Conformed Copy - C1880 - Energy Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1880 NIR (Energy Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NIGERIENNE D'ELECTRICITE Dated March 18, 1988 CREDIT NUMBER 1880 NIR PROJECT AGREEMENT AGREEMENT, dated March 18, 1988 between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SOCIETE NIGERIENNE D'ELECTRICITE (NIGELEC). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Niger (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty four million seven hundred thousand Special Drawing Rights (SDR 24,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NIGELEC agrees 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 NIGELEC, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to NIGELEC on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS NIGELEC, in consideration of the Association's Page 2 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 and the term "Fiscal Year" means NIGELEC's fiscal year which runs from January 1 to December 31. ARTICLE II Execution of the Project Section 2.01. NIGELEC 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 Part B 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 B of the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Part B of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 4 to the Development Credit Agreement. Section 2.03. NIGELEC 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 and Part B of the Project. Section 2.04. NIGELEC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, NIGELEC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) NIGELEC shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B 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) NIGELEC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Credit, or the performance by NIGELEC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. In order to carry out Part B.4 (a) of the Project, NIGELEC shall submit to the Association for approval evidence that the conditions referred to under paragraph 3 (e) of Schedule 1 to the Credit Agreement have been fulfilled. ARTICLE III Page 3 Management and Operations of NIGELEC Section 3.01. NIGELEC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, and public utilities practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. NIGELEC 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 public utility practices. Section 3.03. NIGELEC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. NIGELEC shall, not later than December 31, 1988, introduce in its computerized accounting system applications for cost accounting, inventory control, fixed assets register and cash management. ARTICLE IV Financial Covenants Section 4.01. (a) NIGELEC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) NIGELEC shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) and Special Account B 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 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 Association shall have reasonably requested; and (iii) 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, NIGELEC shall: (i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until one year after the Association has received the audit report for the Fiscal Year in which the last disbursement 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 Page 4 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 procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) Except as the Association shall otherwise agree, NIGELEC shall generate, for each of its Fiscal Years after its Fiscal Year ending on December 31, 1987, funds from internal sources equivalent to not less than a reasonable percentage of the annual average of the capital expenditures incurred, or expected to be incurred, for that year, the previous Fiscal Year and next following Fiscal Year. (b) Before November 30 in each of its Fiscal Years, NIGELEC shall, on the basis of forecasts prepared by NIGELEC and satisfactory 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 a copy of such review upon its completion. (c) If any such review shows that NIGELEC would not meet the requirements set forth in paragraph (a) for NIGELEC's Fiscal Years covered by such review, NIGELEC shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its tariffs) 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 electric power operations, consumer deposits and consumer contributions in aid of construction, net non-operating income and any reduction in working capital other than cash; and (B) the sum of all expenses related to electric power operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for depre- ciation 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 terms "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 "working capital other than cash" means the difference between current assets excluding cash and current liabilities at the end of each Fiscal Year. Page 5 (iv) The term "current assets excluding cash" means 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 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, 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 expendi- tures incurred on account of fixed assets, includ- ing interest charged to construction, related to operations. (viii) 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. Section 4.03. (a) Except as the Association shall otherwise agree, NIGELEC shall not incur any debt unless a reasonable forecast of the revenues and expenditures of NIGELEC shows that the estimated net revenues of NIGELEC for each Fiscal Year during the term of the debt to be incurred shall be at least 1.5 times the estimated debt service requirements of NIGELEC in such year on all debt of NIGELEC including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of NIGELEC 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 nstrument 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: (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, Page 6 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 lieu of taxes, incurred in the generation of revenues in (A) above. (v) 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. (vi) The term "reasonable forecast" means a forecast prepared by NIGELEC not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and NIGELEC accept as reasonable and as to which the Association has notified NIGELEC 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 NIGELEC. (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. Section 4.04. NIGELEC shall: (i) not later than December 31, 1988, reduce its electricity receivables to an amount not greater than the equivalent of the amount billed for the previous three months; and (ii) maintain thereafter the receivables at an amount not greater than the amount billed for the previous three months. Section 4.05. NIGELEC shall make sufficient annual provisions for depreciation and revewal of fixed assets in accordance with sound accounting practices. 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 NIGELEC 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 10 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 Page 7 (a) (ii) of this Section, the Association shall promptly notify NIGELEC of this event. 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 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 NIGELEC: NIGELEC B.P. 11202 Niamey Niger Cable address: Telex: NIGELEC 5224 NI 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 NIGELEC, or by NIGELEC on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by its Director General or such other person or persons as NIGELEC shall designate in writing, and NIGELEC 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 Page 8 By /s/ Edward V. K. Jaycox Regional Vice President Africa SOCIETE NIGERIENNE D'ELECTRICITE By /s/ Joseph Diatta Authorized Representative