Bolivia - Vuelta Grande Gas Recycling Project : Credit 1719 - Project Agreement - Conformed

OFFICIAL [ DOCUM N REDIT NIMBER 1719 BO Project Agreement (Vuelta Grande Gas Recycling Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and YACIMIENTOS PETROLIFEROS FISCALES IBOLIVIANOS Dated ; , 1986 CREDIT NUMBER 1719 BO PROJECT AGREEMENT AGREEMENT, dated , 1986, between the INTERNATIONAL DEVELO MENT ASSOCIATION (the Association) and YACIMIENTOS PETROLIFEROS FISCALES BOLIVIANOS (YPFB), an entity wholly owned by, and established and operating under the laws of, the REPUBLIC OF BOLIVIA. WHEREAS (A) by the Development Credit Agreement of even date herewith between the REPUBLIC OF BOLIVIA (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twelve million eight hundred thousand Special Drawing Rights (SDR 12,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that YPFB agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a Subsidiary Loan Agreement to be entered into between the Borrower and YPFB, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to YPFB on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS YPFB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto Lereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this 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. YPFB declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development -2- Credit Agreement and, to this end, shall carry out the Project with due diligence and efficiency, in conformity with appropriate administrative, managerial, financial, engineering and petroleum industry practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. (a) Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. (b) Without limitation to the provisions of paragraph (a) of this Section, YPFB shall procure the goods, works and consul- tants' services for the Project in accordance with the YPFB Procurement Manual. Section 2.03. YPFB shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project. Section 2.04. YPFB shall enter into and duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, YPFB shall not take or concur in any action which would have the effect of amending, abroga- ting, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) YPFB shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) YPFB 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 YPFB of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. YPFB shall: (a) maintain through Project completion, a Project Unit with membership and responsibilities -3- acceptable to the Association, for purposes of coordinating and supervising implementation of the Project; (b) provi.- the Project Unit with adequate staff, funds, resources and facilities to carry out its coordinating, supervising and other responsibi- lities under the Project; (c) appoint a Project Coordinator who shall head the Project Unit and who shall have qualifications and experience satisfactory to the Association; and (d) cnsult with the Association, and obtain the consent of the Association, prior to making any changes in the membership or responsibilities of the Project Unit. Section 2.07. YPFB shall cause the Project Unit to provide quarterly reports of the progress of implementing the Project, within forty-five days after the end of each quarter in YPFB's Fiscal Year. . Section 2.08. (a) In order to assist YPFB in the instal- lation and initial operation of the gas processing plant under Part A.2 of the Project, YPFB shall assign consultants' services under Part C of the Project, to the Project Unit, through com- pletion of the Project. (b) The consultants referred to in the preceding paragraph shall be hired not later than July 30, 1986. Section 2.09. YPFB shall take all action necessary or appro- priate to assist the Borrower in complying with the requirements of Articles III and IV of the Development Credit Agreement. ARTICLE III Management and Operations of YPFB Section 3.01. YPFB shall carry on its operations and con- duct its affairs, including the operations and affairs of the Subsidiary, in accordance with sound administrative, managerial, financial, engineering and petroleum industry practices, under the supervision of qualified and experienced management, assisted by competent staff in adequate numbers. Section 3.02. YPFB shall operate and maintain, and shall cause the Subsidiary to operate and maintain, at all times, their respective plant, machinery, equipment and other property, and from time to time, prompt'y as needed, make all necessary repairs and renewals thereof, all in accordance with sound financial, engineering and petroleum industry practices. -4- Section 3.03. YPFB shall take out and maintain with respon- sible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. YPFB shall: (a) under terms of reference satisfactory to the Associa- tion, carry out, by not later than December 31, 1986, a study of the staff policies of YPFB; (b) promptly upon completion of the study, furnish to the Association for its review and comment, the results of such study and propose a preliminary plan of action to increase efficiency and effectiveness of the managerial, technical and professional staff levels of YPFB; (c) taking into consideration the results of the study and the comments of the Association, by not later than March 31, 1987, propose a final plan of action for achieving such improve- ments and a timetable for the implementation of such plan, acceptable to the Association; and (d) implement such plan in accordance with the agreed time- table, provided, however, that such implementation shall begin by not later than June 30, 1987. Section 3.05. (a) By not later than October 31 of each year, YPFB shall review, together with the Borrower and the Associa- tion, the Annual Capital Investment Plan for the Fiscal Year, and to be carried out during the next Fiscal Year, as well as YPFB's overall financial situation; such review shall include the specific financial requirements for implementing each such Plan, potential private sector promotion and investment, proposed pricing action, and any other financial measures that may be taken during the next Fiscal Year. (b) Except as the Association shall otherwise agree, YPFB shall take all action and measures necessary to carry out each such Annual Capital Investment Plan. Section 3.06. (a) Except as the Association shall otherwise agree, YPFB and the Subsidiary shall not incur any debt, if after the incurrence of such debt, the ratio of debt to equity shall be greater than 40 to 60. -5- (b) For purposes of this Section and Sections 3.07 and 3.08: (i) the term "debt" means any indebtedness of YPFB or the Subsidiary, maturing by its terms more than one year after the date on which it was originally incurred; (ii) debt shall be deemed to be incurred: (A) under a loan contract or agreement, or other instrument providing for such debt, or for the modification of its terms of payment, on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; (iii) the term "equity" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of YPFB and the Subsidiary, not allocated to cover specific liabilities; and (iv) if 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 accept- able to the Association. (c) YPFB and the Subsidiary shall obtain the consent of the Association, prior to undertaking any investment or any commit- ment to invest, which is not included in the relevant Annual Capital Investment Plan and which would result in incurring debt of the equivalent of $10,000,000 or more. Section 3.07. (a) Except as the Association shall otherwise agree, YPFB and the Subsidiary shall not incur any debt, unless a reasonable forecast of the revenues and expenditures of YPFB and the Subsidiary show that the estimated net revenues of YPFB and the Subsidiary, for each Fiscal Year during the term of the debt to be incurred, shall be at least two (2) times the estimated debt service requirements of YPFB and the Subsidiary in such -6- year, on all debt of YPFB and the Subsidiary, including the debt to be incurred. (b) For the purposes of this Section and Section 3.08: (i) the term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations and net non-operating income; and (B) the sum of all expenses related to opera- tions, including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depre- ciation, other non-cash operating charges, interest and other charges on debt; (ii) the term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above; (iii) the term "debt service requirements" means the aggregate of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt; and (iv) the term "reasonable forecast" means a forecast prepared by YPFB for itself and the Subsidiary, not earlier than twelve months prior to the incur- rence of the debt in question, which both the Association and YPFB accept as reasonable and as to which the Association has notified YPFB of its acceptability, provided that no event has occurred since such notification which has, or may reason- ably be expected in the future to have, a mate- rial adverse effect on the financial condition or future operating results of YPFB and the Subsidiary. -7- Section 3.08. (a) Except as the Association shall otherwise agree, YPFB shall maintain a ratio of quick assets to current liabilities of not less than 1.1. (b) Before October 31 in each of its Fiscal Years, YPFB shall review, on the basis of forecasts prepared by YPFB that shall be acceptable to the Association, whether it would meet the requirements set forth in paragraph (a) in respect of such Fiscal Year and the next following Fiscal Year and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that YPFB would not meet the requirements set forth in paragraph (a) for YPFB's Fiscal Years covered by such review, YPFB shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its prices) in order to meet such require- ments. (d) For the purposes of this Section: (i) the term "quick assets" means cash, all assets, excluding inventories, which could in the urdinary course of business be converted into cash within twelve months, including accounts receivable, convertible securities, and pre-paid, expenses properly chargeable to operating expenses within the next Fiscal Year; and (ii) the term "current liabilities" means all liabili- ties which will become due and payable, or could under circumstances then existing be called for payment, within twelve months, including accounts payable, customer advances, debt service require- ments, taxes and payments in lieu of taxes, and dividends. Section 3.09. (a) YPFB shall, at all times, maintain its legal existence and right to carry on operations, and shall, except as the Association shall otherwise agree, take all steps necessary to acquire, maintain and renew such licenses, consents, franchises or other rights, necessary or appropriate, for its operations and the implementation of the Project. (b) Except as the Bank shall otherwise agree, the Borrower shall not sell, lease, transfer or otherwise dispose of any of -8- its property or assets which shall be required for the efficient operation of its business, including the carrying out of the Project. Section 3.10. YPFB shall take and cause to be taken, all action as shall be required to ensure that its operations, including the Project, are carried out in conformity with appro- priate pollution control and ecological standards. Section 3.11. YPFB shall: (i) establish by the Effective Date of the Credit, and maintain until the Closing Date, in the Central Bank of the Borrower or in a commercial bank acceptable to the Association, a Project Account in national currency, on terms and conditions satisfactory to the Association; (ii) make payments out of the Project Account exclu- sively for expenditures for goods, works and consultants' services required for the Project; and (iii) deposit into the Project Account: (A) an initial deposit of the equivalent of $1,000,000; and (B) at two month intervals, beginning the second month after the establishment of the Project Account, an amount at least equal to the aggregate of payments made during the previous two months for expenditures under the Project not financed from the proceeds of the Credit; and (C) all amounts necessary to maintain a minimum balance in such account of the equivalent of $250,000. ARTICLE IV Financial Covenants Section 4.01. (a) YPFB shall maintain records and accounts adequate to reflect, in accordance with consistently maintained sound accounting practices, its operations and financial condi- tion and the operations and financial condition of the Subsi- diary, including separate records and accounto to reflect the operations, resources and expenditures in respect of the Project. 9 (b) YPFB shall: (i) have its accounts, financial statements (balance sheets, statements of income and expenses and related statements), and the accounts and finan- cial statements of the Subsidiary, for each Fiscal Year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year: (A) certified copies of the financial statements for such year as so audited and (B) the reports of such audits by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said accounts and financial statements as well as the audits thereof, and such records, as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of Statements of Expenditure, YPFB shall: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associa- tion has received the audit report for the Fiscal Year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) - 10 - of this Section and that the report thereof con- tains, in respect of such separate accounts, a separate opinion by said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. Section 4.02. YPFB shall extend its internal auditing to include the Material Departments of YPFB, and any other depart- ment or subsidiary that may be created by YPFB. 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 YPFB 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) the date thirty 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 YPFB of this event. Section 5.03. All the provisions of this Agreement shall continue in 'ull 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 - 11 - the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have 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, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For YPFB: Yacimientos Petroliferos Fiscales Bolivianos Casilla 401 La Paz, Bolivia Cable address: Telex: YACIBOL BX 5267 La Paz, Bolivia 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 YPFB, or by YPFB on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the President of YPFB or such other person or persons as the President of YPFB shall designate in writing, and YPF' -hall furnish to the Association sufficient evidence of the aut-,j-ity 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. - 12 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 Regional Vice President Latin America and the Caribbean YACIMIENTOS PETROLIFEROS FISCALES BOLIVIANOS By Authorized Representative - 13 - SCHEDULE I Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and 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 the works included in Part A of the Project shall be prequalified as described in paragraph 2.10 of the Guidelines. 3. To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost the equivalent of $250,000 or more each. Part B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Bolivia may be granted a 15% margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C. Other Procurement Procedures Well services under Part A (1) of the Project, goods and services required for modification of existing compressors for use in the Vuelta Grande gas processing and injection plant under Part A (2) of the Project, and goods which are proprietary in nature and of limited international supply under Part A (2) of the Project, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the Guidelines from at least two countries, and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof), provided, however, - 14 - that the estimated cost of each such contract is less than the equivalent of $250,000, and the aggregate amount of all such contracts does not exceed the equivalent of $5,500,000. Part D. Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 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 $250,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. When payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. When payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraph.e (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the "redit Account on the basis of statements of expenditure. Su. contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement and Section 4.01 (c) (ii) of the Development Credit Agreement. 3. The figure of 10% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. - 15 - Section II. Employment of Consultants In order to as sist YPFB in carrying out the Project, YPFB shall employ consultants whose qualifications, experience, terms of reference and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satis- factory 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. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY