Conformed Copy - C2511 - Freetown Infrastructure Rehabilitation Project - GVWC Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2511 SL GVWC Project Agreement (Freetown Infrastructure Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and GUMA VALLEY WATER COMPANY Dated July 15, 1993 CREDIT NUMBER 2511 SL GVWC PROJECT AGREEMENT AGREEMENT, dated July 15, 1993, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and the GUMA VALLEY WATER COMPANY (GVWC). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Sierra Leone (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighteen million four hundred thousand Special Drawing Rights (SDR 18,400,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that GVWC agrees to undertake such obligations toward the Association as are set forth in this Agreement; WHEREAS GVWC in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, wherever used in this Agreement, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the term "Leone" means currency of the Borrower. ARTICLE II Execution of the Project Section 2.01. GVWC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part C of the Project 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. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. GVWC shall carry out the obligations set forth in Sections 9.03, 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, maintenance and land aquisi- tion, respectively) in respect of the GVWC Project Agreement. Section 2.04. (a) GVWC shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) GVWC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by GVWC of its obligations under this Agreement. Section 2.05. GVWC shall provide in its budget amounts sufficient to cover its counterpart contributions to the costs of the Project. ARTICLE III Management and Operations of GVWC Section 3.01. GVWC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. GVWC shall 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. Section 3.03. GVWC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Page 3 Section 3.04. GVWC shall, until completion of the Project, jointly with the Borrower, SLRA, FCC and the Association carry out in October of each year an annual review of the Project. The annual review shall, inter alia, assess: (i) the progress made in carrying out the various components of the Project; (ii) the work program and budgetary allocations proposed for the said components; (iii) compliance with financial, audit and other covenants under the Project; (iv) the carrying out of GVWC's metering program and its water tariff structure based on metered consumption; (v) status of the solid waste management component of the Project; (vi) performance under the Project of PMCU and FCC's Maintenance Unit; and (vii) corrective measures that need to be taken including changes, if any, in the scope and content of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) GVWC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) GVWC shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the GVWC Special Account and the statements of expenditures audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. (a) GVWC shall by November 1, 1993 increase water charges for non-metered domestic consumers to at least 20 Leones of rateable value. (b) GVWC shall as from November 1, 1994 introduce and maintain a tariff structure satisfactory to the Association which shall be based on metered water consumption. (c) GVWC shall as from its 1993/94 fiscal year commence a program for the annual revaluation of its assets in accordance with consistently maintained methods of valuation satisfactory to the Association. Section 4.03. (a) Except as the Association shall otherwise agree, GVWC shall take all necessary action (including adjustment of its water tariffs) to earn for its fiscal year ending October 31, 1995 and each of its fiscal years following thereafter, an annual return before taxes of not less than the percentage of the average current net value of GVWC's fixed assets in operation specified below in relation to each such fiscal year, namely: (i) 2% in fiscal year 1995; (ii) 3% in fiscal year 1996; (iii) 5% in fiscal year 1997; (iv) 7% in fiscal year 1998; and (v) 8% in fiscal year 1999 and thereafter. (b) Before May 1 in each fiscal year referred to in paragraph (a) above, GVWC shall, on the basis of forecasts prepared Page 4 by GVWC and satisfactory to the Association, review whether it would meet the requirements set forth in said paragraph in respect of such year and the next following fiscal year and shall furnish to the Association the results of such review upon its completion. (c) For the purposes of this Section: (i) The annual return shall be calculated by dividing GVWC's net operating income for the fiscal year in question by one-half of the sum of the current net value of GVWC's fixed assets in operation at the beginning and at the end of that fiscal year; (ii) the term "net operating income" means total operating revenues less total operating expenses; (iii) the term "total operating revenues" means revenues from all sources related to operations; (iv) the term "total operating expenses" means all expenses related to operations, including administration, adequate maintenance and provision for depreciation on a straight-line basis at a rate of not less than 4% per annum of the average current gross value of GVWC's fixed assets in operation, or other basis acceptable to the Association, but excluding interest and other charges on debt and taxes; (v) the average current gross value of GVWC's fixed assets in operation shall be calculated as one- half of the sum of the gross value of GVWC's fixed assets in operation at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association; and (vi) the term "current net value of GVWC's fixed assets in operation" means the gross value of GVWC's fixed assets in operation less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, GVWC shall not, for each of its fiscal years following next after its fiscal year ending on October 31, 1994, incur any debt unless a reasonable forecast of the revenues and expenditures of GVWC for each fiscal year during the term of the debt to be incurred shall be at least 1.5 times the estimated debt service requirements of GVWC in such year on all debt of GVWC including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means any indebtedness of GVWC maturing by its terms more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; Page 5 (iii) the term "debt service requirements" means the aggregate of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt; and (iv) the term "reasonable forecast" means a forecast prepared by GVWC not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and GVWC accept as reasonable and as to which the Association has notified GVWC of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of GVWC. Section 4.05. Whenever for the purposes of Sections 4.02, 4.03 and 4.04 of this Agreement, 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 Association. 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of GVWC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify GVWC of this event. 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 Association: Page 6 International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For GVWC Guma Valley Water Company Guma Building P.O.Box 700 Freetown Sierra Leone Cable Address: Telex: GUWATER 3210 Booth SL 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 GVWC or by GVWC on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the General Manager or such other person or persons as GVWC shall designate in writing, and GVWC shall furnish to the Association 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 DEVELOPMENT ASSOCIATION By /s/ Edward V.K. Jaycox Regional Vice President Africa GUMA VALLEY WATER COMPANY By /s/ T.K. Kargbo Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part B hereof, goods shall be procured under contracts awarded in accordance with procedures consistent Page 7 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 1992 (the Guidelines). 2. For fixed price contracts, the invitation to bid referred to in paragraph 2.13 of the Guidelines shall provide that, when contract award is delayed beyond the original bid validity period, the successful bidder's bid price will be increased for each week of delay by two predisclosed correction factors acceptable to the Association, one to be applied to all foreign currency components and the other to the local currency component of the bid price. Such an increase shall not be taken into account in the bid evaluation. 3. In the procurement of goods in accordance with this Part A, GVWC shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Association shall have agreed to be necessary for purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, GVWC shall use bidding documents based on other internationally recognized standard forms agreed with the Association. 4. Goods to be procured through international competitive bidding, shall be exempted from pre-shipment price inspection by a third party. Part B: Other Procurement Procedures 1. Works estimated to cost $500,000 equivalent or less per contract (up to an aggregate amount not to exceed $2,200,000 equivalent) may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Equipment and materials required for Part C of the Project (up to an aggregate amount not to exceed $1,200,000 equivalent) may be procured under contracts awarded on the basis of comparison of price quotations or bids obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. Part C: Review by the Association 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 $300,000 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 Association pursuant to paragraph 2 (d) of said Appendix shall be furnished to the Association 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 pre- ceding 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 Association pursuant to paragraph 3 of said Appendix shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 3. The figure of 10% is hereby specified for purposes of para- Page 8 graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants 1. In order to assist GVWC in carrying out the Project, GVWC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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 (the Consultants Guidelines). 2. For complex, time-based assignments, GVWC shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, GVWC shall use other standard forms agreed with the Association. 3. Notwithstanding the provisions of paragraph 1 of this Section the provision of the Consultants Guidelines requiring prior review or approval by the Association of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts estimated to cost less than $100,000 equivalent each. However, this exception to such prior review or approval requirements shall not apply to the terms of reference for such contracts nor to the employment of individuals, to single-source hiring of firms, to assignments of a critical nature as reasonably determined by the Association and to amendments of contracts raising the contract value to $100,000 equivalent or above.