Conformed Copy - L2826 - Greater Casablanca Sewerage Project - Project Agreement

Page 1 LOAN NUMBER 2826 MOR Project Agreement (Greater Casablanca Sewerage Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and REGIE AUTONOME INTERCOMMUNALE DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE CASABLANCA Dated July 27, 1987 LOAN NUMBER 2826 MOR PROJECT AGREEMENT AGREEMENT, dated July 27, 1987, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and REGIE AUTONOME INTERCOMMUNALE DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE CASABLANCA (RAD). WHEREAS (A) by the Loan Agreement of even date herewith between Kingdom of Morocco (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to sixty million dollars ($60,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that RAD agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and RAD, part of the proceeds of the loan provided for under the Loan Agreement will be made available to RAD on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS RAD, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the Page 2 respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. RAD declares its commitment to the objectives of the project as set forth in Schedule 2 to the Loan Agreement and, to this end, shall carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 6 to the Loan Agreement. Section 2.03. (a) In order to assist RAD in carrying out Part A.5 (a) of the Project, RAD shall continue to employ consultants whose qualifications, experience and terms of reference shall be satisfactory to the Bank. RAD shall: furnish to the Bank for the Bank's review and comments, the training program included in said Part of the Project promptly upon the preparation thereof; and thereafter, but in any event not later than July 1, 1988, or such later date as the Bank may agree, commence said training program on the basis of the Bank's comments thereon. (b) In order to assist RAD in carrying out the feasibility studies included in Part A.5 (b) of the Project, RAD shall, not later than November 1, 1987, or such later date as the Bank may agree, employ consultants whose qualifications, experience and terms of reference shall be satisfactory to the Bank. RAD shall: take all measures necessary to ensure that said studies shall be completed and copies thereof, together with the recommendations based thereon, furnished to the Borrower and the Bank for their review and comments not later than May 1, 1990 or such later date than July 1, 1991, or such later date as the Bank may agree; and thereafter, but in any event not later than July 1, 1991, or such later date as the Bank may agree, implement such of said recommendations as shall have been agreed among the Borrower, the Bank and RAD. Section 2.04. (a) RAD shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 the Project Agreement and Part A of the Project. (b) Without limitation on the provisions of paragraph (a) of this Section, RAD shall, not later than the end of each calendar quarter, furnish a report to the Borrower's Ministry of the Interior and to the Bank on the progress of Part A of the Project, such report to include a tabulation of the achievement of RAD's performance on the basis of indicators satisfactory to the Bank. Section 2.05. RAD shall duly perform all its obligations under its Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, RAD shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waving its Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) RAD shall, at the request of the Bank, exchange views with the Bank with regard to progress of Part A of the Project, the performance of its obligations under this Agreement and under its Subsidiary Loan Agreement and other matters relating to the purposes of the Loan. Page 3 (b) RAD shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of Loan, or the performance by RAD of its obligations under this Agreement and under its Subsidiary Loan Agreement. ARTICLE III Management and Operations of RAD Section 3.01. RAD 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. RAD 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 engineering, financial and technical practices. Section 3.03. RAD shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) RAD shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) RAD shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each Fiscal Year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, RAD shall produce, for each of its fiscal years, commencing with its fiscal year ending on December 31, 1987, funds from internal sources equivalent to not less than 40% of the annual average of RAD's capital expenditures incurred, or expected to be incurred, for that year, the previous fiscal year and the next following fiscal year. (b) Before October 31 in each of its fiscal years, RAD shall, on the basis of forecasts prepared by RAD and satisfactory to the Bank, review whether it would meet the requirements set forth in paragraph (a) of this Section in respect of such year and the next Page 4 following fiscal year and shall furnish to the Bank a copu of such review upon its completion. (c) If any such review shows that RAD would not meet the requirements set forth in paragraph (a) of this Section for RAD's fiscal years covered by such review, RAD shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (d) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: (A) the sum of revenues from all sources related to sewerage operations, net non- operating income and any reduction in working capital other than cash but excluding consumer and developer deposits and consumer and developer contributions in aid of construction; and (B) the sum of all expenses related to sewerage operations, including administration, adequate maintenance, taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash distributions of surplus, increase in working capital other than cash and other cash outflows other than capital expenditures. (ii) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to sewerage operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (iii) The term "working capital other than cash" means the difference between current assets excluding cash and current liabilities at the end of each fiscal year. (iv) The term "current assets excluding cash" means all assets other than cash which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inventories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (v) The term "current liabilities" means all liabilities 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 requirements, taxes and payments in lieu of taxes, and dividends. (vi) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vii) The term "capital expenditures" means all Page 5 expenditures incurred on account of fixed assets, including interest charged to construction, related to sewerage operations but excluding capital expenditures financed by consumer and developer deposits or consumer and developer contributions in aid of construction. (viii) Whenever for the purposes of this Section it shall be necessary to value, in terms of Dirham, 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 Bank. Section 4.03. RAD shall promptly bill the Borrower's public agencies (as such term is defined in Section 4.03 of the Loan Agreement) so as to enable said public agencies to fulfill the obligations set forth in Sections 4.03 (a) (i) and 4.03 (a) (ii) of the Loan Agreement. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of RAD thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify RAD thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address 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 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 (RCA) Washington, D.C. 248423 (FTCC) or 64145 (WUI) Page 6 For RAD: Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Casablanca 48 Mohamed Diouri Boite Postale 88 Casablanca Royaume du Maroc Telex: 23008 M 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 RAD may be taken or executed by the Director General of RAD or such other person or persons as said Director General shall designate in writing, and RAD shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Kermal Dervis Acting Regional Vice President Europe, Middle East and North Africa REGIE AUTONOME INTERCOMMUNALE DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE CASABLANCA By /s/ M'hamed Bargach Authorized Representative