Liberia - Second Water Supply Project : Credit 1563 - Project Agreement - Conformed

REDIT NUMBER 1563 LBR Project Agreement (Second Water Supply Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and LIBERIA WATER AND SEWER CORPORATION Dated , 1985 CREDIT NUMBER 1563 LBR PROJECT AGREEMENT AGREEMENT, dated O -Z, 1985, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and LIBERIA WATER AND SEWER CORPORATION (hereinafter called LWSC). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Liberia (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to five million one hundred thousand Special Drawing Rights (SDR 5,100,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that LWSC agrees to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and LWSC, the proceeds of the credit pro- vided for under the Development Credit Agreement will be made available to LWSC on the terms and conditions therein set forth; and WHEREAS LWSC, in consideration of the Association entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) LWSC declares its commitment to the objec- tives of the Project as set forth in Schedule 2 to the Develop- ment Credit Agreement, and, to this end, shall carry out the -2- Project described in said Schedule with due diligence and effi- ciency and in conformity with appropriate administrative, finan- cial, engineering and public utility practices. (b) LWSC shall open, and thereafter maintain with adequate funds, at a commercial bank a project account on terms and condi- tions satisfactory to the Association. The Project Account shall be used exclusively to pay for the reasonable cost of goods and services required for the Project. (c) LWSC: (i) shall pay into the Project Account its contributions to the Project in four semi-annual amounts of $200,000 each the first such payment being made no later than June 30, 1986; and (ii) shall not commence work on the construc- tion components of the Project, namely, the storage reservoir and supply and laying of pipes for the extension of the distribution system until it has paid into the Project Account not less than $550,000 of its contributions herein mentioned. Section 2.02. In order to assist LWSC in carrying out the Project, LWSC shall employ consultants, experts and specialists whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, such consul- tants, experts and specialists to be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works required for the Project and 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. (a) LWSC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit 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 LWSC to replace or repair such goods. -3- (b) LWSC shall cause all goods and services financed out of the proceeds of the Credit made available to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) LWSC 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) LWSC shall: (i) maintain records and procedures ade- quate to record and monitor the progress of the Project (includ- ing its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities and con- struction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by LWSC of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such lb%ter date as may be agreed for this purpose between LWSC and the Association, LWSC shall prepare and furnish to the Association a repoft, 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 LWSC and the Association of their respec- tive obligations under the Project Agreement and the accomplish- ment of the purposes of the Credit. (e) LWSC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, -4- property and equipment of LWSC and any relevant records and docu- ments. Section 2.06. LWSC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, LWSC 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 2.07. (a) LWSC shall, at the request of the Assoria- 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) LWSC 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 LWSC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of LWSC Section 3.01. LWSC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. LWSC shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering and public utility practices. Section 3.03. LWSC shall take out and maintain with respons- ible insurers, or make other provisions satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. (a) LWSC shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and -5- franchises which are necessary or useful in the conduct of its operations. (b) LWSC shall not sell or otherwise dispose of any of its property or assets which shall be required for the efficient conduct of its operations. Section 3.05. (a) Until the completion of the Project, LWSC shall not replace lower-level staff who leave (whether by way of termination, resignation, retirement or death) the service of LWSC. (b) LWSC shall take all action within its power to reduce overstaffing in the ranks of its labor force. Section 3.06. LWSC shall no later than December 31, 1985, furnish to the Association an action plan satisfactory to the Association for: (i) increasing LWSC's operational efficiency, (ii) achieving LWSC's financial goals which include reducing LWSC's operating costs, bad debt expense and unaccounted for water, and (iii) operating LWSC's standpipes by private firms or enterprises licensed by, or under contract to, LWSC to supply water to the public. ARTICLE IV Financial Covenants Section 4.01. (a) LWSC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure. (b) LWSC shall retain, uYtil one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure, and shall enable the Association's representatives to examine such records. -6- Section 4.02. LWSC shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (b) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year: (i) certified copies of its financial statements for such year as so audited, and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Credit made available to it and withdrawn from the -,Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Association such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.03. LWSC shall no later than June 30, 1985 furnish to the Association its audited financial statements for fiscal years 1983 and 1984. Section 4.04. (a) LWSC shall adjust the structure and levels of its tariffs, and carry out a program of selective metering, in accordance with ich of the recommendations of the tariff study commissioned under Credit No. 1223 LBR (Monrovia Urban Develop- ment Project) as shall be acceptable to the Association. (b) Subject to the provisions of paragraph (a) above and except as the Association shall otherwise agree, LWSC: (i) shall take all necessary action (including adjust- ments of the structure or levels of its tariffs) as shall be required to produce, for each of its fiscal years after its fiscal year ending on June 30, 1985, gross revenues from all sources equivalent to not less than its total operating expenses; and -7- (ii) shall not incur any debt, if after the incurrence of such debt the internal cash generation of LWSC for the twelve-month period next preceding the incurrence of such debt would be less than 1.5 times the estimated maximum debt service require- ment of any succeeding fiscal year of LWSC. For the purposes of this paragraph: (A) the term "gross revenues from all sources" means the sum of revenues from all sources related to LWSC's operations, net non- operating income and any reductions in non- cash working capital; (B) the term "total operating expenses" means the sum of all expenses related to LWSC's opera- tions, including: (aa) maintenance and admin- istration (excluding depreciation and other non-cash operating charges for fiscal years 1986 through 1989 but including depreciation and said charges for fiscal years 1990 and after), (bb) interest and other charges pay- able on debt (excluding interest financed under a loan contract) and repayment of loans (including sinking fund payments, if any), before fiscal year 1990, (cc) all taxes or payments in lieu of taxes, (dd) all cash dividends and other cash distributions of surplus, (ee) increase in net working capital other than cash, and (ff) any other cash outflows other than project expenditures financed out of the proceeds of the Credit or of the AfDB Loan; (C) the term "debt" means any indebtedness of LWSC maturing by its terms more than one year after the date on which it is originally incurred; (D) debt shall be deemed to be incurred: (i) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the -8- date of such contract, agreement or instru- ment; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into, but only to the extent that the guaranteed debt shall be outstanding; (E) the term "internal cash generation of LWSC" means gross revenues of LWSC from all sources, adjusted to take account of the LWSC's rates in effect at the time of the incurrence of debt even though they were not in effect during the twelve-month period to which such revenues relate, less all operat- ing expenses of LWSC, including expenses accountable to administration, maintenance and taxes (or payments in lieu of taxes), but before provision for depreciation of assets and interest and other charges on debt; (F) the term "debt service requirement" means the aggregate amount of amortization (including sinking fund payments, if any) of, and interest and other charges on, debt; (G) the term "depreciation" means depreciation on a straight-line basis at a rate of not less than 3.5% per annum of the average current gross value of LWSC's fixed assets in opera- tion: and (H) whenever for the purposes of paragraph (b) 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 lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Associa- tion. -9- 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 LWSC 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 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify LWSC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion 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, rable, 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 designated 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, NoW. Washington, D.C. 20433 United States of Ameri.A - 10 - Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For LWSC: Liberia Water and Sewer Corporation P.O. Box 1079 U.N. Drive and Gurley Street Monrovia Liberia Cable address: Telex: LIWASCO 4533 Monrovia 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 LWSC may be taken or executed by the Managing Director or such other person or persons as LWSC shall designate in writing, and LWSC shall furnish to the Association 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 collectively but one instrument. - 11 - 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 DEVELOPMENT ASSOCIATION By <l Regional Vice President Western Africa LIBERIA WATER AND SEWER CORPORATION By Authorized Representative - 12 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for works included in Part C of the Project shall be prequalified as described in paragraph 2.10 of Part A of the Guidelines. B. Other Procurement Procedures LWSC may undertake repair of distribution valves and standpipes and construction of the meter repair workshop included in Part A.1 of the Project using its own personnel. C. Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 of this Schedule, the procedures set forth in para- graph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be furnished to the Association, pursuant to paragraph 2 (d) of Appendix 1 to the Guidelines, shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. - 13 - (b) With respect to each contract not governed by the pre- ceding paragraph, the prceduce s,t f.orth in paragraph 3 and 4 of Appendix 1 to the Guidelincs shall apply; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be fIu..nishF.d to the Association, pursuant to paragraph 3 of Appendix 1 to the Guidelines together with the other information specified therein, shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 (the Special Account Schedule) to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. 3. The figure of 10% is her.by specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of , 198 FOR SECRETARY