Conformed Copy - L3716 - Sichuan Gas Development and Conservation Project - Project Agreement 2

Page 1 CONFORMED COPY GET GRANT AGREEMENT RELATED TO LOAN NUMBER 3716 CHA GRANT NUMBER TF028693 Project Agreement (Sichuan Gas Transmission and Distribution Rehabilitation Project) (A Component of Sichuan Gas Development and Conservation Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as Trustee of the Global Environment Trust Fund and SICHUAN PETROLEUM ADMINISTRATION Dated September 16, 1994 GET GRANT NUMBER TF028693 PROJECT AGREEMENT AGREEMENT, dated September 16, 1994, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as Trustee of grant funds provided by participants of the Global Environment Facility into the Global Environment Trust Fund (GET) (the Trustee) and SICHUAN PETROLEUM ADMINISTRATION (SPA). WHEREAS (A) by the GET Grant Agreement of even date herewith between People's Republic of China (the Recipient) and the Trustee, the Trustee has agreed to make available to the Recipient an amount in various currencies equivalent to seven million three hundred thousand Special Drawing Rights (SDR 7,300,000), on the terms and conditions set forth in the GET Grant Agreement, but only on condition that SPA agree to undertake such obligations toward the Trustee as are set forth in this Agreement; (B) by Sub-grant Agreement to be entered into between the Recipient and SPA, the proceeds of the GET Grant provided for under the GET Grant Agreement will be made available to SPA on the terms and conditions set forth in said Sub-grant Agreement; and Page 2 WHEREAS SPA, in consideration of the Trustee's entering into the GET Grant Agreement with the Recipient, has agreed to undertake 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 GET Grant Agreement and the General Conditions (as so defined and modified) have the respective meanings therein set forth and the following additional term has the following meaning: "GET Grant Agreement" means the GET Grant Agreement of even date herewith, between the Recipient and the Trustee for the Project, as such agreement may be amended from time to time; and such term includes the "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, as applied to such agreement, and all schedules and agreements supplemental to the GET Grant Agreement. ARTICLE II Execution of the Project Section 2.01. SPA declares its commitment to the objectives of the Project as set forth in Schedule 2 to the GET Grant Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and environmental 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 Trustee shall otherwise agree, procurement of the goods required for the Project and to be financed out of the proceeds of the GET Grant shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. SPA shall carry out 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 the Project Agreement and the Project. Section 2.04. SPA shall duly perform all its obligations under the Sub-grant Agreement. Except as the Trustee shall otherwise agree, SPA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Sub-grant Agreement or any provision thereof. Section 2.05. (a) SPA shall, at the request of the Trustee, exchange views with the Trustee with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Sub-grant Agreement, and other matters relating to the purposes of the GET Grant. (b) SPA shall promptly inform the Trustee of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the GET Grant, or the performance by SPA of its obligations under this Agreement and under the Sub-grant Agreement. Section 2.06. SPA shall carry out the training and technical assistance under Part B of the Project in accordance with a program agreed with the Trustee and in a manner satisfactory to the Trustee. Section 2.07. SPA shall maintain the Project Management Office established by it with functions, powers, funds, facilities, and staffing satisfactory to the Trustee. Section 2.08. SPA shall carry out an environmental management program including the regular gas leak detection and maintenance program, agreed with the Trustee, in a manner satisfactory to the Trustee. Page 3 ARTICLE III Management and Operations of SPA Section 3.01. SPA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SPA 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 environmental practices. Section 3.03. SPA shall take out and maintain with responsible insurers, or make other provision satisfactory to the Trustee for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) SPA shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SPA shall: (i) have the records and accounts referred to in paragraph (a) of this Section and its financial statements (balance sheets, statements of income and of sources and uses of funds) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Trustee; (ii) furnish to the Trustee 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 Trustee shall have reasonably requested; and (iii) furnish to the Trustee such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Trustee shall from time to time reasonably request. 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 GET Grant Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Trustee and of SPA thereunder shall terminate on the date on which the GET Grant Agreement shall terminate in accordance with its terms, and the Trustee shall promptly notify SPA 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 Page 4 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 Trustee: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 248423 (RCA), Washington, D.C. 82987 (FTCC), 64145 (WUI) or 197688 (TRT) For SPA: Sichuan Petroleum Administration 3 Block 1, Fuqing Road P.O. Box 55 Chengdu, Sichuan People's Republic of China Cable address: Telex: 3111 Chengdu 60203 SPA CN Chengdu 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 SPA, or by SPA on behalf of the Recipient under the GET Grant Agreement, may be taken or executed by its Director or such other person or persons as its Director shall designate in writing, and SPA shall furnish to the Trustee 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 Acting as Trustee of Global Environment Trust Fund By /s/ Nicholas Hope Acting Regional Vice President East Asia and Pacific Page 5 SICHUAN PETROLEUM ADMINISTRATION By /s/ Yang Jiechi Authorized Representative SCHEDULE Procurement Section I. Procurement of Goods Part A: International Competitive Bidding 1. Goods 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 1992 (the Guidelines). (a) 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 Trustee, 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. (b) In the procurement of goods in accordance with this Part A, the Recipient shall use the relevant standard bidding documents issued by the Trustee, with such modifications thereto as the Trustee shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued or agreed to by the Trustee, the Recipient shall use bidding documents based on other internationally recognized standard forms agreed with the Trustee. 2. To the extent practicable, contracts for goods shall be grouped into bid packages estimated to cost the equivalent of $10,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, 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: Review by the Trustee of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for goods, estimated to cost the equivalent of $250,000 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 Trustee pursuant to said paragraph 2 (d) shall be furnished to the Trustee 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, said 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 Trustee pursuant to said paragraph 3 shall be furnished to the Trustee as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the GET Grant Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to Page 6 contracts on account of which withdrawals from the GET Grant Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines.