Philippines - Third Ports Project : Loan 1855 - Project Agreement - Conformed

LOAN NUMBER 1855 PH Project Agreement (Third Ports Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and PHILIPPINE PORTS AUTHORITY Dated /3 ,1980 LOAN NUMBER 1855 PH PROJECT AGREEMENT AGREEMENT, dated L . , 1980, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and PHILIPPINE PORTS AUTHORITY (hereinafter called the Authority). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of the Philippines (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to sixty-seven million dollars ($67,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Authority agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidi,ry loan agreement to be entered into between the Borrower and the Authority, the proceeds of the loan provided for under the Loan Agreement will be made available to the Authority on the terms and conditions therein set forth; and WHEREAS the Authority, in consideration of the Bank's enter- ing 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. ARTICLE II Execution of Parts E and F of the Project Section 2.01. The Authority shall carry out Parts E and F of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate -2- administrative, financial, engineering and port management prac- tices, and shall provide, or 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 the Authority in carrying out Parts E and F of the Project, the Authority shall employ consultants and advisers whose qualifications, experience and -terms and conditions of employment shall be satisfactory to the Bank. Section 2.03. (a) The Authority undertakes to insure, or make adequate provision for the insurance of, the imported goods for Parts E and F of the Project, to be financed out of the proceeds of' the Loan made available 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 the Authority to replace or repair such goods. (b) Except as the Bank may otherwise agree, the Authority shall cause all goods and services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclu- sively for the Project. Section 2.04. (a) The Authprity shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, training programs, contract documents and work and procurement schedules for Parts E and F of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Authority: (i) shall maintain records and procedures adequate to record and monitor 'the progress of Parts E and F 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 Parts E and F of the Project; (ii) shall enable the Bank's accredited repre- sentatives to visit the facilities and construction sites included in Parts E and F of 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 inter- vals all such information as the Bank shall reasonably request concerning Parts E and F of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure -3- of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Promptly after completion of Parts E and F 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 the Authority and the Bank, the Authority shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of Parts E and F of the Project, its cost and the benefits derived and to be derived from it, the performance by the Authority and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. (d) The Authority shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Authority and any relevant records and documents. Section 2.05. The Authority shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, the Authority 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 2.06. (a) The Authority shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts E and F 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 Loans. (b) The Authority shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts E and F of the Project, the accomplishment of the purposes of the Loan, or the performance by the Authority of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of the Authority Section 3.01. The Authority shall take out and maintain with responsible insurers, or make other provisions satisfactory -4- to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. The Authority shall cause the facilities, equipment, machinery or other property necessary or useful in the operation of all the ports vested in it from time to time to be operated, maintained, renewed and repaired in accordance with sound engineering and management practices. Section 3.03. The Authority shall take all steps necessary to ensure that the operation of all the ports vested in it from time to time shall at all times be conducted, their affairs managed, their future investments planned and their sound financial situa- tion maintained in accordance with sound administrative, financial and engineering practices and under the direction of competent and experienced management. Section 3.04. The Authority shall consult with the Bank prior to implementing any major change in its organizational structure. Section 3.05. The Authority shall by December 31, 1982, complete siltation observations and the review of maintenance dredging requirements at the Port of Cebu. ARTICLE IV Financial Covenants Section 4.01. The Authority shall maintain records including those with respect to Parts A through D of the Project, ade- quate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. The Authority shall: (i) have such 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 six months after the end of each such year, (A) cer-ti- fied 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 re- quested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Authority - 5- and the audit thereof as the Bank shall from time to time reason- ably request. Section 4.03. The Authority shall: (a) not make any substantial change in the Investment Plan except after consultation with the Bank. For the purposes of this Section "substantial change" shall mean a change involving an increase of more than 10% of the estimated cost of the Investment Plan in any financial year; and (b) enter into any craft or equipment purchase agreement with a value of fifty million Pesos or more, only after prior consultation with the Bank. Section 4.04. (a) Except as the Bank shall otherwise agree, the Authority shall take all such measures, including but not limited to adjustments of tariffs by January 1, 1981 in consulta- tion with the Bank, as shall be sufficient to earn an annual rate of return of not less than five per cent (5%) in each of fiscal years 1981, 1982 and 1983, and seven per cent (7%) in fiscal year 1984 and thereafter. (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 net operating revenue for that year to the average of the value of the net fixed assets in operation at the beginning and at the end of that year; (ii) the term "net operating revenue" shall mean the difference between (A) gross operating revenue and (B) operating and administrative expenses, including adequate maintenance and depreciation and taxes including income taxes, if any, but excluding interest and other charges on debt (if any) and dividends on equity capital; 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, such assets to be revalued at least once every five years, in accordance with sound and consistently maintained methods of valuation and depreciation acceptable to the Bank. - 6 - Section 4.05. Except as the Borrower and the Bank may other- wise agree, the Authority shall not at any time incur any debt, unless its net cash generation from operations for the fiscal year immediately preceding such incurrence or a later twelve- month period ended prior to such incurrence, whichever is the greater, shall not be less than 1.75 times the maximum debt service requirements for any succeeding fiscal year on all debt including the debt to be incurred. For the purposes of this Section: (i) the term "debt" shall mean all indebtedness of the Authority, maturing by its terms more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred on the date of execution and delivery of the contract or other instrument providing for such debt or modifying its terms of payment; (iii) the term "net cash generation from operations" means gross revenues from all sources, adjusted to take account of the Authority's dues and rates in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-month period to which such revenues relate, less operational expenses including admi- nistrative expenses, taxes (if any), and adequate maintenance, but before deduction for depreciation and debt service requirements; (iv) the term "debt service requirements" means the aggregate amount of amortization of, and interest and other charges on, debt; and (v) whenever 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 basis of the prevailing official rate-of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Bank. - 7 - 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 Loan Agreement becomes effec- tive. Section 5.02. This Agreement and all obligations of the Bank and of the Authority thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly so notify the Authority there- of. Section 5.03. All the provisions of this Agreement shall continue in full force and e-fect 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 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 the Authority: Philippine Ports Authority 5th Floor, BF Condominium Aduana Intramuros, Manila Cable address: Telex: PHPORTS Eastern 63320 Manila 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 the Authority may be taken or executed by its General Manager or such other person or persons as the Authority shall designate in writing, and the Authority 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 col- lectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused ths 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 a [ Regional Vice President East Asia and Pacific PHILIPPINE PORTS AUTHORITY By /5 Ae I / Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this ki tk day of. 1980. FOR SECRETARY