Papua New Guinea - Second Ports Project : Loan 1551 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1551 PNG Project Agreement (Second Ports Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and PAPUA NEW GUINEA HARBOURS BOARD Dated May 18, 1978 PROJECT AGREEMENT AGREEMENT, dated May 18, 1978, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the PAPUA NEW GUINEA HARBOURS BOARD (hereinafter called PNGHB). WHEREAS (A) by the Loan Agreement of even date herewith between the INDEPENDENT STATE OF PAPUA NEW GUINEA (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equiv- alent to three million five hundred thousand dollars ($3,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that PNGHB agree to undertake such obligations toward the Bank as hereinafter set forth; (B) by a subsidiary loan agreement between the Borrower and PNGHB, the proceeds of the loan provided for under the Loan Agreement will be made available to PNGHB on the terms and condi- tions therein set forth; and WHEREAS PNGHB, 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: 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. ARKICLE II Execution of the Project Section 2.01. PNGHB shall carry out the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and port management practices, and shall provide, or -2- cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. In order to assist PNGHB in the preparation of detailed engineering and specifications for, and in the supervision of the construction of the Project PNGHB shall employ engineering consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank. Section 2.03. Except-as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.04. (a) PNGHB undertakes to insure, or make ade- quate 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, transporta- tion 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 PNGHB to replace or repair such goods. (b) Except as the Bank may otherwise agree, PNGHB 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 Project. Section 2.05. (a) PNGHB shall furnish to the Bank, promptly upon their preparation, the plans, specifications, and construc- tion and procurement schedules for the Project and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) PNGHB: (i) shall maintain records and procedures ade- quate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construc- tion sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, -3- the benefits to be derived from it, the expenditure of the pro- ceeds of the Loan and the goods and services financed out of such proceeds. Section 2.06. PNGHB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, PNGHB 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) PNGHB shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the the Project, the performance of its obligations under this Agree- ment and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) PNGHB shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by PNGHB of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of PNGHB Section 3.01. PNGHB shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. PNGHB shall at all times continue to employ a competent chief financial officer and a competent chief engineer and will, until December 31, 1985, ensure that the qualifications and experience of any successors to the persons presently holding these positions are satisfactory to the Bank. Section 3.03. PNGHB shall, after the completion of Parts A (i) (a) and (b) of the Project close the APC wharf at Port Moresby to cargo ships with a length of more than 10 meters. Section 3.04. PNGHB shall: (i) make arrangements satisfactory to the Bank for one stevedoring firm or consortium to be respon- sible, with effect from January 1, 1979, for all handling opera- tions at the new container terminal at Port Moresby; and (ii) -4- employ with effect from such date a container terminal super- intendent, whose qualifications and experience shall be satis- factory to the Bank, who will be responsible for the operation of the Port Moresby container terminal. Section 3.05. PNGHB shall continue at all times to: (a) operate and maintain, its facilities, equipment and property and from time to time make, or cause to be made, all necessary renewals and repairs thereof, all in accordance with sound administrative, engineering and financial port management practices; and (b) employ sufficient qualified and experienced staff to manage its affairs, plan its future operations and maintain its financial position in accordance with sound administrative, engineering and financial port management practices that are satisfactory to the Borrower and the Bank. Section 3.06. PNGHB shall: (i) introduce and carry out, in a manner and in accordance with a timetable satisfactory to the Bank, a program of staff training to ensure that an adequate number of trained staff are available, particularly in the fields of engineering and accounting, to manage, operate and maintain its facilities, equipment and property; and (ii) employ consultants, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, to assist PNGHB in the preparation of such program of staff training. Section 3.07. Except as the Bank shall otherwise agree, PNGHB shall not sell, lease, transfer or otherwise dispose of any of its property or assets, which shall be required for the efficient conduct of its operations. Section 3.08. PNGHB shall: (i) by March 31, 1979, complete, or cause to have completed by consultants, a study to determine the cost of the services and facilities provided within each major port operated by PNGHB, the terms of reference for such study to be satisfactory to the Bank; and (ii) promptly implement the recommendations made in such study which are acceptable to the Borrower, the Bank and PNGHB and thereafter review such study annually to determine whether any further changes in PNGHB's tariff of dues and rates are necessary to ensure that PNGHB -5- complies, except as the Bank may otherwise agree, with the pro- visions of Section 4.04 (c) of the Prior Project Agreement, which is set forth in Part A of Schedule 2 to this Agreement, within each such major port. ARTICLE IV Financial Covenants Section 4.01. PNGHB shall continue to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. PNGHB shall: (i) have its accounts and finan- cial statements (balance sheets, statements of income and expenses and related statements including cash flow statements) for each fiscal year audited, in accordance with appropriate auditing prin- ciples 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 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of PNGHB and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. (a) It is agreed by the Bank, acting on behalf of the Association, and PNGHB that Section 4.03 of the Prior Proj- ect Agreement is hereby deleted and, except as the Borrower and the Bank may otherwise agree, PNGHB shall review its tariff of dues and rates and take, with effect from January 1, 1979, and as necessary from time to time thereafter, action satisfactory to the Bank, including but not limited to adjustments in its tariff of dues and rates, to enable PNGHB to obtain annual rates of return on the value of its net fixed assets in operation of not less than: (i) 4% for the year ending December 31, 1979; and (ii) 7.0% during each succeeding fiscal year; (b) 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 -6- value of the net fixed assets in operation 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. The value of gross fixed assets in operation shall mean gross fixed assets as revalued from time to time in accordance with the provisions of Section 4.06 of this Agreement, and the depreciation referred to in sub-section (ii) shall mean the depreciation calculated on such revalued assets. Section 4.04. Except as the Borrower and the Bank may other- wise agree, PNGHB shall, prior to undertaking any construction projects (excepting the Project specified in the Loan Agreement) which in any one year involve expenditures in excess of Kina 600,000 during the years ending December 31, 1978, and December 31, 1979, and Kina 1,000,000 during each succeeding year until December 31, 1982, obtain the approval of the Bank to the financial plans in respect of such projects. Section 4.05. Except as the Bank may otherwise agree, PNGHB shall comply with the provisions of Section 4.05 of the Prior Project Agreement regarding its debt service coverage, which is set forth in Part B of Schedule 2 to this Agreement. Section 4.06. Except as the Bank may otherwise agree, PNGHB shall employ consulting engineers, whose qualifications and experience and terms and conditions of employment shall be satisfactory to the Bank, to revalue PNGHB's assets every three years, with the first such revaluation to be completed by December 31, 1978. ARTICLE V Effective Date; Termination; Cancellation and Suspension S'ction 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. -7- Section 5.02. (a) This Agreement and all obligations of the Bank and of PNGHB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Loan Agreement shall termi- nate in accordance with its terms; or (ii) a date 20 years after the date of this Agreement. (b) If the Loan Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Bank shall promptly notify PNGHB of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. 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 herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. 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) -8- For PNGHB: The Secretary Papua New Guinea Harbours Board P.O. Box 671 Port Moresby Papua New Guinea Cable address: Telex: HARBOURS NE 22243 Port Moresby 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 PNGHB may be taken or executed by the Chairman of PNGHB or such other person or persons as the Chairman of PNGHB shall designate in writing, and the Chairman of PNGHB shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Stanley Please Director Country Programs Department East Asia and Pacific Regional Office PAPUA NEW GUINEA HARBOURS BOARD By /s/ Paulius Matane Authorized Representative -9- SCHEDULE 1 Procurement A. International Competitive Bidding 1. Except as the Bank may otherwise agree, contracts for the purchase of goods or for civil works shall be procured in accor- dance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Cred- its" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. Bidders for the civil works included in Part A of the Project shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines. 3. For goods and civil works to be procured on the basis of international competitive bidding under the Project, PNGHB shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the proposed date of avail- ability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procure- ment notice, in such form and detail and containing such informa- tion as the Bank shall reasonably request; the Bank will arrange for the publicz.ion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. PNGHB 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 competi- tive bidding. B. 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: (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 PNGHB of inland freight and other expendi- tures incidental to the delivery of goods to the place of their use or installation shall be included. - 10 - 2. Goods manufactured in Papua New Guinea may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed 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 Papua New Guinea if the bidder shall have estab- lished to the satisfaction of the Bank and PNGHB that the manufacturing cost of such goods includes a value added in Papua New Guinea equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Papua New Guinea. (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 evaluated 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 offered in each group C bid, for the purpose of this further comparison 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 offereO in such group C bid; or (ii) 15% of the c.i.f. bid price of L,ch goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it - 11 - 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. C. Review of Procurement Decisions by the Bank 1. Review of prequalification. PNGHB shall, before qualification is invited, inform the Bank in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalifica- tion shall be furnished by PNGHB to the Bank for its comments before the applicants are notified of PNGHB's decision, and PNGHB shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for civil works and all con- tracts for goods estimated to cost the equivalent of $300,000 or more: (a) Before bids are invited, PNGHB 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 documents or procedures as the Bank shall reasonably request. Any further 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, PNGHB 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 for Parts A (i) (a), (b) and (c) of the Project, on the evaluation and comparison of the bids received, together with the recommendations for award of the said 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 PNGHB and state the reasons for such determination. - 12 - (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 proceeds of the Loan and not governed by the preceding paragraph, PNGHB 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 the respective 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 PNGHB and state the reasons for such determination. - 13 - SCHEDULE 2 Part A: Section 4.04. (c) Promptly thereafter, but in any event by a date not later than July 1, 1976 or such later date as shall be agreed to by the Association [Sic: PNGHB shall] take all necessary measures to introduce and maintain tariffs of dues and rates, on the following basis: (i) dues and rates will be set as far as practi- cable for each port individually; (ii) dues and rates will be levied for all ships and goods using the ports' facilities and services; and (iii) except as the Borrower and the Association shall otherwise agree, dues and rates for services and facilities will be based on, and not less than, the economic costs of those services and facilities, and will take into account the desirability of ensuring that a sufficient proportion of total economic benefits (particularly those enjoyed by ships) resulting from the port investments accrue to the economy of Papua New Guinea. Part B: Section 4.05. (a) Except as the Association shall other- wise agree, PNGHB 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, whichever is greater, shall be not less than 1.5 times the maxi- mum debt service requirements for any succeeding year on all the debt of PNGHB, including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means all debt, including debt assumed or guaranteed by PNGHB, except debt incurred in the ordi- nary 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 -14- agreement is executed; (iii) the term "net revenue means gross operating revenue of PNGHB, 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 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 (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 PNGHB, 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 reasonably determined by the Association.