Conformed Copy - L2774 - Second Guayaquil and Guayas Province Water Supply Project - Memorandum Of Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2774 EC (Second Guayaquil and Guayas Province Water Supply Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and COMMONWEALTH DEVELOPMENT CORPORATION Dated June 17, 1991 LOAN NUMBER 2774 EC MEMORANDUM OF AGREEMENT AGREEMENT, dated June 17, 1991, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called IBRD) and COMMONWEALTH DEVELOPMENT CORPORATION (hereinafter called CDC) (IBRD and CDC hereinafter sometimes collectively called the Lenders). WHEREAS (A) by a loan agreement between IBRD and Empresa Municipal de Agua Potable de Guayaquil (hereinafter called EMAP-G), dated September 26, 1987 (hereinafter called the IBRD Loan Agree- ment), the Bank made a loan (hereinafter called the IBRD Loan) to EMAP-G in an amount in various currencies equivalent to thirty-one million dollars ($31,000,000) on the terms and conditions set forth in IBRD Loan Agreement for purposes of financing a portion of the Second Guayaquil and Guayas Province Water Supply Project described in Annex A hereto (hereinafter called the Project); (B) by a loan agreement between CDC and EMAP-G, dated September 18, 1987 (hereinafter called the CDC Loan Agreement), the CDC made a loan (hereinafter called the CDC Loan) to EMAP-G in an amount not to exceed four million nine hundred thousand pounds Page 2 sterling (\1a4,900,000) on the terms and conditions set forth in the CDC Loan Agreement for purposes of financing a portion of the Project; (C) by Law No. 38 passed by the National Congress of the Republic of Ecuador (hereinafter called the Republic) as published in the Registro Oficial on August 3, 1989, the new entity Empresa Provincial de Agua Potable del Guayas (hereinafter called EPAP-G) was created and assumed all the functions, assets and liabilities of EMAP-G; (D) the Republic and EPAP-G have requested IBRD and CDC to agree to: (i) the undertaking by the Republic of all of EMAP-G's covenants, agreements and obligations as borrower (as distinguished from EMAP-G's role as Project executing agency) contained or referred to in the IBRD Loan Agreement and the CDC Loan Agreement and for that purpose, to enter into loan assumption agreements with IBRD and CDC (hereinafter called the IBRD Loan Assumption Agreement, when referring to such agreement between IBRD and the Republic, and the CDC Loan Assumption Agreement, when referring to such agreement between CDC and the Republic); and (ii) the undertaking by EPAP-G of all of EMAP-G's covenants, agreements and obligations as Project executing agency contained or referred to in the IBRD Loan Agreement and the CDC Loan Agreement, for which purpose the Republic shall be required to onlend the proceeds of the IBRD Loan and the CDC Loan to EPAP-G; and (E) IBRD and CDC have agreed to the request of the Republic and of EPAP-G; NOW THEREFORE the Lenders, being cognizant of their common interest in the carrying out of the Project and desiring to cooperate closely and expeditiously with respect to their financial assistance for the Project, have agreed to cooperate in the manner set forth herein. A. Financing Plan The expenditures required for the Project are expected to be financed as described in the financing plan comprising Annex B hereto as such financing plan may be amended from time to time. B. Information and Exchange of Views 1. The Lenders shall promptly make available to each other all pertinent nonconfidential information received from the Republic or EPAP-G which may be of common interest with respect to the Project, the service of the IBRD Loan and the CDC Loan, and the fulfillment of any obligation of the Republic or EPAP-G with respect to the Project. The foregoing shall in no way limit or restrict the right of each of the Lenders to demand and obtain that all information which the Republic is obligated to provide pursuant to the IBRD Loan Assumption Agreement or the CDC Loan Assumption Agreement, respec- tively (or which EPAP-G is obligated to provide pursuant to any agreements with respect to the Project between IBRD and EPAP-G or CDC and EPAP-G), be furnished directly to such Lender. 2. IBRD and CDC shall communicate with and afford each other a reasonable opportunity to exchange views, before taking any action of common interest with respect to the Project, and shall inform each other after taking any such action. The matters on which this exchange of views and information shall be carried out include: (a) notifying the Republic and EPAP-G that the conditions precedent to initial disbursement and effectiveness of the IBRD Loan Assumption Agreement and CDC Loan Assump- tion Agreement, respectively, have been fulfilled; (b) extending the date for compliance with such conditions; Page 3 (c) extending the Closing Date as defined in the IBRD Loan Agreement and the CDC Loan Agreement; (d) amending, abrogating or revoking any provision set forth in the IBRD Loan Agreement or IBRD Loan Assumption Agreement or the CDC Loan Agreement or CDC Loan Assump- tion Agreement or any agreements with respect to the Project between IBRD and EPAP-G or CDC and EPAP-G or waiving any provision set forth in such agreements if such waiver may substantially affect the carrying out or financing of the Project; and (e) taking any action which may lead to the suspension, cancellation or prematuring of the IBRD Loan or the CDC Loan or any part of either of them. For purposes of this paragraph, IBRD and CDC agree, if considered advisable, to designate, from time to time, members of their respective staffs who may meet whenever considered appropriate. C. Supervision The Lenders shall cooperate with each other with regard to the supervision of the Project, shall provide each other copies of their respective nonconfidential supervision reports, promptly as issued, and shall agree where appropriate on specific arrangements for coordinating their action. Nothing in this Memorandum in any way limits the rights of either Lender to supervise the Project in accordance with the provisions of its respective agreements with the Republic or EPAP-G. D. Bidding, Procurement and Disbursement 1. Bidding procedures for the procurement of the goods, works and services required for the Project and to be financed by either or both of IBRD and CDC shall be those described or referred to in Parts A, B and C of Section I, in Section II and in Section III of Schedule 4 to the IBRD Loan Agreement as amended pursuant to the IBRD Loan Assumption Agreement. The Lenders agree that, whenever practicable, all comments proposed to be made to the Republic or EPAP-G regarding such bidding procedures shall be channeled through IBRD. 2. The Lenders shall furnish each other detailed information, at least every six months, or at any time on request, on all disburse- ments made under the IBRD Loan and the CDC Loan, respectively. E. Cooperation The Lenders shall inform each other of any material matter not known to the other or others relating to the progress of the Project and, in particular, of any matter that may interfere substantially with the carrying out of the Project or the achievement of the benefits of the Project or that may lead to a substantial increase in the cost of the Project. The Lenders shall send to each other, for information purposes, copies of reports made by persons sent to review the progress of the Project, as well as copies of correspon- dence with the Republic or EPAP-G which in the opinion of the respective Lender may be of interest in relation to the Project. F. Resolution of Differences In the event of any difference of views on any matter covered by this Memorandum, each Lender shall use its best efforts to reach promptly a mutually acceptable resolution of such difference. Each Lender shall, however, retain its independent right of decision and action under its respective agreement with the Republic or EPAP-G. G. Effectiveness This Memorandum comes into force and effect upon signature by Page 4 the Lenders. ANNEX A Description of the Project The objectives of the Project are to: (a) support the Republic's service goals in the water supply and sewerage sector; (b) improve water supply service levels in Guayaquil; and (c) assist EPAP-G in strengthening its managerial, technical and financial management. The Project consists of the following parts, subject to such modifications thereof as the Lenders, EPAP-G and the Republic may agree upon from time to time to achieve such objectives: Part A: Expansion of the Water Supply System 1. Rehabilitation of EPAP-G's La Toma Treatment Plant to increase its capacity from about 420,000 m3/d to about 660,000 m3/d. 2. Construction of an additional tank to increase storage capacity in the water supply system of EPAP-G by about 22,000 m3. 3. Rehabilitation and construction of about 400 kilometers of distribution system in Guayas Province, including about 50 kilo- meters in downtown Guayaquil. 4. Installation of about 136,000 residential water connections in Guayas Province. 5. A credit program to finance the installation of residential water connections. Part B: Operations Improvement and Training 1. Technical cooperation and training program for EPAP-G's staff on operations and maintenance, leak detection, human resources development and financial and commercial management. 2. Acquisition and utilization of operation and maintenance equipment for EPAP-G, including spare parts, water quality control laboratory, leak detection, communication and topography equipment, vehicles and micro-computers. 3. Acquisition and installation of production and domestic meters and rehabilitation of EPAP-G's meter repair workshop. Part C: Studies Carrying out of studies: 1. To prepare an updated master plan for EPAP-G, such master plan to include activities foreseen for the period up to year 2010; 2. On the rehabilitation of the La Lolita Treatment Plant; and 3. On the merger of, or improvement on, the coordination of activities between the water and sewerage companies operating in Guayaquil. * * * The Project is expected to be completed by December 31, 1994. ANNEX B Estimated Project Costs: Local Foreign Total ---- US$ million ----- Page 5 Expansion of Water Supply System 13.82 17.20 31.02 Operation Improvement and Training 1.32 6.95 8.27 Studies 0.14 0.51 0.65 Base Cost (December 1986 prices) 15.28 24.66 39.94 Physical Contingencies 2.21 1.47 3.68 Price Contingencies 1.10 1.46 2.56 Total Project Cost 18.59 27.59 46.18 Interest during Grace Period -IBRD Financed - 3.30 3.30 -CDC Financed - 1.00 1.00 Total Financing Required 18.59 31.89 50.48 ===== ===== ===== Financing Plan: Local Foreign Total ----- US$ million ----- IBRD 5.61 25.39 31.00 CDC 1.50 6.50 8.00 Borrower 11.48 - 11.48 Total 18.59 31.89 50.48 Estimated Disbursements: IBRD FISCAL YEAR 1987 1988 1989 1990 1991 1992 1993 1994 1995 ------------------- US$ million -------------------- Annual 0.80 6.01 7.56 6.49 3.80 2.46 2.03 1.31 0.54 Cumulative 0.80 6.81 14.37 20.86 24.66 27.12 29.15 30.46 31.00