Conformed Copy - C1819 - Petroleum Refining and Distribution Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1819 GH (Petroleum Refining and Distribution Project) between REPUBLIC OF GHANA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated September 21, 1987 CREDIT NUMBER 1819 GH DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated September 21, 1987, between REPUBLIC OF GHANA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) Part A of the Project will be carried out by GHAIP and Parts B and C of the Project will be carried out by GOIL with the Borrower's assistance and, as part of such assistance, the Borrower will make available to GHAIP and GOIL, respectively, the proceeds of the Credit as provided in this Agreement; (C) the Borrower intends to contract from the European Investment Bank (EIB) a credit in an amount equivalent to about $6,500,000 to assist in financing Part A of the Project on the Page 2 terms and conditions set forth in an agreement to be entered into between the Borrower and EIB; (D) the Borrower intends to obtain from the Federal Republic of Germany through Kreditanstalt fur Wiederaufbau (KfW) a credit in an amount equivalent to about 16 million deutsche mark to assist in financing Part B of the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and KfW; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association, GHAIP and GOIL; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.O1. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.O2. 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 additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association, GHAIP and GOIL of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "GHAIP Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and GHAIP pursuant to Section 3.O1 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the GHAIP Subsidiary Loan Agreement; (c) "GOIL Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and GOIL pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the GOIL Subsidiary Loan Agreement; (d) "Subsidiary Loan Agreements" mean the GHAIP Subsidiary Loan Agreement and the GOIL Subsidiary Loan Agreement; (e) "GHAIP" means the Ghanaian Italian Petroleum Company Limited; (f) "GOIL" means the Ghana Oil Company Limited; (g) "MFP" means the Ministry of the Borrower responsible for fuel and power; (h) "VLTC" means the Volta Lake Transportation Company Limited; (i) "Special Accounts" means the accounts referred to in Section 2.02 (b) of this Agreement; and (j) "Project" means with respect to: (i) GHAIP, Part A of the Project, and (ii) GOIL, Parts B and C of the Project. ARTICLE II Page 3 The Credit Section 2.O1. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to eleven million seven hundred thousand Special Drawing Rights (SDR 11,700,000). Section 2.O2. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association 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 Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars two special accounts in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 3 to this Agreement. One of the Special Accounts shall be used for expen- ditures made under the Project by GHAIP and the other Special Account shall be used for expenditures made under the Project by GOIL. Section 2.O3. The Closing Date shall be December 31, 1991 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the Credit not withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.O5. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.O6. Commitment charges and service charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.O7. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 15 and November 15 commencing November 15, 1997, and ending May 15, 2037. Each installment to and including the installment payable on May 15, 2007 shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half percent (1-1/2%) of such principal amount. Section 2.O8. The currency of the United States of America is hereby specified for the purposes of Section 4.O2 of the General Conditions. Section 2.09. GHAIP (for Part A of the Project) and GOIL (for Parts B and C of the Project) are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.O2 of this Agreement and Article V of the General Conditions. Page 4 ARTICLE III Execution of the Project Section 3.O1. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause GHAIP and GOIL to perform in accordance with the provisions of the Project Agreement all the obligations of GHAIP and GOIL therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable GHAIP and GOIL to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit to GHAIP and GOIL under two subsidiary loan agreements, the first to be entered into between the Borrower and GHAIP, and the second to be entered into between the Borrower and GOIL, under terms and conditions which shall have been approved by the Association. The said terms and conditions shall include an interest rate equal to 1.1 times the prevailing interest rate applicable to Bank Loans, repayment of principal over a period of 15 years including a grace period of 3 years and the assumption by GHAIP and GOIL, respectively, of the risk of fluctuations in the value of currencies so relent to them. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreements or any provision thereof. Section 3.02. 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 the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that 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, respectively) in respect of Part A of the Project shall be carried out by GHAIP, and in respect of Parts B and C of the Project shall be carried out by GOIL pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall, by December 31, 1987, introduce a new petroleum pricing system satisfactory to the Association. Section 3.05. The Borrower shall cause all outstanding arrears of debt between GOIL and other state-owned enterprises to be settled in accordance with a timetable satisfactory to the Association. Section 3.06. The Borrower shall: (i) prepare a report which shall evaluate the socio-economic impact of the facilities provided under Part C (2) of the Project on farmers' reseller outlets in the rural areas; and (ii) furnish the report to the Association for its review no later than the earlier of the following dates, namely, a date two months after the date of the report's completion or June 30, 1989. Section 3.07. (a) The Borrower shall cause VLTC and GOIL to enter into an agreement satisfactory to the Association no later than December 31, 1987, for the bulk transport by the Volta Lake Page 5 of GOIL's petroleum products. (b) The Borrower shall cause VLTC to provide no later than December 31, 1989, the water-side facilities (petroleum barges and jetties) required for movement of petroleum products on the Volta Lake. Section 3.08. The Borrower shall: (i) jointly review with the Association the report of the management improvement study for GHAIP and GOIL commissioned by the Borrower; and (ii) no later than December 31, 1987: (A) prepare jointly with GHAIP and GOIL a plan of action satisfactory to the Association for the carrying out of such of the recommendations of the said report as the Association and the Borrower shall have agreed; and (B) furnish to the Association the said plan of action. The Borrower shall thereafter cause the agreed recommendations to be carried out in accordance with the plan of action. Section 3.09. The Borrower shall ensure that with effect from fiscal year 1988, GHAIP establishes its refinery processing margin in accordance with a schedule and criteria satisfactory to the Association. Section 3.10. The Borrower undertakes to maintain petroleum prices at or above international petroleum price levels. Section 3.11. The Borrower shall by January 1, 1988 bring into effect the final arrangements for the bulk procurement of crude oil and bulk marketing of petroleum products referred to in Section 5.01 of this Agreement. ARTICLE IV Remedies of the Association Section 4.O1. Pursuant to Section 6.O2 (h) of the General Conditions, the following additional events are specified: (a) GHAIP and GOIL shall have failed to perform any of their obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that GHAIP or GOIL will be able to perform their respective obligations under the Project Agreement. (c) The regulations of GHAIP or GOIL shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of GHAIP or GOIL to perform any of their respective obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of GHAIP or GOIL or for the suspension of their respective operations. (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any grant or loan or credit made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such loan or credit shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply Page 6 if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.O2. Pursuant to Section 7.Ol (d) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; (b) the events specified in paragraphs (c) and (d) of Section 4.01 of this Agreement shall occur; and (c) the event specified in paragraph (e) (i) (B) of Section 4.01 of this Agreement shall occur, subject to the proviso of subparagraph (ii) of that paragraph. ARTICLE V Effective Date; Termination Section 5.O1. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.O1 (b) of the General Conditions: (a) the GHAIP Subsidiary Loan Agreement has been executed on behalf of the Borrower and GHAIP; (b) the GOIL Subsidiary Loan Agreement has been executed on behalf of the Borrower and GOIL; (c) an arrangement, satisfactory to the Association, has been made for the bulk procurement of crude oil and bulk marketing of petroleum products; (d) a Managing Director has been appointed at GOIL with qualifications and experience in oil marketing; and (e) establishment of a petroleum pricing system, satis- factory to the Association, which is based on the recommendations of the pricing study commissioned by the Borrower. Section 5.O2. The following are specified as additional matters, within the meaning of Section 12.O2 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by GHAIP and GOIL and is legally binding upon GHAIP and GOIL in accordance with its terms; (b) that the GHAIP Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and GHAIP and is legally binding upon the Borrower and GHAIP in accordance with its terms; and (c) that the GOIL Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and GOIL and is legally binding upon the Borrower and GOIL in accordance with its terms. Section 5.O3. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section l2.O4 of the General Conditions. Page 7 ARTICLE VI Representative of the Borrower; Addresses Section 6.O1. The PNDC Secretary for Finance and Economic Planning is designated as representative of the Borrower for the purposes of Section ll.O3 of the General Conditions. Section 6.O2. The following addresses are specified for the purposes of Section ll.Ol of the General Conditions: For the Borrower: PNDC Secretary for Finance and Economic Planning Ministry of Finance and Economic Planning P.O. Box M.40 Accra, Ghana Cable address: Telex: ECONOMICON 2205 MIFA EPGH Accra For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 2O433 United States of America Cable address: Telex: INDEVAS 44OO98 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. REPUBLIC OF GHANA By /s/ Eric Otoo Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V. K. Jaycox Regional Vice President Africa SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the Page 8 amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil Works: (a) Part A of the 235,000) Project ) ) 100% ) (b) Parts B and C 625,000) of the Project ) (2) Equipment and materials: (a) Part A of the 545,000) Project ) 100% of foreign ) expenditures (b) Parts B and C 8,425,000) of the Project ) (3) Consultants' services and Project Management: (a) Part A of 310,000) the Project ) ) 100% (b) Parts B and C 155,000) of the Project ) Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Training for Part C 235,000 100% of the Project (5) Unallocated 1,170,000 ___________ TOTAL 11,700,000 2. For the purposes of this Schedule the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding an amount equivalent to SDR 625,000, may be made in respect of Categories (2) (a) and (3) (a) on account of payments made for expenditures before that date but after January 1, 1987. SCHEDULE 2 Description of the Project Page 9 The objectives of the Project are: (i) to rationalize the Borrower's investment plan in the petroleum refinery and distribution subsector; (ii) to increase the reliability, and reduce the cost, of supply and distribution of petroleum products in the country; (iii) to further reduce oil pollution related to GHAIP's operations at Tema; (iv) to assist the bulk transport of petroleum products via the Volta Lake to the Northern and Upper Regions of Ghana and to neighboring countries; (v) to improve the movement of agricultural products in the remote areas; (vi) to counter deforestation with the increased availability of kerosene and liquified petroleum gas (LPG); (vii) to restructure the operating/earning basis of GHAIP's Tema refinery and to rationalize responsibility for bulk marketing of petroleum products; and (viii) to strengthen GHAIP and GOIL by ensuring that they operate on a commercial basis. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Rehabilitation of GHAIP's refinery and (i) acquisition of equipment for offsite facilities, utility systems, LPG handling facilities, product shipping facilities, and distillation unit; and (ii) acquisition of vehicles. Part B: 1. Rehabilitation of GOIL's petroleum storage facilities at Takoradi and Kumasi. 2. Construction and equipping of the following facilities at Akosombo and Buipe: (i) storage tanks; (ii) product transfer facilities; and (iii) waterside facilities (supply of petroleum barges and construction of jetty facilities). 3. Rehabilitation of GOIL's retail outlets network. Part C: 1. Expansion of GOIL's LPG storage and filling facilities including the construction of about 3 new plants and acquisition of materials, equipment and vehicles. 2. Construction of facilities and equipment for farmers' service reseller outlets of petroleum products; and acquisition of vehicles for Project work. 3. The carrying out of a program satisfactory to the Association for the training of GOIL's managerial and operational personnel, and provision to GOIL of computer facilities. * * * The Project is expected to be completed by June 30, 1991. SCHEDULE 3 Special Accounts 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit Page 10 allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means the following amounts to be withdrawn from the Credit Account and deposited in the Special Accounts pursuant to paragraph 3 (a) of this Schedule equivalent to: (i) $200,000 with respect to the Special Account to be used by GHAIP for expenditures made by GHAIP under the Project; and (ii) $750,000 with respect to the Special Account to be used by GOIL for expenditures made by GOIL under the Project. 2. Except as the Association shall otherwise agree, payments out of a Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that a Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Asso- ciation from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of a Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into a Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to the eligible Categories less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further Page 11 withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of a Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in a Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account.