LOAN NUMBER 2036 UNI ASWC Project Agreement (Anambra Water Supply and Sanitation Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and ANAMBRA STATE WATER CORPORATION Dated /3 , 1981 LOAN NUMBER 2036 UNI ASWC PROJECT AGREEMENT AGREEMENT, dated AJ"'r 1 / 2 , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and ANAMBRA STATE WATER CORPORATION (hereinafter called ASWC). WHEREAS (A) by the Loan Agreement of even date herewith between the Federal Republic of Nigeria (hereinafter called the Borrower) and the Bank, the Bank has agreed to make avail- able to the Borrower an amount in various currencies equivalent to sixty-seven million dollars ($67,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that ASWC agrees to undertake such obligations toward the Bank as are hereinafter set forth; and (B) by a subsidiary loan agreement to be entered into between the Borrower and Anambra State of Nigeria (hereinafter called Anambra State), an amount equivalent to sixty-seven million dollars ($67,000,000) will, out of the proceeds of the loan provided for under the Loan Agreement, be relent by the Borrower to Anambra State on the terms and conditions therein set forth; (C) by two sub-loan agreements to be entered into between Anambra State and ASWC and between Anambra State and Onitsha Local Government (hereinafter called OLG) an amount equivalent to fifty-five million two hundred thousand ($55,200,000) or such other amounts as shall be allocated to ASWC under Categories (1), (5) and (6) in Schedule 1 to the Loan Agreement will be relent by Anambra State to ASWC out of the proceeds of the Loan relent to Anambra State by the Borrower and an amount equivalent to three million dollars ($3,000,000) or such other amounts as shall be allocated to OLG under Category (2) (a) and (c) in said Schedule 1 will be relent by Anambra State to OLG out of said proceeds on the terms and conditions set out in the sub-loan agreements; and WHEREAS ASWC, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. ASWC shall carry out Parts A and B of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utilities practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. (a) ASWC shall establish and thereafter main- tain in a form and with functions and staffing satisfactory to the Bank a project unit (hereinafter called "Project Unit") to assist ASWC in carrying out its Parts of the Project. (b) ASWC shall establish and thereafter maintain for the purposes of the Project Unit a commercial bank account into which shall be deposited all payments made to ASWC out of the proceeds of the Loan and all contributions and payments made by Anambra State to ASWC 1or purposes of the Project. (c) ASWC shall appoint as head of the Project Unit a Project Manager whose qualifications and experience and terms and condi- tions of employment (including terms of reference) shall be satisfactory to the Bank. Section 2.03. In order to assist ASWC in carrying out its Parts of the Project, ASWC shall: (i) employ consultants and financial, commercial, training and operations experts; and (ii) not later than September 30, 1981, employ a Chief Training Officer, a Commercial Adviser and an Electrical and a Mechanical Superintendent; whose qualifications, experience and terms and conditions of employment (including terms of reference) shall be satisfactory to the Bank. -3- Section 2.04. Except as the Bank shall otherwise agree, pro- curement of the goods and civil works to be financed out of the proceeds of the Loan, shall be governed by the provisions of the Schedule to the Anambra State Agreement. Section 2.05. (a) ASWC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan on-lent to it by Anambra State against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ASWC to replace or repair such goods. (b) Except as the Bank may otherwise agree, ASWC shall cause all goods and services financed out of the proceeds of the Loan on-lent to it by Anambra State to be used exclusively for its Parts of the Project. Section 2.06. (a) ASWC shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for its Parts of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) ASWC shall: (i) maintain records and procedures adequate to record and monitor the progress of its Parts of the Project, to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in its Parts of the Project; (ii) enable the Bank's accredited repr-sentatives to visit the facilities and construction sites included in its Parts of the Project and to examine the goods financed out of the proceeds of the Loan on-lent to it by Anambra State and any relevant records and documents; and (iii) furnish to the Bank at regular intervals all such information as the Bank shall reasonably request con- cerning its Parts of the Project, the cost and, where appropriate, the benefits to be derived therefrom, the expenditure of the proceeds of the Loan relent to it by Anambra State and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. -4- (d) Promptly after completion of its Parts of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Bank and ASWC, ASWC shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of its Parts of the Project, the cost and the benefits derived and to be derived therefrom, the performance by ASWC and the Bank of their respective obligations under the ASWC Project Agreement and the accomplishment of the purposes of the Loan. (e) ASWC shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of ASWC and any relevant records and documents. Section 2.07. ASWC shall duly perform all its obligations under the ASWC Sub-loan Agreement. Except as the Bank shall otherwise agree, ASWC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the ASWC Sub-loan Agreement or any provision thereof. Section 2.08. (a) ASWC shall, at the request of the Bank, exchange views with the Bank with regard to the progress of its Parts of the Project, the performance of its oblig.tions under this Agreement ad under the ASWC Sub-loan Agreeme,. and other matters relating to the purposes of the Loan. (b) ASWC shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of its Parts of the Project, the accomplishment of the purposes of the Loan, or the performance by ASWC of its obligations under this Agreement and under the ASWC Sub-loan Agreement. Section 2.09. ASWC shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out its Parts of the Project and shall furnish to the Bank, as soon as possible after such acquisition, evidence satis- factory to the Bank that such land and rights in respect of land are available for purposes related to its Parts of the Project. Section 2.10. ASWC shall cause the facilities provided under its Parts of the Project to be adequately maintained and cause all necessary repairs thereof to be made. -5- ARTICLE III Management and Operations of ASWC Section 3.01. ASWC shall: (a) at all times manage its affairs, plan the development of its properties and facilities and maintain its financial position in accordance with appropriate administrative, engineering, public utilities and financial practices under the supervision of experi- enced and competent management; and shall cause its plant, equip- ment, properties and facilities to be maintained and all necessary renewals and repairs thereto to be made, all in accordance with appropriate administrative, engineering, public utilities and financial practices; (b) take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amo!nts as shall be consistent with appro- priate practice; (c) take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its operations; and (d) not sell or otherwise dispose of any of its property or assets which shall be required for the efficient conduct of its operations. Section 3.02. (a) ASWC shall at all times carry on its operations under qualified and experienced managerial staff, with sufficient supporting staff, in accordance with appropriate management practices. (b) ASWC shall consult with the Bank before making or agreeing to make any future appointments to the posts of Project Manager, Commercial Manager and Chief Training Officer of ASWC. ARTICLE IV Financial Covenants Section 4.01. ASWC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. -6- Section 4.02. ASWC shall keep separate accounts and prepare separate financial statements for its Onitsha Zone and such other zones as shall be agreed with the Bank and shall establish and thereafter maintain with adequate funds a commercial bank account for the Onitsha Zone into which ASWC shall deposit the total revenues of that zone which shall be used primarily for payment of Onitsha Zone's capital and operating expenditures. Section 4.03. ASWC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements in respect of each of its zones and the consolidation thereof) 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 months after the end of each such year in the case of fiscal year 1981 and the years following, (A) certified copies of its finan- cial 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 the accounts and financial statements of ASWC and the audit thereof as the Bank shall from time to time reasonably request. Section 4.',4. Except as the Bank shall other -se agree: (a) ASWC shiall, from time to time, take or c.use to be taken all such measures (including adjustments of the structure or levels of its tariffs) as shall be required to produce in the Onitsha Zone and in such other zones as shall be agreed by the Bank and ASWC for each fiscal year following after December 31, 1982, funds from internal sources equivalent (i) with respect to the Onitsha Zone, to not less than an average of 23% of ASWC's capital expenditures for Onitsha Zone for the fiscal years 1983 through 1986 or for such later period as shall be required to complete the Project; and (ii) with respect to any other zones agreed by the Bank and ASWC, to such other percentage of capital expenditures for such zones and for such periods as may be agreed by the Bank and ASWC. (b) Before October in each of its fiscal years, ASWC shall, on the basis of appropriate plans and forecasts to be prepared by ASWC on a basis satisfactory to the Bank, review the adequacy of its tariffs with a view to meeting the requirement set forth - 7 - in paragraph (a) above for the next following fiscal year and shall furnish to the Bank a copy of such review upon its completion. (c) For the purpose of this Section: (i) the term "funds from internal sources" means the difference between: (1) the sum of gross revenues from all sources, net consumer contributions for connections or other construction works, net non-operating income and any reduction in non-cash working capital; and (2) the sum of all operating expenditures for each zone, including maintenance and admin- istration (excluding depreciation and other non-cash operating charges but including a reasonable share of ASWC's headquarters operating expenses), interest or 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 casuL diviuends and other casn CisL..out&ons of surplus, increase in net working capital other than cash, and any other cash outflows other than cash expenditures. (ii) the term "capital expenditures" means all expenditures incurred on account of fixed or capital assets, including interest charged to construction, if any. Section 4.05. Except as the Bank shall otherwise agree, ASWC shall not incur with respect to the Onitsha Zone and any Zones selected under Section 4.04 of this Agreement any debt unless the consolidated net revenues of Onitsha Zone and the selected zone or zones for the fiscal year next preceding the date of such incur- rence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum consolidated debt service requirement for any succeeding fiscal year on all the debt of Onitsha Zone and - 8 - the selected zone or zones including the debt to be incurred. For the purposes of this Section: (i) the term "debt" means all debt, including debt assumed or guaranteed by ASWC, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence; (ii) the term "incur" with reference to any debt in- cludes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (A) under a loan contract or agreement, on the date the loan contract or agreement is entered into and (B) under a guarantee agreement, on the date the agreement providing for such guarantee is entered into but only to the extent that the underlying debt is outstanding; (iii) the term "consolidated net revenues" means gross operating revenues of ASWC, adjusted to take account of tariffs in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve- month period to which such revenues relate, less all operating expenses, including adequate mainte- nance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (iv) the term "consolidated debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt of ASWC; and (v) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other cur- rency is obtainable by ASWC, at the time such valuation is made, for the purposes of servicing such debt, or, if such other currency is not obtainable, at the rate of exchange that will be reasonably determined by the Bank. -9- Section 4.06. ASWC shall maintain its assets at current prices through annual revaluation of such assets using methods of valuation acceptable to the Bank and on the basis of such revalued assets provide for annual depreciation. 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 ASWC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly so notify ASWC 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 herein- after 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 - 10 - Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For ASWC: The General Manager Anambra State Water Corporation P.M.B. 1296 3 Constitution Road Enugu, Anambra, Nigeria Cable address: Telex: WATER CORPORATION 51161 WATER NG Enugu 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 ASWC may be taken or executed by the General Manager of ASWC or such other person or persons as ASWC shall designate in writing, and ASWC 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 collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be - 11 - delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT B y /V 20- /)W,(, Regional Vice President Western Africa ANAMBRA STATE WATER CORPORATION By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this /- day of , 198/. FOR SECRETARY