Conformed Copy - L2910 - Power Distribution Project - Project Agreement 2

Page 1 CONFORMED COPY LOAN NUMBER 2910 MOR (Power Distribution Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and CASABLANCA INTERMUNICIPAL WATER AND ELECTRICTY DISTRIBUTION UTILITY MEKNES WATER AND ELECTRICITY DISTRIBUTION UTILITY KENITRA INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY FES WATER AND ELECTRICITY DISTRIBUTION UTILITY TETOUAN INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY Dated June 21, 1989 LOAN NUMBER 2910 MOR LOCAL UTILITIES PROJECT AGREEMENT AGREEMENT, dated June 21, 1989, among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank), and CASABLANCA INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY (Casablanca Utility), MEKNES WATER AND ELECTRICITY DISTRIBUTION UTILITY (Meknes Utility), KENITRA INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY (Kenitra Utility), FES WATER AND ELECTRICITY DISTRIBUTION UTILITY (Fes Utility) and TETOUAN INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY (Tetouan Utility), (collectively, the Local Utilities). 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 ninety million dollars ($90,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Local Utilities agree to undertake such Page 2 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 each of the Local Utilities, part of the proceeds of the loan provided for under the Loan Agreement will be made available to the Local Utilities on the terms and conditions set forth in said Subsidiary Loan Agreements; and WHEREAS the Local Utilities, in consideration of the Bank's entering into the Loan Agreement with the Borrower, have 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 and the General Conditions (as so defined) have the respective meanings therein set forth and the term "Local Utilities Action Plan" means the 1988-1994 plan of actions for the development and improvement of the Local Utilities' electric power distribution activities set forth or referred to in the Schedule to this Agreement, as the same may be amended from time to time by agreement between the Bank and the Local Utility concerned. ARTICLE II Execution of the Project Section 2.01. The Local Utilities declare their commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall each carry out its respec- tive Part of the Project (a) with due diligence and efficiency, (b) in accordance with the Local Utilities Action Plan and (c) in conformity with appropriate administrative, financial, engineer- ing, electric power 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 purpose. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for the Parts B through F of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.03. The Local Utilities shall each 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 its respective Part of the Project. Section 2.04. The Local Utilities shall each: (a) duly perform all its obligations under its Subsidiary Loan Agreement, and except as the Bank shall otherwise agree, shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving said Subsidiary Loan Agreement or any provision thereof; (b) at the request of the Bank, exchange views with the Bank with regard to the progress of its respective Part 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; and (c) promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of its respective Part of the Project, the accomplishment of the purposes Page 3 of Loan, or the performance by such Local Utility of its obligations under this Agreement and under its Subsidiary Loan Agreement. ARTICLE III Management and Operations of the Local Utilities Section 3.01. The Local Utilities shall each carry on its operations and conduct its affairs in accordance with the Local Utilities Action Plan and with sound administrative, financial, engineering, and electric power practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. The Local Utilities shall each operate and maintain at all times 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 electric power practices. Section 3.03. The Local Utilities shall each 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) The Local Utilities shall each maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) The Local Utilities shall each: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year, commencing with its fiscal year ending December 31, 1988, 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, the Local Utilities shall each: (i) produce for each of its fiscal years after its fiscal year ending on December 31, 1987, total revenues related to electric power operations equivalent to not less than its total operating expenses related to electric power operations; (ii) review before October 31 in each of its fiscal years, on the basis of forecasts prepared by it and satisfactory to the Bank, whether it would meet the requirements set forth in sub-paragraph (a) (i) of this Section in respect of such year and the next following fiscal year and shall furnish to the Bank the results of such review upon its completion; and (iii) if any such review shows that such Local Utility would not meet the requirements set forth in paragraph (a) of this Section for its fiscal years covered by such review, promptly take all necessary measures (including, without limitation, adjustments of the Page 4 structure or levels of its rates) in order to meet such requirements. (b) For purposes of this Section: (i) The term "total revenues" means the sum of total operating revenues and net non-operating income. (ii) The term "total operating revenues" means revenues from all sources related to operations. (iii) 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. (iv) The term "total operating expenses" means all expenses related to operations, including adminis- tration, adequate maintenance, taxes and payments in lieu of taxes, provision for depreciation on a basis acceptable to the Bank, and interest and other charges on debt. (v) 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 Bank. Section 4.03. (a) Except as the Bank shall otherwise agree, the Local Utilities shall each: (i) produce, for each of its fiscal years after its fiscal year ending on December 31, 1987, funds from internal sources related to electric power operations equivalent to not less than 30% of the annual average of its capital expenditures related to electric power operations incurred, or expected to be incurred, for that year, the previous fiscal year and the next following fiscal year; (ii) review before October 31 in each of its fiscal years, on the basis of forecasts prepared by it and satisfactory to the Bank, whether it would meet the requirements set forth in sub-paragraph (a) (i) of this Section in respect of such year and the next following fiscal year and furnish to the Bank a copy of such review upon its completion; and (iii) if any such review shows that it would not meet the requirements set forth in sub-paragraph (a) (i) of this Section for its fiscal years covered by such review, promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (b) 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 operations and net non-operating income, but excluding non-cash operating revenues; and (B) the sum of all expenses related to operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt Page 5 service requirements, all cash dividends and other cash distributions of surplus and other cash outflows other than capital expenditures. (ii) The term "net non-operating income" means the dif- ference 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 "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (iv) The term "capital expenditures" means all expendi- tures incurred on account of fixed assets, including interest charged to construction, related to operations, minus consumer contributions in aid of construction other than overhead surcharges levied on consumers. (v) 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 Bank. Section 4.04. (a) Except as the Bank may otherwise agree, the Local Utilities shall each: (i) take all measures necessary to ensure that: (A) the balance of its electricity bills due and payable as at July 31, 1988 shall be paid in equal annual installments commencing not later than September 30, 1988 with the last payment to be made not later than September 30, 1992; and (B) all electricity bills (other than those referred to in (A) above), shall be paid not later than the earlier of: (i) the due date of such bill; and (ii) sixty (60) days after the date of such bill; (ii) not transfer any funds allocated to, or generated through the operations of, its electric power department to any of its other departments unless and until all electricity bills which shall have been outstanding for sixty (60) days or more after the date of such bill shall have been paid; and (iii) promptly bill the Borrower's public agencies so as to enable said public agencies to fulfill the obligations set forth in Section 4.03 of the Loan Agreement in accordance with the provisions of said Section. (b) For purposes of this Section: (i) the term "electricity bills" means, in respect of each Local Utility, the amounts periodically billed by ONE to such Local Utility for the supply of Page 6 electricity and related services by ONE to such Local Utility; (ii) the term "electric power department" means the department of the Local Utility responsible for electric power operations; and (iii) the term "public agencies" has the meaning set forth in Section 4.03 of the Loan Agreement. Section 4.05. The Local Utilities shall each: (a) prepare and furnish to the Bank not later than Octo- ber 31 of each of its fiscal years for the Bank's review and comments, a proposed least-cost investment program for the next five following fiscal years, together with a financing plan therefor; (b) afford the Bank a reasonable opportunity to exchange views with said Local Utility on said investment program; and (c) carry out during the following fiscal year such investment program as shall have been approved by the Bank, with due diligence and efficiency and in accordance with sound financial, economic, administrative, engineering, electric power and public utility 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 Loan Agreement becomes effective. Section 5.O2. This Agreement and all obligations of the Bank and of the Local Utilities thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the Local Utilities 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 (ITT), Washington, D.C. 248423 (RCA) or Page 7 64145 (WUI) For Casablanca Utility: Regie Autonome Intercommunale d'Eau et d'Electricite de Casablanca 48, rue Mohamed Diouri Casablanca Morocco Telex: 23008 For Meknes Utility: Regie Autonome de Distribution d'Eau et d'Electricite de Meknes 78, avenue des F.A.R. Meknes Morocco Telex: 41910 For Kenitra Utility: Regie Autonome Intercommunale de Distribution d'Eau et D'Electricite de Kenitra Kenitra Morocco Telex: 91048 For Fes Utility: Regie Autonome de Distribution d'Eau et d'Electricite Angle rue de Pologne et rue de Grace Fes Morocco Telex: 51939 For Tetouan Utility: Regie Autonome Intercommunale d'Eau et d'Electricite de Tetouan 1 rue Marakat Annoual Tetouan Morocco Telex: 43608 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed in respect of a Local Utility, under this Agreement may be taken or executed on behalf of said Local Utility by its chief executive officer or such other person or persons as such chief executive officer shall designate in writing, and said Local Utility 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 Page 8 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/ W. Thalwitz Regional Vice President Europe, Middle East and North Africa CASABLANCA INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY MEKNES WATER AND ELECTRICITY DISTRIBUTION UTILITY KENITRA INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY FES WATER AND ELECTRICITY DISTRIBUTION UTILITY TETOUAN INTERMUNICIPAL WATER AND ELECTRICITY DISTRIBUTION UTILITY By /s/ A. Benjelloun Authorized Representative SCHEDULE Local Utilities Action Plan In order to ensure the proper development of their electric power activities, the Local Utilities shall, inter alia, carry out the following measures: A. Parts B through F of the Project The Local Utilities shall each: 1. prepare and furnish to the Bank not later than June 30, 1988 for the Bank's review and comments, proposed programs for the provision of computer hardware and software and the provision of overseas training, all under its respective Part of the Project; 2. afford the Bank a reasonable opportunity to exchange views with such Local Utility on said programs; and 3. thereafter, promptly carry out such programs as shall have been approved by the Bank. B. Management and Operations of the Local Utilities 1. The Local Utilities shall each develop, on the basis of guidelines satisfactory to the Bank, and introduce and apply: (a) not later than October 31, 1989, a suitable cost accounting system; (b) not later than April 30, 1990 a suitable management information system; and (c) not later than September 30, 1990, a suitable general accounting system; all designed to strengthen the financial management of such Local Utility's electric power and water supply operations. Page 9 2. The Local Utilities shall each: (a) carry out, under terms of reference satisfactory to the Bank, an analysis of the contributions of its customers in aid of construction to develop a system of accurately forecasting such contributions; (b) take all measures necessary to ensure that said analysis is completed and a copy thereof, together with the recommendations based thereon, is furnished to the Bank not later than September 30, 1990; (c) afford the Bank a reasonable opportunity to exchange views with such Local Utility on the results and conclusions of said analysis and on said recommendations; and (d) thereafter take all measures necessary to introduce and apply said system not later than July 31, 1991, on the basis of said exchange of views. 3. The Local Utilities shall each take all measures required on its part to implement, not later than June 30, 1990, the recommendations referred to in Part B.1 (d) of Schedule 7 to the Loan Agreement, designed to strengthen its capabilities in demand forecasting and investment planning activities and to facilitate the proper coordination of said activities with those of the other Project Enterprises and Other Utilities.