Conformed Copy - L4020 - Energy Project - Project Agreement 2

Page 1 CONFORMED COPY LOAN NUMBER 4020 MD Moldenergo Project Agreement (Energy Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and MOLDENERGO Dated July 23, 1996 LOAN NUMBER 4020 MD PROJECT AGREEMENT AGREEMENT, dated July 23, 1996, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and MOLDENERGO (Moldenergo). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Moldova (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount equal to ten million dollars ($10,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Moldenergo agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and Moldenergo, a portion of the proceeds of the loan provided for under the Loan Agreement will be relent to Moldenergo on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS Moldenergo, in consideration of the Bank's entering into the Loan Agreement with the Borrower, 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 Loan Agreement, the Preamble to this Agreement Page 2 and the General Conditions (as so defined) have the respective meanings therein set forth and the term "its Part of the Project" means Parts A, D (i) and E (i) of the Project. ARTICLE II Execution of the Project Section 2.01. (a) Moldenergo 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 its Part of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, public utility and environ- mental practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for its Part of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, Moldenergo shall carry out in a timely manner the actions set forth in the Financial Action Plan. Section 2.02. Except as the Bank shall otherwise agree, procure- ment of the goods and consultants' services required for its Part of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.03. (a) Moldenergo shall carry 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 and its Part of the Project. (b) For the purposes of Section 9.07 of the General Conditions and without limitation thereto, Moldenergo shall provide information to the Borrower to enable the Borrower to comply with Section 3.05 of the Loan Agreement. Section 2.04. Moldenergo shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about September 15, 1997, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Bank, by October 31, 1997, or such later date as the Bank shall request, the report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank's views on the matter. Section 2.05. Moldenergo shall duly perform all its obligations under the Moldenergo Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, Moldenergo shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Moldenergo Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) Moldenergo shall, at the request of the Bank, exchange views with the Bank with regard to the progress of its Part of the Project, the performance of its obligations under this Agreement Page 3 and under the Moldenergo Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan; and (b) Moldenergo shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of its Part of the Project, the accomplishment of the purposes of the Loan, or the performance by Moldenergo of its obligations under this Agreement and under the Moldenergo Subsidiary Loan Agreement. ARTICLE III Management and Operations of Moldenergo Section 3.01. Moldenergo shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, public utility, engineering and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. Moldenergo 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, public utility and environmental practices. Section 3.03. Moldenergo shall 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. ARTICLE IV Financial Covenants Section 4.01. (a) Moldenergo shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) Moldenergo shall: (i) 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 independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six (6) 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 (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. Moldenergo shall: (a) until December 31, 1996, maintain cash collections for electricity of not less than 30% of total collections and, thereafter, maintain such level as may be agreed with the Bank under the Financial Action Plan; and (b) by October 15, 1996, submit to the Bank a debt repayment plan including, without limitation, a schedule for: (i) collection of overdue accounts; and (ii) repayment of short and long term debt and accounts payable, satisfactory to the Bank and implement the said plan, taking into account the Bank's comments thereon. Page 4 Section 4.03. Moldenergo shall take all action required on its part to ensure that its electricity tariffs are set and maintained at levels established by the Borrower in accordance with Section 4.02 (b) of the Loan Agreement. 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 Moldenergo thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Moldenergo 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 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For Moldenergo: Moldenergo 78 Hincesti Street Chisinau Republic of Moldova 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 Moldenergo, or by Moldenergo on behalf of the Borrower under the Loan Agreement, may be taken or executed by the General Director of Moldenergo or such other person or persons as the General Director of Moldenergo shall designate in writing, and Moldenergo 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 counter- parts, each of which shall be an original, and all collectively but one instrument. Page 5 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/ Basil G. Kavalsky Acting Regional Vice President Europe and Central Asia MOLDENERGO By /s/ Nicolae Tau Authorized Representative