Conformed Copy - L2957 - Uttar Pradesh Power Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2957 IN (Uttar Pradesh Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and STATE OF UTTAR PRADESH Dated July 27, 1988 PROJECT AGREEMENT AGREEMENT, dated July 27, 1988 between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and STATE OF UTTAR PRADESH, acting by its Governor (Uttar Pradesh). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred fifty million dollars ($350,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Uttar Pradesh agree to undertake such obligations toward the Bank as are set forth in this Agreement; and WHEREAS Uttar Pradesh, 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 Page 2 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 respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. Uttar Pradesh declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall cause the Board to carry out 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 the Project. Section 2.02. Uttar Pradesh shall relend to the Board the proceeds of the Loan made available by the Borrower to Uttar Pradesh under terms and conditions satisfactory to the Bank, which shall, except as the Bank may otherwise agree, include interest at a rate of not less than 10.25% per annum on the principal amount so relent and withdrawn by the Board and outstanding from time to time, and repayment over a period of twenty years, including therein a period of grace of five years. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. Uttar Pradesh shall carry out or cause to be carried 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. Section 2.05. (a) Uttar Pradesh shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Loan. (b) Uttar Pradesh shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by Uttar Pradesh of its obligations under this Agreement. Section 2.06. Uttar Pradesh shall implement or cause to be implemented the Rehabilitation and Resettlement Plan in accordance with the principles and objectives and institutional arrangements agreed with the Bank. Section 2.07. Uttar Pradesh shall cause the Board to complete all surveys and collect necessary data, and make a formal appli- cation to the appropriate authorities by December 31, 1988 to obtain clearance required under the Forests (Conservation) Act, 1980, of the Borrower for the purposes of installation of 400 kV transmission lines for the evacuation of power from the hydro power station to be constructed under Part A of the Project. ARTICLE III Management and Operations of the Board Section 3.01. Uttar Pradesh shall cause the Board to: (i) Page 3 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; (ii) 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 public utility practices; and (iii) 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 appro- priate practice. Section 3.02. Without limiting the generality of the foregoing provisions of this Article, Uttar Pradesh shall cause the Board to ensure that, under arrangements satisfactory to the Bank, the dams and related structures constructed under Part A of the Project, shall be periodically inspected in accordance with sound engineering practice in order to determine whether there are any deficiencies in the condition of such structures, or in the quality and adequacy of maintenance or methods of operations of the same, which may endanger their safety. To this end, the Board shall propose to the Bank appropriate arrangements for the Bank's review no later than one year before the expected completion of such structures. Section 3.03. (a) In order to strengthen the institutional capacity and financial viability of the Board, Uttar Pradesh shall, and shall cause the Board to, implement the Action Plan in a timely manner. (b) In order to enable the Bank to monitor the imple- mentation of the Action Plan, Uttar Pradesh shall cause the Board to furnish to the Bank: (i) commencing September 30, 1988, quarterly progress reports indicating the progress attained in imple- menting the measures included in the Action Plan; and (ii) commencing December 31, 1988, annual progress reports on the financial performance for the ensuing financial year specifying the actions to be taken to meet the financial targets specified in the Action Plan, and updated financial projections for the next five years. Section 3.04. (a) Uttar Pradesh shall take all such action as shall be necessary to ensure that all undisputed arrears due to the Board from Uttar Pradesh, including its departments and agencies as of August 31, 1987, are cleared by no later than March 31, 1989. (b) Uttar Pradesh shall prepare and furnish to the Bank by December 31, 1988, a program to ensure that commencing April 1, 1989, all of its agencies pay their electricity bills within 60 days of billing. ARTICLE IV Particular Covenants Section 4.01. Uttar Pradesh shall cause the Board to: (a) maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition; (b) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each financial year audited, in accordance with appropriate auditing principles consistently applied, by Page 4 independent auditors acceptable to the Bank; (c) commencing financial year 1989/90, furnish to the Bank 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 Bank shall have reasonably requested; and (d) 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. Notwithstanding the foregoing provisions of Section 4.01 of this Agreement, Uttar Pradesh shall cause the Board to furnish the audited accounts, together with the auditor's report, to the Bank, in respect of the Board's accounts for finan- cial years 1987/88 and 1988/89, within 12 months after the end of each such financial year. Section 4.03. (a) Uttar Pradesh shall cause the Board to take from time to time all such measures as may be necessary including, if necessary, adjustment of tariffs of the Board to ensure that, except as the Bank shall otherwise agree, commencing financial year 1990/91, the total revenues in any financial year shall, after meeting: (i) all expenses properly chargeable to revenues, including operating maintenance and management expenses; (ii) taxes on income and profits; (iii) depreciation; and (iv) interest payable on all debentures, bonds and loans; produce such surplus as is not less than 3% of the net fixed assets of the Board in service at the beginning of such year. (b) For the purposes of this Section: (i) "total revenues" means revenues of the Board from the sale of electricity and other services, miscel- laneous income, rural electrification subsidies received from Uttar Pradesh, state electricity duties received, and such other subventions as shall be made in respect of extraordinary costs which are borne by the Board and which should not reasonably be borne by customers of the Board; (ii) "expenses" means the cost of power purchased, fuel operating, maintenance, management and administra- tive expenses, and all taxes and duties accruing during the financial year, other than taxes on income and profits of the Board; (iii) "taxes on income and profits" consists of income taxes and other levies accrued by the Board according to the provisions of any legislation or regulation applicable in this respect; (iv) "depreciation" means a provision derived in accor- dance with the straight-line method based on the useful life of assets as stipulated in the Borrower's notification issued under the provisions of Section 68 of the Electricity (Supply) Act 1948, of the Borrower, based on the gross value of the Board's fixed assets in service at the beginning of each year; (v) "interest payable on all debentures, bonds and loans" means all interest, excluding interest during construction, accrued by the Board during the financial year and all other charges on debt; and (vi) "net fixed assets of the Board in service" means the original cost of such fixed assets, as reduced Page 5 by the aggregate of the cumulative depreciation in respect of such assets, less consumers' contri- bution for service lines, also reduced by the aggregate of the cumulative depreciation in respect of such portion of the service lines as has been financed by consumer contributions. 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 Uttar Pradesh thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Uttar Pradesh 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 desig- nated 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 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For Uttar Pradesh: Secretary to the Government of Uttar Pradesh Department of Power Lucknow, Uttar Pradesh India Cable address: POWER Lucknow 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 Uttar Pradesh may be taken or executed by a Secretary to the Government of Uttar Pradesh or such other person or persons as Uttar Pradesh shall designate in writing, and Uttar Pradesh shall furnish to the Bank sufficient evidence of the Page 6 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 collec- tively 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/ Bilsel Alisbah Acting Regional Vice President Asia STATE OF UTTAR PRADESH By /s/ N. Misra Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part D 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). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in India may be granted a 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: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A hereof, a margin of preference to domestic contractors may be granted in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and para- graph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Contracts for civil works and equipment estimated to cost the equivalent of $15,000,000 and $200,000 each or less, respectively, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. Page 7 2. Contracts for specialized instruments estimated to cost the equivalent of $500,000 in the aggregate may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part E: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for civil works and equip- ment estimated to cost the equivalent of $15,000,000 and $200,000 or more, respectively, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where 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 Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank 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 preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said 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 Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be fur- nished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Board in carrying out the Project, Uttar Pradesh shall cause the Board to employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981.