LOAN NUMBER 2371 JO Project Agreement (Energy Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and JORDANIAN ELECTRIC POWER COMPANY Dated , 1984 ÿþLOAN NUMBER 2371 JO PROJECT AGREEMENT AGREEMENT, dated , 1984, between INTERNATIONAL BANK FOR RECONTRUCTION D DEVELOPMENT (herein- after called the Bank) and JORDANIAN ELECTRIC POWER COMPANY (hereinafter called JEPCO). WHEREAS (A) by the Loan Agreement of even date herewith between the Hashemite Kingdom of Jordan (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to thirty million dollars ($30,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that JEPCO agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and JEPCO, part of the proneeds of the loan provided for under the T-oan Agreement will be made available to JEPCO on the terms and conditions therein set forth; and WHEREAS JEPCO, 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: 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, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. JEPCO shall carry out Part B (1) of the Project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. -2- Section 2.02. In order to assist JEPCO in the evaluation of bids and the supervision of construction under Part B (1) of the Project, JEPCO shall employ engineering consultants whose quali- fications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfac- tory 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. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods required under Part B (1) of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) JEPC0 undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Borrower against hazards incident to the acquisition, transporta- tion and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a cur- rency freely usable by JEPCO to replace or repair such goods. (b) JEPCO shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the purposes of Part B (1) of the Project. Section 2.05. (a) JEPCO shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for Part B (1) of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) JEPCO: (i) shall maintain records and procedures ade- quate to record and monitor the progress of Part B (1) of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in Part B (1) of the Project; (ii) shall enable the Bank's representatives to visit the facilities included in Part B (1) of the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning Part B (1) of the Project, - 3 - its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by JEPCO of any contract for goods 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. (d) Promptly after completion 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 JEPCO and the Bank, JEPCO shall prepare, in cooperation with the Borrower and the other Implementing Agencies, and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by JEPCO and the Bank of their respective obligations under this Agreement and the accomplishment of the purposes of the Loan. (e) JEPCO shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of JEPCO and any relevant records and documents. Section 2.06. JEPCO shall duly perform all its obligations under the JEPCO Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, JEPCO shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the JEPCO Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) JEPCO shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part B (1) of the Project and the performance of its obligations under this Agreement and under the JEPCO Subsidiary Loan Agreement and other matters relating LO the purposes of the Loan. (b) JEPCO shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part B (1) of the Project, the accomplishment of the purposes of the Loan, or the performance by JEPCO of its obligations under this Agreement and under the JEPCO Subsidiary Loan Agreement. ARTICLE III Management and Operations of JEPCO Section 3.01. JEPCO shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, public utility and engineering practices and under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. JEPCO 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 and financial practices. Section 3.03. JEPCO shall take out and maintain with responsible insurers, or make other provisions 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. JEPCO shall maintain separate accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. JEPCO shall: (a) have its 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; (b) furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and -5- (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.03. Except as the Bank may otherwise agree, JEPCO shall take all such measures as shall be required to produce during each of its fiscal years beginning with fiscal year 1983, funds from internal sources equivalent to not less than 25% for fiscal year 1983 and 35% for fiscal year 1984 and thereafter, of JEPCO's average capital expenditures for electricity operations for two years, comprising the year in question and the next pre- ceding year. For the purposes of this Section: (a) The term "funds from internal sources" means the dif- ference between: (i) the sum of gross revenues from all sources related to electricity operations, cash consumer contribu- tions in aid of construction, net non-operating income, and any other cash inflows but excluding external funds for financing capital expenditures; and (ii) the sum of all expenses of operation, including maintenance and administration (excluding depre- ciation and other non-cash operating charges), interests, repayment of loans and cash dividends. (b) The term "capital expenditures" means all expenditures incurred on account of fixed or capital assets, including interest during construction. Section 4.04. JEPCO shall review with the Borrower, at least three months before the end of each fiscal year, measures necessary for JEPCO to comply with the requirements of Section 4.03 of this Agreement for the following fiscal year and shall consult with the Bank, prior to the beginning of such following fiscal year, on such measures. Section 4.05. (a) Except as the Bank shall otherwise agree, JEPCO shall not incur any debt unless a reasonable forecast of the revenues and expenditures of JEPCO shows that the projected internal cash generation of JEPCO for each fiscal year during the - 6 - term of the debt to be incurred shall be at least 1.5 times the projected debt service requirement of JEPCO in such year on all debt of JEPCO, including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means any indebtedness of JEPCO, including debt incurred by others on behalf of JEPCO but for the service of which JEPCO is responsible, 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 con- tract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; (iii) the term "internal cash generation" means revenues from all sources, related to electricity opera- tions, less all expenses related to electricity operations, including maintenance and administra- tion and all taxes or payments in lieu of taxes, but before provision for depreciation of assets and interest and other charges on debt; (iv) the term "debt service requirement" means the aggregate amount of amortization (including sink- ing fund payments, if any) of, and interest and other charges on, debt but excluding interest charges during construction; (v) the term "reasonable forecast" means a forecast prepared by JEPCO not earlier than twelve months prior to the incurrence of the debt in question, which both the Bank and JEPCO accept as reasonable and as to which the Bank has notified JEPCO of its acceptability, provided that no event has occurred since such notification which has, or may reason- ably be expected in the future to have, a material adverse effect on the financial condition or future operating results of JEPCO; and - 7 - (vi) whenever for the purposes of this Section 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 Bank. Section 4.06. During the implementation of Part B (1) of the Project, JEPCO shall: (a) issue and sell new shares in a total amount which shall be sufficient, when added to all grant contribution provided by the Borrower for JEPCO's investment, to enable JEPCO to meet its capital expenditures under the Project; and (b) consult with the Bank, in sufficient time before the beginning of each fiscal year, with a view to determining, in light of such contribution and the expected capital expenditures of JEPCO during such year, the amount of shares to be issued and the timing thereof. Section 4.07. JEPCO shall take all action required to ensure that all departments and agencies of the Borrower will: (i) pay, not later than March 31, 1984, all electricity bills owed by them to JEPCO and outstanding, as of such date, for a period of six weeks or more; and (ii) pay thereafter all such bills within six weeks from the date of their issuance by JEPCO. 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 JEPCO thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify JEPCO thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. - 8 - 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (JUI) For JEPCO: Jordanian Electric Power Company P.O. Box 618 Amman, Jordan Cable Address: Telex: ELECTRICO 21507 JEPCO JO AMMAN 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 JEPCO may be taken or executed by the General Manager of JEPCO or such other person or persons as the General Manager shall designate in writing, and JEPCO shall -9- 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 representatives thereunto duly authorized, 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//d~JPux /1 62. Regional Vice President Europe, Mid e East and North Africa JORDANIAN ELECTRIC POWER COMPANY By Authoriiz' presentative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Goods required under Part B (1) of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured on the basis of international com- petitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, JEPCO shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first ten- der or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. JEPCO shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of interne.t- )aal competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port-of-entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in - 11 - Jordan may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which would be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified ir one of the following three groups: (1) Group A: bids offering goods manufactured in Jordan if the bidder shall have established to the satisfaction of JEPCO and the Bank that the manufacturing cost of such goods includes a value added in Jordan equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. id price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. - 12 - C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equivalent of $250,000 or more: (a) Before bids are invited, JEPCO shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, JEPCO shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants referred to in Section 2.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform JEPCO and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, JEPCO shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, - 13 - together with the analysis of the respective bids, recommenda- tions for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform JEPCO and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, JEPCO shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform JEPCO and state the reasons for its determination. 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 vav&u) 19% FOR SECRETARY