Haiti - Fifth Power Project : Credit 2053 - Project Agreement - Conformed

GC ~CIAL CREDIT NUMBER 2053 HA Project Agreement (Fifth Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and ELECTRICITt D'HAITI Dated 1989 CREDIT NUMBER 2053 HA PROJECT AGREEMENT AGREEMENT, dated , 1989 between INTERNATIONAL DEVELOPMENT ASSOVATION (the Association) and ELECTRICIT9 D'HAITI (EdH). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Haiti (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighteen million six hundred thousand Special Drawing Rights (SDR 18,600,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that EdH agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by an agreement (the Subsidiary Loan Agreement) to be entered into between the Borrower and EdH, the proceeds of the credit provided for under the Development Credit Agreement will be made available to EdH on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS EdH, 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. EdH declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development -2- Credit Agreement, and to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, environmental 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. 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 provisioas of Schedule 1 to this Agreement. Section 2.03. EdH 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. EdH shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, EdH 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) EdH shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress 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) EdH shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by EdH of its obligations under this Agreement and under the Subsidiary Loan Agreement. (c) Without limitation to paragraphs (a) and (b) of this Section, EdH shall: (i) commencing in Fiscal Year 1990, furnish to the Association as soon as available, but in any event not later than 30 days after the end of each quarter, quarterly reports of such scope and in such detail as the Association shall request of measures taken by EdH pursuant to Section 3.02 of this Agreement -3- and of the costs of such measures; (ii) commencing in Fiscal Year 1989, furnish to the Association by September 30 on each Fiscal Year, a progress report on the implementation of the agreed plan of action for Part C of the Project. Section 2.06. EdH shall, not later than December 31, 1989: (a) furnish to the Association a plan of action, satisfactory to the Association, prepared by consultants under terms of reference and having experience and qualifications, all satisfactory to the Association, for the purposes of Part A.4 of the Project; and (b) employ consultants under terms of reference and having experience and qualifications, all satisfactory to the Association, for the purposes of Part C of the Project. ARTICLE III Management and Operations of EdH Section 3.01. (a) EdH shall carry on its operations and con- duct its affairs in accordance with sound administrative, finan- cial, environmental and public utility practices under the supervision of qualified and experienced managemenc assisted by competent staff in adequate numbers. (b) Without limitation on the provisions of paragraph (a) of this Section, EdH shall: (i) cause the positions of General Manager, Deputy General Manager, Technical Director, Planning Director, Administrative Director, Commercial Director, Financial Director and Internal Auditor to be filled at all times by persons whose qualifications and experience shall be satisfactory to the Borrower, the Association and EdH; and (ii) not later than August 15 in each Fiscal Year, commencing in Fiscal Year 1989, furnish to the Association for its comments, a detailed plan of action for recruitment or assignment of its staff for the following Fiscal Year which shall include, inter alia, a temporary restriction on hiring of staff to professionals and technicians; (iii) carry out such plans of action taking into account the comments, if any, made by the Association; and (iv) maintain ratios of customers per staff not lower than: (A) 64:1 in Fiscal Year 1989; (B) 72:1 in Fiscal Year 1990; (C) 78:1 in Fiscal Year 1991; (D) 83:1 in Fiscal -4- Year 1992; (E) 88:1 in Fiscal Year 1993; (F) 92:1 in Fiscal Year 1994; (0) 97:1 in Fiscal Year 1995; and (H) 100:1 in Fiscal Year 1996 and thereafter. Section 3.02. EdH 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, environmental and public utility practices. Section 3.03. EdH shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. EdH shall take all action, including the installation and utilization of adequate instruments, to monitor continuously its dams, reservoir banks, associated structures, earthworks, penstocks and other waterways, and its generating plant structures and equipment, and shall cause such facilities to be inspected, at least once a year, by qualified and experienced experts in accordance with appropriate engineering practices, in order to determine whether there are any deficiencies or potential deficiencies in their condition, or in the quality or adequacy of maintenance or methods of operation of such facilities which may endanger the safety of any of such facilities or the staff maintaining or operating them. Section 3.05. Except as the Association shall otherwise agree, EdH shall not sell, lease, transfer, assign or otherwise dispose of any of its rights, property or assets except in the ordinary course of business. Section 3.06. Except as the Association shall otherwise agree, EdH shall: (a) (i) reduce its total losses of energy produced in Port-au-Prince to not more than: (A) 25% in Fiscal Year 1990; (B) 20% in Fiscal Year 1991; (C) 18% in Fiscal Year 1992; and (D) 16% in Fiscal Year 1993 and thereafter; and (ii) reduce its losses of energy produced in the provinces of the Borrower to not more than: (A) 18% in Fiscal Year 1990; and (B) 15% in Fiscal Year 1991 and thereafter; and (b) take, in a timely manner, for the above purposes, all necessary measures (including legal measures) satisfactory to the Association. -5- ARTICLE IV Financial Covenants Section 4.01. (a) EdH shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition including separate records and accounts to reflect the resources and expenditures in respect of the Project. (b) EdH 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 five 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. Section 4.02. (a) Except as the Association shall otherwise agree, EdH shall earn, for each Fiscal Year after Fiscal Year 1988, an annual return of not less than: (i) 3.5% in Fiscal Year 1989; (ii) 4.5% in Fiscal Year 1990; (iii) 5% in Fiscal Year 1991; (iv) 5.5% in Fiscal Year 1992; (v) 6% in Fiscal Year 1993; (vi) 7% in Fiscal Year 1994; and (vii) 8% in Fiscal Year 1995 and thereafter of the average current net value of EdH's fixed assets in operation. (b) On or before December 31 and June 30 in each Fiscal Year commencing December 31, 1989, EdH shall, on the basis of forecasts prepared by EdH and satisfactory to the Association, review -6- 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 EdH would not meet the requirements set forth in paragraph (a) for the Fiscal Years covered by such review, EdH 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 purposes of this Section: (i) The annual return shall be calculated by dividing EdH's net operating income for the Fiscal Year in question by one-half of the sum of the current net value of EdH's fixed assets in operation at the beginning and at the end of that Fiscal Year. (ii) The term "net operating income" means total operat- ing revenues less total operating expenses. (iii) The term "total operating revenues" means revenues from all sources related to operations. (iv) The term "total operating expenses" means all expenses related to operations , including administration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a basis acceptable to the Association, but excluding interest and other charges on debt. (v) The average current gross value of EdH's fixed assets in operation shall be calculated as one-half of the sum of the gross value of EdH'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 sound and consistently maintained methods of valuation satisfactory to the Bank. (vi) The term "current net value of EdH's fixed assets in operation" means the gross value of EdH's fixed assets in operation less the amount of accumulated -7- depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. Section 4.03. (a) Except as the Association shall otherwise agree, EdH shall not incur any debt unless a reasonable forecast of the revenues and expenditures of EdH shows that the estimated net revenues of EdH 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 EdH in such year on all debt of EdH including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of EdH 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: (A) the sum of revenues from all sources related to operations and net non-operating income; and I (B) the sum of all expenses related to operations including administration, adequate maintenance, 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 dif- ference between: (A) revenues from all sources other than those related to operations; and -8- (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 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 EdH not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and EdH accept as reasonable and as to which the Association has notified EdH 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 EdH. (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. (a) Except as the Association shall otherwise agree and until the Project has been completed, EdH shall neither commit itself to nor make any capital expenditures (not required for the Project) which would exceed by more than 1% the current net value of EdH's fixed assets in operation unless the Association has been furnished with evidence, satisfactory to the Association, that the proposed expenditures are economically and technically justified and EdH has obtained financing under terms and conditions which will not materially and adversely affect its financial condition or operations, including the carrying out of the Project. (b) For purposes of this Section: -9- (i) the term "capital expenditures" has the meaning assigned to it in Section 4.05 (b) (i) of this Agreement; and (ii) the term "current net value of EdH's fixed assets in operation" has the meaning assigned to it in Section 4.02 (d) (vi) of this Agreement. Section 4.05. (a) EdH shall not use its resources for any purpose other than to pay the costs of its capital expenditures, total operating expenses and debt service requirements. (b) For the purposes of this Section: (i) The term "capital expenditures" means all expenditures incurred on account of fixed assets including interest charged to construction, related to operations. (ii) The term "debt service requirements" has the meaning assigned to it in Section 4.03 (b) (v) of this-Agreement. (iii) -The term "total operating expenses" has the meaning assigned to it in Section 4.02 (d) (iv) of this Agreement. (iv) 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 4.06. Except as the Association shall otherwise agree, EdH shall: (a) annually value its fixed assets in operation to such extent as shall be necessary to reflect adequately, at the time of such valuation, the current value thereof, in accordance with a sound and consistently applied method of valuation acceptable to the Association; and - 10 - (b) register, annually, the results of such valuation on its books. Section 4.07. The Prior Agreement is hereby amended by deleting its Sections 3.06, 4.03, 4.05 and 4.06 and replacing them by Sections 3.06, 4.02, 4.03 and 4.04 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 EdH 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 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify EdH 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. ARTICJLE 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 telefax to the party to which it is required or - 11 - 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 EdH: Electricitd d'Haiti Boite Postale 1753 Port-au-Prince Haiti Cable address: Telex: ELECDHA 3490113 Port-au-Prince 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 EdH, or by EdH on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the General Manager of EdH or such other person or persons as such General Manager shall designate in writing, and EdH 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 collec- tively but one instrument. - 12 - 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 Regional Vice President Latin American and the Caribbean ELECTRICITE D'HAITI By Authorized Representative - 13 - SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 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 Haiti 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, Haiti may grant a margin of preference to domestic contractors 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: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $50,000 or more, the procedures set forth in para- graphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (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. 2. The figure of 10% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. -14- Section II: Employment of Consultants In order to assist EdH in carrying out the Project, EdH shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles 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. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY