.  - 15 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Financial Secretary The Ministry of Finance Freetown, Sierra Leone Cable address: MINFIN Freetown 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.  - 16 - 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 in the District of Columbia, United States of America, as of the day and year first above written. SIERRA LEONE By ./s/ A.B. Kamara Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Roger Chaufournier Regional Vice President Western Africa  - 17 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amount of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) For Parts of the Project to be car- ried out by SLEC: (a) Equipment for 6,o8o,ooo 100% of foreign King Tom exten- expenditures sion (b) Civil works for 550,000 60% King Tom exten- sion (c) Data processing 200,000 100% of foreign equipment expenditures (d) Engineering 270,000 50% of foreign services for expenditures King Tom exten- sion (2) Project preparation 900,000 100% of foreign for Bumbuna hydro- expenditures plant (3) Unallocated 200,000 TOTAL 8,200,000  - 18 - 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Association that no proceeds of the Credit 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 the amount of any such taxes levied on or in re- spect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent.with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made: (a) in respect of payments made for expendi- tures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $5,700,000, may be made in respect of Category (1) on account of payments made for such expenditures before that date but after February 1, 1975; and (b) under Category (2): (A) in respect of expenditures for Part F (1) of the Project until the Bumbuna Development Committee referred to in Section 3.03 (a) of this Agreement shall have been established and the executive engineer referred to in Section 3.03 (b) of this Agreement shall have been appointed; and (B) in respect of expendi- tures for Parts F (2) and (3) of the Project unless the technical,  - 19 - economic and financial viability of the Bumbuna hydroelectric development shall have been established to the satisfaction of the Association by the feasibility study under Part F (1) of the Proj- ect. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Association may, by notice to the Borrower: (i) reallo- cate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to an- other Category and which in the opinion of the Association 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 fur- ther withdrawals under such Category may continue until all expen- ditures thereunder shall have been made. 6. If the Association 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 expendi- tures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, can- cel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit.  - 20 - SCHEDULE 2 Description of the Project The Project consists of the following Parts: Part A: The installation of a 9.2 MW diesel-electric generator at the King Tom power station including auxiliary facilities. Part B: Measures to prevent electric generator outages at the King Tom power station by (1) hiring of a specialist to study the causes of such outages and the electric protection schemes of the generators and to design, and supervise procurement and installation of additional protective devices required, and (2) procurement and installation of such protective devices. Part C: The construction of the first stage of a 33 kV dis- tribution in the Western system. Part D: The installation of a 1,000 kW diesel-electric generator at Makeni, one 500 kW diesel-electric generator at Lungi and eight 100 kW diesel-electric generators in other provincial centers to be determined by agreement with the Association.  - 21 - Part E: (1) The employment of consultants to: (1) procure, plan and supervise the construction or installation for Parts A, C and D above; (2) prepare a master plan for the further electrification of provincial areas; and (3) strengthen SLEC's financial management and accounting procedures. (2) Purchase of data processing equipment for SLEC. Part F: The employment of consultants to: (1) complete the feasibility study of Bumbuna hydroplant; (2) design the first stage of such plant to the detail required for the preparation of tender documents for the main items of equipment and civil works; and (3) to preDare such tender documents. The Project is expected to be completed by September 30, 1979.