China - Three Ports Project : Loan 2207 - Loan Agreement - Conformed

O FFIC IA L LOAN NUMBER 2207 CHA 9CUIME N TS Loan Agreement (Three Ports Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated IL . ( , 1982 LOAN NUMBER 2207 CHA LOAN AGREEMENT AGREEMENT, dated OV11M4 (-6 , 1982, between PEOPLE'S REPUBLIC OF CHINA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agree- ment by making the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same fcrce and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "MOC" means the Borrower's Ministry of Communications; and (b) "Project CHC" means any of the four cargo handling corporations established or to be established by MOC to operate the Huangpu Coal Terminal, Huangpu Container Terminal, Shanghai Container Terminal, and Tianjin Container Terminal, to be con- structed under Parts A, B, C and D of the Project, respectively, and "Project CHCs" means all four of said cargo handling corpora- tions, collectively. - 2 - ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred and twenty-four million dollars ($124,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between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 Bank, for expen- ditures made (or, if the Bank 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 Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and services required for the Project and to be iinanced out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1987 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the. Bank a commit- ment charge at the rate of three-quarters of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. - 3 - ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and port management prac- tices, and shall provide, promptly as needed, the funds, facili- ties, services and other resources required for the purpose. Section 3.02. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indem- nity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services fi- nanced out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.03. (a) The Borrower shall furnish to the Bank, 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 Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (in- cluding 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 representatives to visit the facilities and construction 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 reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. -4 (c) Upon the award by the Borrower of any contract for goods or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nation- ality of the party to whom the contract was awarded and the con- tract price, (d) 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 the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall rea- sonably 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 the Borrower and the Bank of their res- pective obligations under the Loan Agreement and the accomplish- ment of the purposes of the Loan. Section 3.04. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all sL'h land and rights in respect of land as shall be required for the construction (and operation) of the facilities included in the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for pur- poses related to the Project. Section 3.05. The Borrower shall carry out the training programs under Part E of the Project in accordance with a plan agreed between the Borrower and the Bank. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, -5- unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower, including the Project CHCs, responsible for carrying out the Project or any part there- of. (b) The Borrower shall cause each Project CHC to maintain records adequate to reflect in accordance with consistently main- tained appropriate accounting practices the operations and finan- cial condition of such Project CHC. (c) The Borrower shall cause each Project CHC: (i) to 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 - 6 - consistently applied, by independent auditors acceptable to the Bank; (ii) to 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 audi- tors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) to furnish to the Bank such other information concerning the accounts and financial statements of such Project CHC and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. The Borrower shall cause each Project CHC to at all times operate and maintain its plants, machinery, equip- ment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and administrative practices. Section 4.04. The Borrower shall cause each Project CHC to take out and maintain with responsible 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 4.05. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall take, or cause each Project CHC to take, all such measures (including, but not limited to, adjustments in the structure and levels of tariffs and other charges) as shall be required to ensure that each such Project CHC's total working revenues for each year, commencing January 1, 1986, shall be equivalent to not less than twice its total work- ing expenditures for that year. For the purposes of this Sec- tion: (a) the term "total working expenditures" shall mean the sum of all expenditures related to the Project CHC's operations, including maintenance, administration and all taxes or payments in lieu of taxes (except for income taxes) but excluding depre- ciation charges, and net of interest and other charges on debt, repayment of loans, all cash distribution of surplus, increases in net working capital other than cash, and any other cash out- flows other than cash expenditures related to the Project CHC's operations; and -7- (b) the term "total working revenues" shall mean the sum of revenues from all sources related to the Project CHC's opera- tions. Section 4.06. The Borrower shall: (a) cause each of the Pro- ject CHCs to carry out a study of the annual operating costs incurred by said Project CHC during at least the first full year of operation of its facilities constructed under the Project; and (b) exchange views with the Bank on the terms of reference and findings.of each such study. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely that the the Borrower's State Council shall have approved the Loan Agreement. Section 5.02. The date V 4-, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Sanlihe Beijing People's Republic of China -8- Cable address: Telex: FINAMIN 22486 MFPRC CN Beijing 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) 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. PEOPLE'S REPUBLIC OF CHINA By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President East Asia and Pacific 9 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expen- ditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed Cargo handling 124,000,000 100% of foreign equipment expenditures and 100% of local ex- penditures (ex-factory) TOTAL 124,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the tei .itory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the teLritory 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 respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such - 10 - item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower, reduce the dis- bursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eli- gible for financing out of the proceeds of the Loan. - 11 - SCHEDULE 2 Description of the Project The Project consists if the following Parts: Part A: Huangpu Coal Terminal (1) Construction of a coal wharf of about 440 meters in length, with an alongside depth of 12.5 meters below mean low water level (MLW) with capacity to accomodate two bulk vessels of up to 35,000 deadweight, and a revetment at its northern extremity. (2) Construction of a quay of about 400 meters in length, for barge loading of coal, with an alongside depth of 4 meters Ielow MLW for 200 meters and 3 meters below MLW for the other 200 meters. (3) Reclamation and paving of an area required for a stock- pile yard and ancillary facilities. (4) Dredging for the front of the coal wharf constructed under Part A (1) above, to a depth of about 12.5 meters below MLW; and dredging for the barge quay constructed under Part A (2) above, to the required depth. (5) Construction of auxiliary buildings, a highway bridge, a railway bridge and ancillary facilities. (6) Provision and installation of coal handling equipment. Part B: Huangpu Container Terminal (1) Construction of a container wharf of about 470 meters in length and an alongside depth of 12 meters below MLW, and a revetment at the south side of the said wharf. (2) Reclamation and paving of an area required for a con- tainer yard and ancillary facilities. (3) Dredging of a basin in front of the wharf constructed under Part B (1) above, to a depth of 12 meters below MLW. - 12 - (4) Construction of ancillary buildings, a railway con- tainer freight station, a roadway container freight station and other structures required for the terminal. (5) Provision and installation of container handling equip- ment. Part C: Shanghai Container Terminal (1) Construction of a container wharf of 424 meters in length with an alongside depth of 10.5 meters below MLW. (2) Reclamation and paving of an area required for a con- tainer yard and ancillary facilities. (3) Dredging of a basin in front of the wharf constructed under Part C (1) above, to a depth of 10.5 meters below MLW. (4) Construction of an auxillary transfer station of about 2 kilometers from the terminal with a roadway container freight station, a container yard and ancillary facili- ties. (5) Provision and installation of container handling equip- ment. Part D: Tianjin Container Terminal (1) Construction of a container wharf of about 890 meters in length and an alongside depth of 12 meters below MLW or the local datum. (2) Reclamation and paving of an area required for a con- tainer yard and ancillary facilities. (3) Dredging of a basin in front of the wharf to a depth of 12 meters below MLW or the local datum and dredging of a channel to a depth of 10 meters below MLW or the local datum. (4) Construction of a railway container freight station, a roadway container freight station, ancillary buildings and structures required for the terminal. - 13 - (5) Provision and installation of containe- handling equip- ment. Part E: Staff Training (1) Provision of a program of training for staff in oper- ating procedures for the terminals constructed under Parts A, B, C and D above. (2) Provision of a program of training for staff for the establishment of computerized management information systems for container operations at the terminals con- structed under Parts B, C and D above. Part F: Containerization Study Carrying out and completion by December 31, 1984, of a con- tainerization study of the hinterlands of the ports of Huangpu, Shanghai and Tianjin, to identify inland intermodal terminals, other facilities and transport equipment required to optimize the door to door transport potential of the containerization of cargo through these ports. The Project is expected to be completed by December 31, 1986. -14- SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May 1 and November 1 beginning May 1, 1988 through May 1, 2002 4,135,000 On November 1, 2002 4,085,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 15 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years 1.75% before maturity More than three years but 3.50% not more than six years before maturity More than six years but not 6.40% more than eleven years before maturity More than eleven years but 9.30% not more than sixteen yeab ue-ore maturity More than sixteen years but 10.45% not more than eighteen years before maturity More than eighteen years 11.60% before maturity - 16 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" 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. For goods to be procured on the basis of international com- petitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank 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 de- tail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods 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 the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and simi- lar taxes levied in connection with the sale or delivery, pur- suant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in the People's Republic of China may be granted a margin of - 17 - preference in accordance with, and subject to, the following pro- visions: 1. 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. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in the People's Republic of China if the bidder shall have established to the satisfaction of the Bor- rower and the Bank that the manufacturing cost of such goods includes a value added in the People's Republic of China equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evalu- ated bids shall the-a 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. 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported goods offered in each group C bid, for the purpose of this fur- ther comparison only, an amount equal to: (i) the amount of cus- toms duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such 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 - 18 - shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures Goods estimated to cost less than the equivalent of $200,000 per contract, up to an aggregate amount equivalent to $1,000,000, may be procured under contracts awarded after evaluation and com- parison of quotations solicited from at least three qualified suppliers eligible under the Guidelines. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts to be awarded on the basis of international competitive bidding under Part A of this Schedule: (a) Before bids are invited, the Borrower 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 docu- ments 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 bid- ders. (b) After bids have been received and evaluated, the Bor- rower 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 on the evaluation and compari- son of the bids received, 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 the Borrower and state the reasons for such determination. (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 was invited. - 19 - (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. 2. With respect to each contract not governed by the preceding paragraph, the Borrower 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 con- tract, together with the analysis of the respective quotations, 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 state the rea- sons for such determination. 3. Before agreeing to any material modification or waiver of the terms and 2onditions 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 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change ordec and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. 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 day of ,198 . FOR SECRETARY