Nicaragua - Managua Water Supply Project : Credit 0026 - Credit Agreement - Conformed

CREDIT NUMBER 26 NI Development Credit Agreement (Managua Water Supply Project) BETWEEN REPUBLIC OF NICARAGUA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 7, 1962 CREDIT NUMBER 26 NI Development Credit Agreement (Managua Water Supply Project) BETWEEN REPUBLIC OF NICARAGUA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 7, 1962 Drorlopment Trebit A1gruemWn AGREEMENT, dated September 7, 1962, between RE- PUBLIC OF NICARAGUA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I Credit Regulations SECTION 1.01. The parties hereto accept all the provisions of Development Credit Regulations No. 1 of the Association dated June 1, 1961, (said Development Credit Regulations No. 1 being hereinafter called the Regulations) with the same force and effect as if they were fully set forth herein. ARTICLE II The Credit SECTION 2.01. The Association agrees to make available to the Borrower, on the terms and conditions in this Agree- ment set forth or referred to, a development credit in an amount in various currencies equivalent to three million dollars ($3,000,000). SECTION 2.02. The Association shall open a Credit Ac- count on its books in the name of the Borrower and shall credit to such Account the amount of the Credit. The amount of the Credit may be withdrawn from the Credit Account as provided in, and subject to the rights of can- cellation and suspension set forth in, this Agreement and the Regulations. SECTION 2.03. Notwithstauding the first sentence of Sec- tion 4.01 of the Regulations and except as the Borrower and the Association shall otherwise agree: 4 (a) The Borrower shall be entitled to withdraw from the Credit Account (i) amounts expended for the reason- able cost of goods to be financed out of the proceeds of the Credit, and (ii) if the Association shall so agree, such amounts as shall be required to meet payments to be made for the reasonable cost of such goods. (b) No withdrawals shall be made on account of (i) expenditures prior to July 1, 1962 or (ii) expenditures in the currency of the Borrower or for goods produced in (including services supplied from) the territories of the Borrower. SECTION 2.04. Withdrawals from the Credit Account shall be in such freely convertible currency or currencies as the Association shall from time to time reasonably select. SECTION 2.05. The Borrower shall pay to the Associa- tion a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. SECTION 2.06. Service charges shall be payable semi- annually on March 1 and September 1 in each year. SECTION 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual instalments payable on each March 1 and September 1 commencing September 1, 1972 and ending March 1, 2012, each instalment to and in- cluding the instalment payable on March 1, 1982 to be one- half of one per cent (1/2 of 1%) of such principal amount, and each instalment thereafter to be one and one-half per cent (11/%) of such principal amount. ARTICLE III Use of Proceeds of the Credit SECTION 3.01. The Borrower shall cause the proceeds of the Credit to be applied exclusively to financing the cost of goods required to carry out the Project described in the 5 Schedule to this Agreement. The specific goods to )w financed out of the proceeds of the Credit and the methods and procedures for procurement of such goods shall bo determined by agreement between the Borrower and the Association, subject to modification by further agreement between them. SECTION 3.02. Except as the Borrower and the Associt- tion shall otherwise agree, the Borrower shall cause all goods financed out of the proceeds of the Credit to be used in the territories of the Borrower exclusively in the carrying out of the Project. ARTICLE IV Particular Covenants SECTION 4.01. (a) The Borrower shall enter into a Sub- sidiary Loan Agreement with Empresa Aguadora de Managua (hereinafter called the Empresa) satisfactory to the Association, providing for the relending of the proceeds of the Credit to the Empresa and containing appropriate provisions with respect to the financing and carrying out of the Project. Such Subsidiary Loan Agreement shall not be amended, assigned or abrogated, nor shall any material waiver of any provision thereof be given, without the con- sent of the Association. (b) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound engineering, financial and public utility practices. (c) Except as the Association shall otherwise agree, in the carrying out of the Project the Borrower shall employ or cause to be employed engineering consultants acceptable to, and upon terms and conditions satisfactory to, the Borrower and the Association. (d) Except as the Association shall otherwise agree, the Borrower shall cause the Project to be carried out by con- tractors s;itisfactory to the Borrower an(I the Association employed under conticts satisfactory to the Borrower and the Association. 6 (e) The general design assumptions to be used for the Project shall be as agreed between the Association and the Borrower. (f) Upon request from time to time by the Association, the Borrower shall promptly furnish or cause to be fur- nished o the Association the plans, specifications and work schedules for the Project and any material modifications subsequently made therein, in such detail as the Association shall request. (g) The Borrower shall at all times make or cause to be made available promptly as needed all sums which shall be required for the carrying out of the Project. (h) The Borrower shall maintain or cause to be main- tained records adequate to identify the goods financed out of the proceeds of the Credit, to disclose the use thereof in the Project, to record the progress of the Project (in- cluding the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the op- erations and financial condition of the Empresa and all financial transactions between the Borrower and the Empresa; shall enable the Association's representatives to inspect the Project, all properties and facilities operated by the Empresa, the goods and any relevant records and documents; and shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Credit, the Project, the goods and the operations and financial condition of the Empresa. SECTION 4.02. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably requa,st with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower. 7 (b) The Borrower and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes o2 the Credit and the maintenance of the service thereof. The Borrower shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accom- plishment of the purposes of the Credit or the maintenance of the service thereof. (c) The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. SECTION 4.03. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Borrower or laws in effect in its territories and free from all restrictions imposed under the laws of the Borrower or laws in effect in its territories. SECTION 4.04. This Agreement shall be free from any taxes or fees that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in con- nection with the execution, issue, delivery or registration thereof. SECTION 4.05. The Borrower shall cause the Empresa to operate, maintain, repair and renew its plants, equipment and property in accordance with sound engineering stand- ards and to conduct its operations and maintain its financial position in accordance with sound business and public utility practices. SECTION 4.06. The Borrower shall take or cause to be taken all necessary action to assure that the Empresa shall at all times maintain water rates adequate to provide sufficient revenue: (a) to cover operating expenses, including taxes, if any, and interest payments on borrowings, and to provide for 8 adequate maintenance and depreciation based on realistic valuations of assets; (b) to v et repayments on long-term indebtedness to the extent that any such repayments exceed the provisions for depreciation; and (c) to finance the normal year to year extensions of the water supply system and to provide a reasonable part of the cost of future major expansion. SECTION 4.07. The Borrower will cause the Project to be carried out and the Managua water supply system to be operated through the Empresa. For this purpose the Borrower undertakes: (a) that the Empresa be given through a Reglamento authority to hire and discharge personnel, to keep separate accounts and to enter into contracts. (b) that the water supply accounts of the Empresa be kept separate and distinct from those for other services, including sewerage. (c) that the Empresa will have itF accounts and records subjected to an annual audit by a qualified independent accountant or firm of accountants satisfactory to the Asso- ciation and the Empresa. (d) that the Empresa may retain for its own use in the water supply undertaking all the water revenues collected by it. (e) the decrees and Reglamentos constituting and gov- erning the operations of the Empresa will be altered only with the agreement of the Association. ARTICLE V Remedies of the Association SECTION 5.01. (i) If any event specified in paragraph (a) or paragraph (c) of Section 5.02 of the Regulations 9 shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (b) of Section 5.02 of the Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower, then at any sub- sequent time the Association, at its option, may declare the principal of the Credit then outstanding to be due and pay- able immediately, and upon any such declaration such principal shall become due and payable immediately, any- thing in this Agreement to the contrary notwithstanding. ARTICLE VI Effective Date; Termination SECTION 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 8.01(b) of the Regulations: (a) Evidence satisfactory to the Association has been furnished to the Association that the Subsidiary Loan Agreement has been duly entered into. (b) Arrangements satisfactory to the Association have been made for the provision of funds to the Empresa (in addition to the Credit) to be made available to the Empresa as required for the carrying out of the Project. (c) Arrangements satisfactory to the Association have been made for the retention of engineering consultants for the carrying out of the Project. (d) A Reglamento pursuant to Section 4.07(a) satis- factory to the Association has been issued. SECTION 6.02. The following is specified as an additional matter within the meaning of Section 8.02(b) of the Regula- tions, to be included in the opinion or opinions to be furnished to the Association: That the Subsidiary Loan Agreement has been duly au- thorized or ratified by, and executed and delivered on behalf 10 of, the Borrower and the Empresa respectively and is valid and enforceable in accordance with its terms. SECTION 6.03. A date sixty days after the date of this Agreement is hereby specified for the purposes of Section 8.04 of the Regulations. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be June 30, 1966, or such other date as may from time to time be agreed between the Borrower and the Association. SECTION 7.02. The following addresses are specified for the purposes of Section 7.01 of the Regulations: For the Borrower: Republica de Nicaragua Ministerio de Fomento y Obras Publicas Apartado Postal 88 Managua, Nicaragua Alternative address for cablegrams and radiograms: Fomento Managua, Nicaragua For the Association: International Development Association 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Indevas Washington, D. C. 11 SECTION 7.03. The Minister of Finance of the Borrower is designated for the purposes of Section 7.03 of the Regulations. IN WITNESS WHEREOF, the parties hereto acting through their representatives thereunto duly authorized, have caused this Development Credit Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF NICARAGUA By J. C. ALEGRIA Authorized Representative INTERNATIONAL DEVELOPMENT AssoCIATION By W. A. B. ILIFF Vice President 12 SCHEDULE 1 Description of the Project The Project consists of the expansion and improvement of the Managua water supply system. It will include the following facilities and services: (a) New low-pressure pumping facilities at Lake Asososca, conversion of existing pumping facilities for high-pressure service at Lake Asososca and flow meters to measure water pumped at these stations; (b) New and improved chlorination facilities; (c) Transmission mains leading from Lake Asososca to the distribution system and major improvements and extensions to the distribution system, including, inter alia, the construction of new distribution storage reservoirs; (d) Improvement of the meter repair shop; (e) The purchase and instalation of about 8,000 new metered service connections in the new service areas and 3,350 new meters for existing unmetered service connections; (f) A study of the dependable yield of the existing water source and for the development of new sup- plementary supply sources; (g) Engineering services for the design of the Project and supervision of Project construction.