Somali - Fourth Port Project : Credit 0838 - Project Agreement - 1 - Conformed

CONFORMED COPY CREDIT NUMBER 838 SO Project Agreement (Fourth Port Project) between INie ATIONAL DEVELOPMENT ASSOCIATI00 and SOMALI PORT AUTHORITY Dated August 23, 1978 CREDIT NUMBER 838 SO PROJECT AGREEMENT AGREEMENT, dated August 23, 1978, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and SOMALI PORT AUTHORITY, a public agency established and operating under Law No. 1 of 1973 of the Borrower (hereinafter called SPA). WHEREAS by the Development Credit Agreement of even date herewith between Somali Democratic Republic (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various curren- cies equivalent to five million five hundred thousand dollars ($5,500,000), on the terms and conditions set forth in the Devel- opment Credit Agreement, but only on condition that SPA agree to undertake such obligations toward the Association as are here- inafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and SPA, the proceeds of the credit provided for under the Development Credit Agreement will be made available to SPA on the terms and conditions therein set forth; and WHEREAS SPA, 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. SPA shall assist the Borrower in the carrying out of the Project described in Schedule 2 to the Development Credit Agreement. -2- Section 2.02. SPA shall, not later than December 31, 1978, employ, and thereafter maintain, in its service, for a period of at least two years, a duly qualified, experienced and competent port management expert with terms of reference satisfactory to the Association. Section 2.03. SPA shall conduct its operations of the along- side general cargo facilities financed under the Previous Projects in such a manner as to achieve the operational targets set forth in, and substantially in accordance with the provisions of, the Schedule to this Agreement. Section 2.04. SPA shall enable the Association's representa- tives to examine all plants, installations, sites, works, build- ings, property and equipment of SPA and any relevant records and documents. Section 2.05. SPA shall dily perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SPA 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 2.06. (a) SPA shall at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) SPA shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by SPA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SPA Section 3.01. SPA shall take out and maintain with respon- sible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. SPA shall at all times carry on its operations under qualified a1;nd experienced managerial staff, with sufficient -3- supporting staff, in accordance with sound port operating prac- tices. Section 3.03. SPA shall adequately maintain the works, installations and equipment used in SPA's port operations at Mogadishu and in all other ports under SPA's jurisdiction, and promptly make all necessary renewals and repairs thereof, all in accordance with sound engineering and port management standards and practices. Section 3.04. SPA shall at all times take all steps necessary to maintain its right to carry on its operations, including the Project, and shall, except as the Association shall otherwise agree, take all steps necessary to acquire and retain such land, interests in land and properties, and to acquire, maintain and renew such licenses, consents, franchises and other rights, as may be necessary or useful for the construction of the Project and the carrying on of SPA's operations. Section 3.05. SPA shall prepare a training program for its staff in consultation with the Association, and shall, not later than June 1, 1979, or such other date as shal be agreed among the Borrower, the Association and SPA, commence the implementation of the said program. ARTICLE IV Financial Covenants Section 4.01. SPA shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. SPA 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than six 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 Association shall have reasonably requested; and (iii) furnish to the Association such other infor- mation concerning the accounts and financial statements of SPA -4- and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. SPA shall not undertake, prior to the com- pletion of the Project, any capital investment (other than planned centralized capital investments as defined in Law No. 58 of 1972 of the Borrower, investments included in the Project and invest- ments for normal maintenance and renewal of equipment) estimated to exceed in cost, in any one fiscal year, six million Somali Shillings (So.Sh.6,000,000), except after consultation with the Association. Section 4.04. (a) Without any limitation upon the provisions of Section 4.03 of this Agreement, SPA undertakes that it shall not incur any debt unless its net revenue for the fiscal year next preceding the date of such incurrence or for a later twelve- month period ending prior to the date of such incurrence, which- ever is greater, shall be not less than two times the maximum debt service requirements for any succeeding year on all its debt, including the debt to be incurred. For the purposes of this Section: (i) the term "debt" means all debt, including debt assumed or guaranteed by SPA, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (ii) debt shall be deemed to be incurred on the date on which a contract or loan agreement or guarantee agreement is executed; (iii) the term "net revenue" means gross operating revenue of SPA, 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, and administrative expenses, but before provision for depreciation, and interest and other charges on debt; (iv) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund provisions), interest and other charges on debt; and -5- (v) whenever it shall be necessary to value in the currency used in the territory 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 SPA, at the time such valuation is made, for the purposes of servicing such debt, or if such other currency is not obtainable, at a rate of exchange acceptable to the Association. (b) Section 4.03 of the Project Agreement (Mogadiscio Port Extension Project) dated October 15, 1975, between the Association and SPA, is deleted and the provisions of Section 4.04 (a) of this Agreement are substituted therefor. Section 4.05. Except as the Borrower and the Association shall otherwise agree, SPA shall from time to time take all necessary measures, including but not limited to adjustments in its tariffs, as shall be required to enable SPA to earn an annual rate of return of not less than 5% for each year. For the purposes of this Section: (i) the annual rate of return shall be calculated in respect of each fiscal year by relating the operat- ing surplus for that year to the average of the value of the net fixed assets in operations at the beginning and at the end of that year; (ii) the term "operating surplus" shall mean the differ- ence between (A) operating revenue; and (B) operat- ing and administrative expenses, including adequate maintenance and depreciation, but excluding inter- est and other charges on debt and income taxes (if any); and (iii) the term "value of net fixed assets in operation" shall mean the gross value of fixed assets in operation less the accumulated depreciation, both as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Association. Section 4.06. Subject to the requirements of Section 4.05 hereof, SPA shall continue to take all necessary measures to -6- introduce and maintain tariffs of dues and rates, on the following basis: (a) dues and rates will be set as far as practicable for each port individually; (b) dues and rates will be levied for all ships and goods using the pirt's facilities and services; and (c) except as SPA and the Association shall otherwise agree, dues and rates for services and facilities will be based on, and cover not less than, the costs of those services and facilities, and will take into account the desirability of ensuring that economic benefits (particularly those enjoyed by ships) resulting from the port investments accrue to the economy of the Borrower. 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 SPA 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 twenty years after the date of this Agree- ment. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SPA of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. 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 des- ignated 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For SPA: Somali Port Authority Mogadishu Somali Democratic Republic Cable address: SOMALPORT Mogadishu Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SPA may be taken or executed by its President or its General Manager or such other person or persons as he shall designate in writing, and SPA shall furnish to the Association sufficient evidence of the authority and the authenti- cated specimen signature of each such person. -8- Section 6.03. This Agreement may be executed in several coun- terparts, 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 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ W. Wapenhans Regional Vice President Eastern Africa SOMALI PORT AUTHORITY By /s/ Abdullahi Ahmed Addou Authorized Representative SCHEDULE Operation Target 1. Availability of port 75% commencing January 1979 operations equipment 2. Utilization of port 85% commencing January 1979 operations equipment 3. Gang shift productivity in tons per eight hours: 1978 1979 1980 1981 (a) Bagged cargo 105 120 135 150 (b) General cargo 56 64 72 80 (c) Bananas 112 128 144 160 4. Average number of ships' 3 commencing from 1978 hatches worked simultan- eously