Conformed Copy - C1985 - Second Water Supply Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1985 GUI (Second Water Supply Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NATIONALE DES EAUX DE GUINEE Dated May 3, 1989 CREDIT NUMBER 1985 GUI PROJECT AGREEMENT AGREEMENT, dated May 3, 1989, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and the SOCIETE NATIONALE DES EAUX DE GUINEE (SONEG). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Guinea (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty- nine million three hundred thousand Special Drawing Rights (SDR 29,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SONEG agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a Subsidiary Financing Agreement to be entered into between the Borrower and SONEG, the proceeds of the credit provided for under the Development Credit Agreement will be made available to SONEG on the terms and conditions set forth in said Page 2 Subsidiary Financing Agreement; and WHEREAS SONEG, 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 hereby 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. (a) SONEG declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out the - 2 - Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and water supply practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) SONEG shall entrust the operation of its water supply system to SEEG pursuant to the Lease Contract. (c) SONEG shall, for the purposes of the Project, open and maintain in dollars a special account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 3 to the Development Credit Agreement. Section 2.02. 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 the Schedule to this Agreement. Section 2.03. SONEG 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, respectively) in respect of the Project Agreement. Section 2.04. SONEG shall duly perform all its obligations under the Subsidiary Financing Agreement. Except as the Associa- tion shall otherwise agree, SONEG shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Financing Agreement or any provision thereof. Section 2.05. (a) SONEG 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 Financing Agreement, and other matters relating to the purposes of the Credit. (b) SONEG shall promptly inform the Association and the Borrower of any condition which interferes or threatens to inter- fere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by SONEG of its obliga- Page 3 tions under this Agreement and under the Subsidiary Financing Agreement. - 3 - Section 2.06. SONEG shall, not later than October 31 of each year starting with 1989, submit to the Association for its review: (a) its proposed operating and capital expenditure budgets for the following year; (b) financial forecasts for the following three years; (c) a detailed training program for the following year; and (d) a draft revised version of the Contrat-Plan with the Borrower covering the following three years. Section 2.07. SONEG shall, not later than December 31, 1989, submit to the Association for its review new accounting proce- dures, including the preparation of consolidated sectoral accounts. Section 2.08. SONEG shall, starting not later than December 31, 1989, maintain its staffing at a level not exceeding 60 staff. Section 2.09. SONEG shall: (a) cause SEEG to prepare and thereafter monitor and update on a six-monthly basis a program for carrying out Part C of the Project, including proposed financing and procurement methods in accordance with the Schedule to this Agreement; and (b) submit such program and updates thereof to the Associa- tion for its review. Section 2.10. SONEG shall: (a) cause SEEG to report perio- dically to SONEG on its operating and financial performance; and (b) forward such information to the Association in such detail as the Association shall reasonably request. Section 2.11. SONEG and SEEG shall consult each other to decide on the construction of new standpipes in Conakry and secondary urban centers. ARTICLE III Management and Operations of SONEG Section 3.01. SONEG shall, and shall cause SEEG to, carry on its operations and conduct its affairs in accordance with sound - 4 - administrative, financial, engineering and water supply practices with qualified and experienced personnel in adequate numbers. Section 3.02. SONEG 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 water supply practices. Section 3.03. SONEG shall take out and maintain with respon- sible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) SONEG shall maintain records and accounts Page 4 adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SONEG 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than eight 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 Association shall have reasonably requested; (iii) without limitation to the provisions of paragraph (b)(ii) of this Section, furnish to the Association as soon as available, but in any case not later than two months after the end of each four-month period: (A) audited statements of water dis- tributed, billed and collected, of the Special Account and of the records and accounts referred to - 5 - in paragraph (c) of this Section, and (B) the report of the four-monthly audit by said auditors, of such scope and in such detail as the Association shall have reasonably determined; and (iv) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, 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, SONEG shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Associa- tion has received the audit 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 records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the proce- dures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) SONEG shall: (i) maintain a single rate on water use applicable to Page 5 all users for a period ending not earlier than one year after the completion of the installation of water meters on all service connections; and - 6 - (ii) thereafter, maintain, except as the Association shall otherwise agree, its lowest rate applicable to any category of customers at a level not less than 1.2 times the average consolidated water supply operating costs, calculated by adding the lease contractor rate to SONEG's average operating expenses per cubic meter of water distributed, billed and collected. (b) For the purposes of this Section, the term "operating expenses" means total operating expenses, as defined in Section 4.06 (d)(iv) of this Agreement, minus provision for depreciation. Section 4.03. SONEG shall not, until the Project shall have been completed, make any new investment estimated to cost the equivalent of more than $1,000,000 each, unless such investment shall, in the opinion of the Association, be technically, finan- cially and economically viable based on detailed financing plans and forecasts submitted to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, SONEG shall not incur any debt unless a reasonable forecast of the revenues and expenses of SONEG shows that the estimated net revenues of SONEG for each fiscal year during the term of the debt to be incurred shall be at least equal to the estimated debt service requirements of SONEG in such year on all debt of SONEG including the debt to be incurred, but excluding the debt borne by the Borrower pursuant to the Contrat-Plan. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of SONEG maturing by its terms more than one year after the date on which it is 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 "net revenues" means the difference between: - 7 - (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 operations including administration, adequate mainte- nance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) 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 Page 6 lieu of taxes, incurred in the generation of revenues in (A) above. (v) The term "debt service requirements" means the aggregate of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) The term "reasonable forecast" means a forecast prepared by SONEG not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and SONEG accept as reasonable and as to which the Association has notified SONEG of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of SONEG. (vii) Whenever for the purposes of this Section 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 Association. - 8 - Section 4.05. SONEG shall, each year, carry out a pro forma revaluation of the net value of its fixed assets, to such extent as shall be necessary to reflect adequately, at the time of each such revaluation, the current value thereof in accordance with a sound and consistently applied method of valuation, acceptable to the Association. Section 4.06. (a) Except as the Association shall otherwise agree, SONEG shall earn, for each of its fiscal years from 1991 to 1993, an annual return of not less than 1.5% of the average current net value of SONEG's fixed assets in operation, and for each of its fiscal years thereafter an annual return of not less than 2.5% of said value. (b) Before September 30 in each of its fiscal years, SONEG shall, on the basis of forecasts prepared by SONEG and satis- factory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such 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 SONEG would not meet the requirements set forth in paragraph (a) for SONEG's fiscal years covered by such review, SONEG shall promptly take all necessary measures (including, without limitation, adjustments of the struc- ture or levels of its rates) in order to meet such requirements. (d) For the purposes of this Section: (i) the annual return shall be calculated by dividing SONEG's net income for the fiscal year in question by one half of the sum of the current net value of SONEG's fixed assets in operation at the beginning and at the end of that fiscal year; (ii) the term "net income" means total revenues less total operating expenses; (iii) the term "total revenues" means the sum of revenues from all sources related to operations and con- tributions to debt service from the national Page 7 budget; (iv) the term "total operating expenses" means all expenses related to operations, including adminis- tration, adequate maintenance, taxes and payments - 9 - in lieu of taxes, and provision for depreciation, in accordance with accounting methods generally accepted in water supply or on any other basis acceptable to the Association, of the average current gross value of SONEG's fixed assets in operation, but excluding interest and other charges on debt; (v) the average current gross value of SONEG's fixed assets in operation shall be calculated as one half of the sum of the gross value of SONEG's fixed assets in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with the methods of valuation referred to in Section 4.05 of this Agreement; and (vi) the term "current net value of SONEG's fixed assets in operation" means the gross value of SONEG's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with the methods of valuation referred to in Section 4.05 of this 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of SONEG 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 twenty (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 SONEG of this event. - 10 - 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, telex or facsimile to the party to which it is required or permitted to be given or made at such party's address hereinafter Page 8 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 SONEG: Societe Nationale des Eaux de Guinee Conakry Republic of Guinea 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 SONEG, or by SONEG on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by SONEG's Director General or such other person or persons as the Director General shall designate in writing, and - 11 - SONEG 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. 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 /s/ Edward V. K. Jaycox Regional Vice President Africa SOCIETE NATIONALE DES EAUX DE GUINEE By /s/ Kekoura Camara Authorized Representative - 12 - SCHEDULE Procurement and Consultants' Services Page 9 Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. 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). 2. To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost more than the equivalent of $100,000 each, and contracts for civil works in bid packages estimated to cost more than the equivalent of $250,000 each. 3. Bidders for civil works shall be prequalified as described in paragraph 2.10 of the Guidelines. 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 the Republic of Guinea 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.1 hereof, a margin of preference may be granted to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Civil works for Parts A and D of the Project estimated to cost the equivalent of $250,000 or less, and goods for Parts A, D and E of the Project estimated to cost the equivalent of $100,000 or less may be procured under contracts awarded: - 13 - (a) 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 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), up to an aggregate amount not to exceed the equivalent of $1,500,000; or (b) on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association, up to an aggregate amount not to exceed the equivalent of $1,500,000. 2. Civil works and goods for Part C of the Project estimated to cost less than the equivalent of $250,000 per contract, up to an aggregate amount not to exceed the equivalent of $1,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from at least two different countries eligible under the Guide- lines, in accordance with procedures acceptable to the Associa- tion. 3. Proprietary equipment and spare parts for Part C of the Project may be purchased by direct negotiated contract with one manufacturer or supplier, up to an aggregate amount not to exceed the equivalent of $1,000,000, if in the opinion of the Associa- tion: (a) suitable equipment or spare parts, compatible with Page 10 equipment already in place, cannot be obtained from another source; and (b) the cost of such equipment or spare parts is reasonable. Part E: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.3 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 for civil works under Parts A, C and D of the Project estimated to cost more than the equivalent of $250,000 and for goods under Parts A, C, D and E of - 14 - the Project estimated to cost more than the equivalent of $100,000, 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 proce- dures 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. 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 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 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. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 3. The figure of 10% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist SONEG in carrying out the Project, SONEG shall employ management, financial, economic, legal and engineering consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Associa- tion. Such consultants shall be selected in accordance with prin- ciples 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.