Madagascar - Andekaleka Hydroelectric Project : Credit 0817 - Project Agreement - Conformed

COFORMED COPY CREDIT NUMBER 817 MAG Project Agreement (Andekaleka Hydroelectric Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and JIRO SY RANO MALAGASY (JIRAMA) Dated June 19, 1978 CREDIT NUMBER 817 MAG PROJECT AGREEMENT AGREEMENT, dated June 19, 1978, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and JIRO SY RANO MALAGASY (hereinafter called JIRAMA). WHEREAS by the Development Credit Agreement of even date herewith between Democratic Republic of Madagascar (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower a Credit in an amount in various currencies equivalent to thirty-three million dollars ($33,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that JIRAMA agree to undertake the obligations toward the Association that are hereinafter set forth; WHEREAS by a Subsidiary Loan Agreement to be entered into between the Borrower and JIRAMA, the proceeds of the Credit provided for under the Development Credit Agreement will be relent to JIRAMA on the terms and conditions therein set forth; and WHEREAS JIRAMA, in consideration of the Association's enter- ing 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. JIRAMA shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices. -2- Section 2.02. In order to assist JIRAMA in: (a) the supervi- sion of the construction of the Project, (b) the preparation of bidding documents for the Project and (c) carrying out Part B of the Project, JIRAMA shall employ engineering and management consultants and other specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. Except as the Association and JIRAMA shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. JIRAMA undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by JIRAMA to replace or repair such goods. Section 2.05. Except as the Association may otherwise agree, JIRAMA shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) JIRAMA shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) JIRAMA: (i) shall maintain records adequate to record and monitor the progress of the Project (including its cost and, when appropriate, the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower and to disclose their use in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's represen- tatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its -3- cost and, when appropriate, the benefits to be derived from t, the expenditures of such proceeds and the goods and servir .s financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between JIRAMA and the Association, JIRAMA shall prepare and furnish to the Associa- tion a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by JIRAMA and the Association of their respective obligations under the Development Credit Agree- ment and the accomplishment of the purposes of the Credit. Section 2.07. JIRAMA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, JIRAMA 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 provi- sion thereof. Section 2.08. (a) JIRAMA 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) JIRAMA shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by JIRAMA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of JIRAMA Section 3.01. JIRAMA 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. JIRAMA shall notify the Association of any proposed appointment to the position of its Interconnected Zone Manager, Development Manager, or Administrative and Financial -4- Manager, in advance of any such appointment in order to afford the Association an adequate opportunity to comment thereon. Section 3.03. Except as the Association shall otherwise agree: (a) JIRAMA shall at all times maintain its corporate existence and right to conduct its operations, and shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges, licenses, concessions and franchises which are necessary in the conduct of such operations, and (b) JIRAMA shall not increase the number of its permanent unskilled labor beyond the level required by the scope of its operations. Section 3.04. JIRAMA shall continue at all times to conduct its operations and manage its affairs according to appropriate technical, financial, administrative and public-utility policies and practices under qualified and experienced management and staff at all levels, functioning with such autonomy and such powers as shall be necessary for the purpose. ARTICLE IV Financial Covenants Section 4.01. (a) JIRAMA shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. (b) Pursuant to paragraph (a) of this Section, JIRAMA shall maintain separate accounts for its water supply and electricity operations. Section 4.02. JIRAMA shall: (i) have its accounts and finan- cial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accor- dance 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 five 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 information concerning the accounts and financial statements of JIRAMA and the audit thereof as the Association shall from time to time reasonably request. -5- Section 4.03. (a) Except as the Association shall otherwise agree, JIRAMA shall take all necessary steps within its power (including but not limited to adjustments to its tariffs for electrical energy) as shall be required to provide JIRAMA with net operating income sufficient to yield a rate of return on the value of its net fixed assets of not less than 8% per annum. (b) For th-- purposes of this Section: (i) The annual rate of return shall be calculated by relating the net operating income of JIRAMA for the year in question to the average of the values of the net fixed assets of JIRAMA at the beginning and at the end of that year; (ii) The term "value of the net fixed assets" shall mean the gross book value of fixed assets used for elec- tric utility operations, including any buildings primarily used as offices for electric utility operations, excluding work in progress, less the amount of accumulated depreciation, to be revalued annually as of JIRAMA's financial year 1977 in accordance with methods of revaluation acceptable to the Association and JIRAMA. (iii) The term "net operating income" shall mean the difference between: (A) gross revenue from electric utility opera- tions, including rents from buildings pri- marily used as offices for electric utility operations and excluding interest on invest- ments and other income applicable to opera- tions or activities which are not electric utility in character; and (B) the expenses related to electric utility operations, including: (1) operation, maintenance, purchased power and administration expenses; (2) the costs of experimental and general research work for the electric utility industry and of preliminary surveys, -6- plans and investigations of utility projects which do not prove to be feasi- ble and are abandoned; (3) taxes, including income taxes related to net operating income; and (4) the allowance for depreciation, applied to the gross book value of fixed assets as revalued pursuant to paragraph (b) (ii) of this Section. (iv) Interest and other charges on debt are not to be deducted as expenses under paragraph (b) (iii) (B) of this Section, but the amount of such charges related to electric utility operations shall be taken into account in calculating the amount of "income taxes related to net operating income" under such paragraph. Section 4.04. Except as the Association shall otherwise agree, JIRAMA shall not incur any debt unless its consolidated net revenue for the fiscal year next preceding the date of such incur- rence, or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall not be less than 1.5 times the maximum consolidated debt-service requirement for any succeeding fiscal year on all the debt of JIRAMA including the debt to be incurred. For the purpose of this Section: (a) the term "debt" means all debt, including debt assumed or guaranteed by JIRAMA, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after the incurrence thereof; (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 (i) under a loan contract or agreement on the date and to the extent the loan 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) the term "consolidated net revenue" means the consoli- dated gross revenue adjusted to take account of tariffs in effect at the time of the incurrence of debt even though they were not in -7- effect during the entire fiscal year or twelve-month period to which such revenue relates, less consolidated operating, mainte- nance and administration expenses and taxes, if any, but before provision for depreciation and interest and other charges on debt and excluding for the purposes of this paragraph intercompany revenues and expenses; and (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. Section 4.05. JIRAMA shall: (a) carry out a study for the elaboration of a new tariff structure for its electricity opera- tions based on principles of long-term marginal costs, under terms of reference satisfactory to the Association; (b) prepare a tariff structure for said operations on the basis of the conclusions of the above-mentioned study; and (c) put into effect, by July 1, 1979, or such later date as the Association may accept, said tariff structure. Section 4.06. Except as the Association shall otherwise agree, no funds will be transferred by JIRAMA from its electri- city operations to its water operations prior to the completion of the Project. 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 JIRAMA 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 26 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) -8- (ii) of this Section, the Association shall promptly notify JIRAMA r 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 JIRAMA: Boite Postale 200 Antananarivo Madagascar Cable address: Telex: JIRAMA 22235 Antananarivo -9- 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 JIRAMA may be taken or executed by its Director General or such other person or persons as JIRAMA shall designate in writing, and JIRAMA shall furnish to the Association sufficient evidence of the authority and the authenticated speci- men signature of each such person. 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 Antananarivo, Democratic Republic of Madagascar, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ Andre R. Gue Acting Regional Vice President Eastern Africa JIRO SY RANO MALAGASY (JIRAMA) By /s/ Caleb Rakotoarivelo Authorized Representative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (here- inafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of interna- tional competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, JIRAMA shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. JIRAMA shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (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 JIRAMA of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Review of Procurement Decisions by the Association 1. Before bids are invited, JIRAMA shall furnish to the Asso- ciation, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a - 11 - description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. 2. After bids have been received and evaluated, JIRAMA shall, before a final decision on the award is made, inform the Associa- tion of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report, by the consultants referred to in Section 2.02 of this Agreement, on the evaluation and compari- son of the bids received, together with the recommendations for award of the said consultants and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform JIRAMA and state the reasons for such determination. 3. The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those.on which bids were asked or prequalification invited. 4. Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 5. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issu- ing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original nrice, JIRAMA shall inform the Association of the proposed moditcation, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform JIRAMA and state the reasons for its determination.