Conformed Copy - L2958 - Phosphate Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2958 CHA (Phosphate Development Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated January 31, 1989 LOAN NUMBER 2958 CHA LOAN AGREEMENT AGREEMENT, dated January 31, 1989, between PEOPLE'S REPUBLIC OF CHINA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) Part A of the Project will be carried out by Guizhou Phosphate Company (the Company) with the Borrower's assistance, and as part of such assistance, the Borrower will make available to the Company the proceeds of the Loan as provided in this Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; Page 2 NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions), constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "MCI" means the Borrower's Ministry of Chemical Industry or any successor thereto; (b) "Company" means the Guizhou Phosphate Company, a state enterprise of the Borrower established and operating pursuant to the Charter; (c) "Charter" means the Charter of the Company, approved by Chemical Industry Bureau of Guizhou Province on May 12, 1988; (d) "Project Agreement" means the agreement between the Bank and the Company of even date herewith, as the same may be amended from time to time, and such term includes all agreements supplemental to the Project Agreement; (e) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Company, pursuant to Section 3.02 (a) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to such agreement; (f) "Special Account" means the account to be opened and thereafter maintained pursuant to Section 2.02 (b) of this Agreement; and (g) "tpy" means metric tons per year. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to sixty-two million seven hundred thousand dollars ($62,700,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars, a special account in a bank acceptable to the Bank, on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1993 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Page 3 Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one-half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semi-annually on May 1 and November 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end: (i) shall carry out Part B of the Project through MCI with due diligence and efficiency and in conformity with appropriate administrative and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project; and (ii) without limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause the Company to perform all its obligations set forth in the Project Agreement, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Company to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. Section 3.02. (a) The Borrower shall relend the proceeds of the Loan to the Company under a subsidiary loan agreement to be entered into between the Borrower and the Company under terms and conditions which shall have been approved by the Bank and which shall include, inter alia: (i) interest payable at 105% of the variable rate payable under Section 2.05 of this Agreement; (ii) commitment charge calculated in accordance with Section 2.04 of this Agreement; (iii) repayment period of 20 years, including a grace period of five years; and (iv) the Company shall bear the foreign exchange risk for its subsidiary loan. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement to affect the provisions of paragraph (a) above. Section 3.03. The Borrower shall maintain the Project Coordination Unit Page 4 established within MCI to coordinate implementation of the Project, with staff and responsibilities acceptable to the Bank. Section 3.04. Except as the Bank shall otherwise agree, procurement of the goods and employment of engineering firms and consultants required for the Project, to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.05. The Bank and the Borrower hereby agree that the obligations set forth in Sections 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 and maintenance, respectively) in respect of Part A of the Project, shall be carried out by the Company pursuant to Section 2.04 of the Project Agreement. Section 3.06. In order to assist in carrying out Part A of the Project, the Borrower shall: (a) furnish to the Bank semi-annually a report on the progress towards completion of downstream phosphate fertilizer plants necessary to assure full use of the output of phosphate concentrate of the project mine (Wengfu) including: the diammonium phosphate plant at Tonglin, Anhui Province; the diammonium phosphate plant at Guixi, Jiangxi Province; the diammonium phosphate plant at Dongting, Hunan Province; the nitrophosphate plant at Jinan, Shandong Province; and the nitrophosphate plant at Kaifeng, Henan Province; and (b) ensure that the Company completes the triple superphosphate plant at Wengfu in accordance with Section 2.08 of the Project Agreement. ARTICLE IV Financial and Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of Part B of the Project. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section, and those for the Special Account, for each fiscal year 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 copy of 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 accounts and the audit thereof and said reports as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; Page 5 (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by said auditors as to whether the proceeds of the Loan withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 4.02. The Borrower shall allow the Company to sell its entire output of fertilizer and phosphate concentrate outside the state allocation plan at negotiated prices. Section 4.03. Without limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cover any cash flow deficits of the Company during its first three years of operations, provided such deficits do not result from inefficient management or operation, as determined by agreement between the Borrower and the Bank. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) the Company shall have failed to perform any of its obligations under the Project Agreement; (b) as a result of events which occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that the Company will be able to perform its obligations under the Project Agreement; (c) the Charter shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Company to perform any of its obligations under the Project Agreement; and (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Company or for the suspension of any of its operations. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty (60) days after notice thereof shall have been given by the Bank to the Borrower and the Company; and (b) any event specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Borrower's State Council has approved the Loan Agreement; and (b) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Company. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion Page 6 or opinions to be furnished to the Bank: (a) the Project Agreement has been duly authorized or ratified by, executed and delivered on behalf of the Company, and is legally binding upon the Company in accordance with its terms; and (b) the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and the Company, and is legally binding upon the Borrower and the Company in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Sanlihe Beijing, 100820 People's Republic of China Cable address: Telex: FINANMIN 22486 MFPRC CN Beijing 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) 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. PEOPLE'S REPUBLIC OF CHINA By /s/ Han Xu Authorized Representative INTERNATIONAL BANK FOR Page 7 RECONSTRUCTION AND DEVELOPMENT By /s/ S. Javed Burki Acting Regional Vice President Asia SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and 55,800,000 100% of foreign materials expenditures, 100% of local expenditures (ex-factory) and 75% of local expen- ditures for other items procured locally (2) Engineering, 1,200,000 100% licensing and technical services (3) Training for 300,000 100% Part A.2 (ii) of the Project (Schedule 2) (4) Project 200,000 100% management (5) Unallocated 5,200,000 __________ TOTAL 62,700,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $500,000, may be made in respect of Categories (1) and (2) on account of payments made for expenditures before that date but after February 5, 1988. SCHEDULE 2 Page 8 Description of the Project The objectives of the Project are to assist the Borrower in: (a) establishing appropriate strategies for the development of an efficient phosphate industry, including investments to meet fertilizer demand; (b) undertaking such major investments, providing a model for development of modern phosphate mines and beneficiation plants; and (c) strengthening central government staff capability for phosphate subsectoral planning. Part A: Wengfu Phosphate Mine 1. Construction and equipping of: (a) an open-pit mine at Wengfu, Guizhou Province, to produce 2,500,000 tpy of phosphate rock; (b) a beneficiation plant to process phosphate rock into high-grade phosphate concentrate; (c) a slurry pipeline; (d) dewatering facilities; and (e) related infrastructure, including workshops, stores, offices, laboratory, power and water supply and housing. 2. Strengthening the management and staff capabilities of the Company, through: (a) training of staff both (i) local and (ii) overseas; and (b) provision of consultants' services. Part B: Institutional Development Strengthening the capabilities of central government staff and staff of the Company in project implementation, mine maintenance, sub-sector planning, and plant operation, through training of staff, and provision of consultants' services and equipment. * * * The Project is expected to be completed by June 30, 1993. SCHEDULE 3 Amortization Schedule Payment of Principal Date of Payment Due (expressed in dollars)* November 1, 1993 1,145,000 May 1, 1994 1,190,000 November 1, 1994 1,235,000 May 1, 1995 1,280,000 November 1, 1995 1,330,000 May 1, 1996 1,385,000 November 1, 1996 1,435,000 May 1, 1997 1,490,000 November 1, 1997 1,550,000 May 1, 1998 1,610,000 November 1, 1998 1,670,000 May 1, 1999 1,735,000 November 1, 1999 1,805,000 May 1, 2000 1,870,000 November 1, 2000 1,945,000 May 1, 2001 2,020,000 November 1, 2001 2,100,000 May 1, 2002 2,180,000 November 1, 2002 2,265,000 May 1, 2003 2,350,000 November 1, 2003 2,440,000 May 1, 2004 2,535,000 November 1, 2004 2,635,000 May 1, 2005 2,735,000 November 1, 2005 2,840,000 May 1, 2006 2,950,000 November 1, 2006 3,065,000 Page 9 May 1, 2007 3,180,000 November 1, 2007 3,305,000 May 1, 2008 3,425,000 ________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part C 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 of this Schedule, goods manufactured in China 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: Other Procurement Procedures Page 10 1. Equipment for which there are only a limited number of suppliers, as determined by the Bank, up to an aggregate amount not exceeding the equivalent of $8,000,000, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of qualified suppliers, to be agreed with the Bank, 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). 2. Items or groups of items estimated to cost the equivalent of not more than $200,000 per contract, up to an aggregate amount not exceeding the equivalent of $3,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from at least three qualified suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: 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 estimated to cost the equivalent of more than $1,000,000, 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 procedures shall be modified to ensure that the two conformed copies of the contract 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, such procedures shall be modified to ensure that the two conformed copies of the contract required 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 furnished pursuant to paragraph 4 of Schedule 5 to the Loan Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist in carrying out the Project, the Borrower and the Company shall employ engineering firms and consultants, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. 2. 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 Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3) and (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and Page 11 (c) the term "Authorized Allocation" means an amount equivalent to $5,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On the basis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding Page 12 in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account.