Conformed Copy - L3498 - Second Maharashtra Power Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3498 IN (Second Maharashtra Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and STATE OF MAHARASHTRA Dated July 8, 1992 LOAN NUMBER 3498 IN PROJECT AGREEMENT AGREEMENT, dated July 8, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and STATE OF MAHARASHTRA, acting by its Governor, (Maharashtra). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred fifty million dollars ($350,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Maharashtra agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) for the purpose of carrying out the Project, the proceeds of the loan provided for under the Loan Agreement will be made available by the Borrower to Maharashtra as provided for in the Loan Agreement; and WHEREAS Maharashtra, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake Page 2 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, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth, and the term "Coupon Rate" means the Borrower's rate of long-dated securities (15 years maturity) approved for the purposes of advances under Section 17 (4) (a) of the Reserve Bank of India Act, 1934, as amended, or comparable available marketable securities carrying the guarantee of Maharashtra. ARTICLE II Execution of the Project Section 2.01. (a) Maharashtra declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out or cause to be carried out the Project through the Board, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering 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. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Bank and Maharashtra shall otherwise agree, Maharashtra shall carry out or cause to be carried out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Maharashtra shall relend to the Board an amount equivalent to $349,000,000 under financial arrangements to be entered into between Maharashtra and the Board from the proceeds of the Loan made available by the Borrower to Maharashtra, under terms and conditions which shall have been approved by the Bank, which shall, except as the Bank may otherwise agree, include interest rate per annum of not less than the prevailing Coupon Rate on the principal amount so relent and withdrawn by the Board and outstanding from time to time, and repayment over a period of twenty years, including therein a period of grace of five years. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.04. Maharashtra shall carry out or cause to be carried 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 the Project Agreement. Section 2.05. (a) Maharashtra shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Loan. (b) Maharashtra shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by Maharashtra of its obligations under this Agreement. ARTICLE III Page 3 Management and Operations of the Board Section 3.01. Maharashtra shall cause the Board to: (i) carry on its operations and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; (ii) 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 and public utility practices; and (iii) 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. Section 3.02. Maharashtra shall cause the Board to: (i) reduce total commercial accounts receivables less any disputed amount to less than 2.5 months of revenues; and (ii) reduce commercial accounts payables to less than 2.0 months of consumption of fuel and consumables, plus purchases of power. ARTICLE IV Financial Covenants Section 4.01. (a) Maharashtra shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound engineering practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of Maharashtra responsible for carrying out the Project. (b) Maharashtra shall: (i) have the records and accounts referred to in paragraph (a) of this Section 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 nine months after the end of each such year, 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 and accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. Maharashtra shall cause the Board to: (a) maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) 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 indepen- dent auditors acceptable to the Bank; (c) furnish to the Bank as soon as available, but in any case not later than nine 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 (d) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit Page 4 thereof, as the Bank shall from time to time reasonably request. Section 4.03. (a) Except as the Bank shall otherwise agree, Maharashtra shall cause the Board from time to time to take all such measures (including without limitation, adjustments of the structure or levels of its tariffs) as shall be required to: (i) produce, for each of its financial years 1992/93 and 1993/94, funds from internal sources equivalent to not less than twenty percent (20%) of the annual average of the Board's capital expenditures incurred, or expected to be incurred, during the previous, current and following financial years, and not less than twenty-five percent (25%) in financial year 1994/95 and thereafter; and (ii) earn an annual return of not less than four and one-half percent (4.5%) in its financial year 1992/93 and thereafter, of the average net value of the fixed assets in operation of the Board. (b) The foregoing provisions of sub-paragraph (a) (ii) of this Section supercede the provisions of Section 4.03 (a) of the Project Agreement (Maharashtra Power Project) between the Bank and Maharashtra dated September 11, 1989. (c) Before March 31 in each financial year, Maharashtra shall cause the Board, on the basis of forecasts prepared by the Board and satisfactory to the Bank, to review the adequacy of its tariffs to meet the requirement set forth in the preceding paragraph (a) in respect of such year and the next following financial year and shall furnish to the Bank a copy of such review upon its completion. (d) For the purposes of this Section: (i) The term "funds from internal sources" means the difference between: (A) the sum of gross revenues from all sources related to the Board's operations, consumer deposits and cash consumer contributions in aid of construction, net non-operating income and any reduction in non-cash working capital; and (B) the sum of all expenses of the Board's operations, including maintenance and administration (excluding depreciation and other non-cash operating charges), interest and other charges on debt (excluding interest financed under a loan contract), repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, all cash dividends and other cash distributions of surplus, increase in non-cash working capital and any other cash outflows other than cash expenditures related to the operations of the Board; (ii) The term "capital expenditures" means all expenditures incurred on account of fixed or capital assets, including interest charged to construction, related to the operations of the Board; (iii) "annual return" means gross revenue of the Board less expenses, divided by net fixed assets of the Board at the beginning of each financial year; (iv) "gross revenue" means the revenue earned and received for the electric services provided by the Board; (v) "expenses" means the sum of all operating expenses, taxes on income and profits, depreciation and interest charged on all Page 5 debentures, bonds and loans; (vi) "operating expenses" means the cost of power generated as well as purchased, fuel, operating, maintenance, management and administrative expenses, and all taxes accruing during the financial year, other than taxes on income and profits of the Board; (vii) "taxes on income and profits" consists of income taxes and other levies accrued by the Board according to the provisions of any legislation or regulation applicable in this respect; (viii) "depreciation" means a provision derived in accordance with the straight-line method based on the useful life of assets as stipulated in the Borrower's notification G.S.F. No. 1330 (E) dated December 12, 1986, issued under the provisions of Section 68 of the Electricity (Supply) Act 1948, of the Borrower, based on the gross value of the Board's fixed assets in service at the beginning of each year; (ix) "interest charged on all debentures, bonds and loans" means all interest, excluding interest during construction, accrued by the Board during the financial year and all other charges on debt; and (x) "net fixed assets of the Board" means: (A) the original cost of such fixed assets, as reduced by the aggregate of the cumulative depreciation in respect of such assets; less (B) consumers' contribution for service lines, also reduced by the aggregate of the cumulative depreciation in respect of such portion of the service lines as has been financed by consumer contributions. Section 4.04. Maharashtra shall make satisfactory financial arrangements for the acquisition and installation of HVDC terminals required under Part A (ii) of the Project. 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 5.02. This Agreement and all obligations of the Bank and of Maharashtra thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Maharashtra 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 Page 6 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 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For Maharashtra: Secretary to the Government of Maharashtra Department of Energy Mantralya, Bombay India Cable address: Telex: ENRG 114170 Mantralya, Bombay 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 Maharashtra may be taken or executed by a Secretary to the Government of Maharashtra or such other person or persons as Maharashtra shall designate in writing, and Maharashtra 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 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/ D. Joseph Wood Regional Vice President South Asia STATE OF MAHARASHTRA By /s/ Lalit Mansingh Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Page 7 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 hereof, goods manufactured in India 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 Contracts for small items estimated to cost the equivalent of $100,000 each or less up to an aggregate amount of $6,300,000 equivalent may be procured on the basis of comparison of price quotations solicited from a list of at least three suppliers 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 $1,000,000 or more 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 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 4 to the Loan Agreement. (c) The provisions of the preceding subparagraph (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 (a) (ii) of the Loan Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist Maharashtra in carrying out the Project, Maharashtra shall employ or cause to be employed by the Board, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. 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. Page 8 SCHEDULE 2 Implementation Program 1. Maharashtra shall, not later than December 31 each year, furnish to the Bank the annual revisions to the five-year revolving capital investment and associated financing plan of the Board. 2. Maharashtra shall: (i) establish a commission to review institutional arrangements in the power sector in Maharashtra; and (ii) not later than December 31, 1993, discuss the findings and recommendations of said commission with the Bank. 3. Maharashtra shall, jointly with the Bank, carry out a mid-term review in the third year of the Project to assess overall progress of the Project. 4. Maharashtra shall ensure that, not later than March 1 each year, the Board shall furnish to the Bank a work plan, including the list of distribution lines and substations to be constructed under the Project in the following year. 5. Maharashtra shall cause the Board to implement, in carrying out Part A of the Project, environmental mitigatory measures agreed with the Bank, which shall include, inter alia, (i) the implementation of a waste water treating and management scheme; (ii) the installation of dust supression systems; (iii) the retrofitting of the ash pond; and (iv) the acquisition and installation of air monitoring equipment. 6. Maharashtra shall, for the purpose of afforestation, make arrangements to transfer to its Forest Department, land equivalent to the forest land required and apportioned for the Project, and shall ensure that the Board shall deposit with the appropriate authorities an estimated amount sufficient for such afforestation.