World Bank Documentdocuments.worldbank.org/curated/.../Credit...Project-Project-Agreement.pdf · the Development Credit Agreement with due diligence and efficiency and in conformity

CONFORMED COPY

CREDIT NUMBER 334 IND

Project Agreement(Second Electricity Distribution Project)

BETWEEN

INTERNATIONAL DEVELOPMENT ASSOCIATION

AND

PERUSAHAAN UMUM LISTRIK NEGARA

DATED SEPTEMBER 29, 1972

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CONFORMED COPY

CREDIT NUMBER 334 IND

Project Agreement(Second Electricity Distribution Project)

BETWEEN

INTERNATIONAL DEVELOPMENT ASSOCIATION

AND

PERUSAHAAN UMUM LISTRIK NEGARA

DATED SEPTEMBER 29, 1972

PROJECT AGREEMENT

AGREEMENT, dated September 29, 1972, betweenINTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called theAssociation) and PERUSAHAAN UMUM LISTRIK NEGARA (hereinafter calledPLN).

WHEREAS by the Development Credit Agreement of even date herewithbetween REPUBLIC OF INDONESIA (hereinafter called the Borrower) and theAssociation, the Association has agreed to make available to the Borrower anamount in various currencies equivalent to forty million dollars ($40,000,000), onthe terms and conditions set forth in the Development Credit Agreement, but onlyon condition that PLN agree to undertake such obligations toward the Associationas hereinafter set forth; and

WHEREAS PLN, in consideration of the Association's entering into theDevelopment Credit Agreement with the Borrower, has agreed to undertake theobligations 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 shallotherwise require, the several terms defined in the Development Credit Agreementand in the General Conditions (as so defined) have the respective meanings thereinset forth.

ARTICLE II

Execution of the Project

Section 2.01. PLN shall carry out the Project described in Schedule 2 tothe Development Credit Agreement with due diligence and efficiency and inconformity with sound public utility, administrative, financial and engineeringpractices.

Section 2.02. PLN shall employ engineering and management consultantsacceptable to the Association upon terms and conditions satisfactory to the

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Association, to carry out the engineering and to assist PLN in supervising theconstruction of the works included in Part A of the Project and to assist PLNin management, planning, cost reduction, staff training and operating the trainingunit as described in Part B of the Project.

Section 2.03. PLN shall cause all works included in Part A of the Projectto be constructed either by contractors acceptable to the Association, employedupon terms and conditions satisfactory to the Association, or pursuant to otherarrangements satisfactory to the Association.

Section 2.04. Except as the Association shall otherwise agree, the goods andservices (other than spare parts and components needed for replacement onequipment and services of consultants) required for the Project and to be financedout of the proceeds of the Credit, shall be procured on the basis of internationalcompetition under procedures consistent with the Guidelines for Procurement underWorld Bank Loans and IDA Credits, published by the Bank in April 1972, andin accordance with, and subject to, the provisions set forth in Schedule 1 to thisAgreement.

Section 2.05. (a) PLN undertakes to insure, or make adequate provision forthe insurance of, the imported goods to be financed out of the proceeds of theCredit made available to it by the Borrower against hazards incident to theacquisition, transportation and delivery thereof to the place of use or installation,and for such insurance any indemnity shall be payable in a currency freely usableby PLN to replace or repair such goods.

(b) Except as the Association may otherwise agree, PLN shall cause allgoods and services financed out of the proceeds of the Credit made available toit by the Borrower to be used exclusively for the Project.

Section 2.06. (a) PLN shall furnish to the Association promptly upon theirpreparation, the plans, specifications, reports, contract documents and constructionand procurement schedules for the Project, and any material modifications thereofor additions thereto, in such detail as the Association shall reasonably request.

(b) PLN: (i) shall maintain records adequate to record the progress ofthe Project (including the cost thereof) and to identify the goods and servicesfinanced out of the proceeds of the Credit made available to it by the Borrower,and to disclose the use thereof in the Project; (ii) shall, witheut limitation uponthe provisions of Section 5.03 of this Agreement, enable the Association'srepresentatives to inspect the Project, the goods financed out of such proceedsand any relevant records and documents; and (iii) shall furnish to the Association

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all such information as the Association shall reasonably request concerning theProject, the expenditure of the proceeds of the Credit so made available to itand the goods and services financed out of such proceeds.

ARTICLE III

Management and Operations of PLN

Section 3.01. PLN shall at all times manage its affairs, maintain its financialposition, plan its future expansion and carry on its operations, all in accordancewith sound engineering, administrative, financial and public utility practices andunder the supervision of experienced and competent management assisted byexperienced and competent staff in adequate numbers. To that end, but withoutlimiting the generality of the foregoing, PLN shall promptly after receipt by PLNfurnish to the Association the recommendations of its management consultants,review with the Association such recommendations without delay, and implementsuch recommendations as shall have been agreed between the Association and PLNto be appropriate, provided that such implementation shall be initiated within threemonths after such agreement shall have been reached.

Section 3.02. (a) PLN shall maintain its existence and right to carry onoperations, and shall take all steps necessary to acquire, maintain and renew allinterests in land and other properties and all rights, powers, privileges and franchiseswhich are necessary or useful in the carrying out of the Project or in the conductof its business.

(b) PLN shall at all times operate and maintain its plants, facilities,equipment and other property, and promptly as required make all necessary repairsand renewals thereof, in accordance with sound engineering and public utilitypractices.

(c) Except as the Association shall otherwise agree, PLN shall not sell,lease, transfer or otherwise dispose of any of its property or assets, which shallbe required for the efficient operation of its business and undertaking.

Section 3.03. PLN shall take out and maintain with responsible insurers,or make other provisions, including self-insurance, satisfactory to the Associationfor, insurance against such risks and in such amounts as shall be consistent withsound practice.

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ARTICLE IV

Financial Covenants

Section 4.01. PLN shall maintain records adequate to reflect in accordancewith consistently maintained sound accounting practices its operations and financialcondition.

Section 4.02. PLN shall, for the first time for its fiscal year 1973: (i) haveits accounts and financial statements (balance sheets, statements of income andexpenses and related statements) for each fiscal year audited, in accordance withsound auditing principles consistently applied, by independent auditors acceptableto the Association; (ii) furnish to the Association as soon as available, but in anycase not later than six months after the end of each such year, (A) certified copiesof its financial statements for such year as so audited and (B) the report of suchaudit by said auditors, of such scope and in such detail as the Association shallhave reasonably requested; (iii) furnish to the Association together with said reportan opinion satisfactory to the Association showing that all amounts owed to PLNfor services provided by PLN to any department or agency of the Borrower duringsuch fiscal year have been fully paid in cash; and (iv) furnish to the Associationsuch other information concerning the accounts and financial statements of PLNand the audit thereof as the Association shall from time to time reasonably request.

Section 4.03. (a) PLN undertakes to effectively introduce beforeJanuary 1, 1973, or such later date as the Association shall agree, such tariffsas the Association and PLN shall agree to be appropriate.

(b) On the basis of the recommendations emanating from PLN's presentlyongoing tariff study, the Association and PLN shall inter alia agree on an appropriateearnings test for PLN.

(c) Except as the Association shall otherwise agree, PLN shall take fromtime to time all steps (including but not limited to adjustments in its tariffs) whichshall be necessary to provide revenues from PLN's operations at least sufficient:

(i) to cover (1) all operating expenses of PLN, includingadministration and overhead expenses, maintenance anddepreciation, (2) taxes, if any, and (3) interest on, and,to the extent it exceeds depreciation, amortization of,debt; and

(ii) to finance a reasonable portion of PLN's capitalexpenditures.

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(d) PLN shall submit its proposed tariff revisions promptly to the Borrowerfor such administrative approvals as shall be required under the Governing Laws.

ARTICLE V

Consultation, Information and Inspection

Section 5.01. The Association and PLN shall cooperate fully to assure thatthe purposes of the Credit will be accomplished. To that end, the Associationand PLN shall from time to time, at the request of either party, exchange viewsthrough their representatives with regard to the performance of their respectiveobligations under this Agreement, the administration, operations and financialcondition of PLN and other matters relating to the purpose of the Credit.

Section 5.02. The Association and PLN shall promptly inform each otherof any condition which interferes with, or threatens to interfere with, theaccomplishment of the purposes of the Credit, or the performance by either ofthem of its obligations under this Agreement.

Section 5.03. PLN shall enable the Association's representatives to inspectall plants, sites, works, properties and equipment of PLN and any relevant recordsand documents.

ARTICLE VI

Effective Date; Termination;Cancellation and Suspension

Section 6.01. This Agreement shall come into force and effect on the dateupon which the Development Credit Agreement becomes effective.

Section 6.02. (a) This Agreement and all obligations of the Association andof PLN thereunder shall terminate on the earlier of the following two dates:

(i) the date on which the Development Credit Agreement shallterminate in accordance with its terms; or

(ii) a date twenty-five years after the date of this Agreement.

(b) If the Development Credit Agreement terminates in accordance withits terms before the date specified in paragraph (a) (ii) of this Section, theAssociation shall promptly notify PLN of this event.

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Section 6.03. All the provisions of this Agreement shall continue in full forceand effect notwithstanding any cancellation of an amount of the Credit orsuspension of the Borrower's right to make withdrawals from the Credit Accountunder the Development Credit Agreement.

ARTICLE VII

Miscellaneous Provisions

Section 7.01. Any notice or request required or permitted to be given ormade under this Agreement and any agreement between the parties contemplatedby this Agreement shall be in writing. Such notice or request shall be deemedto 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 permittedto be given or made at such party's address hereinafter specified or at such otheraddress as such party shall have designated by notice to the party giving suchnotice or making such request. The addresses so specified are:

For the Association:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address:

IndevasWashington, D.C.

For PLN:

Perusahaan Umum Listrik NegaraKantor PusatDjl. AdityawannanBlok MI No. 135Kebajoran BaruDjakarta, Indonesia

Cable address:

PLNPSTDjakarta

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Section 7.02. Any action required or permitted to be taken, and anydocuments required or permitted to be executed, under this Agreement on behalfof PLN may be taken or executed by its President Director or such other personor persons as PLN shall designate in writing.

Section 7.03. PLN shall furnish to the Association sufficient evidence ofthe authority and the authenticated specimen signature of the person or personswho will, on behalf of PLN, take any action or execute any documents requiredor permitted to be taken or executed by PLN pursuant to any of the provisionsof this Agreement.

Section 7.04. This Agreement may be executed in several counterparts, eachof which shall be an original, and all collectively but one instrument.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agreement to be signedin their respective names and delivered in the District of Columbia, United Statesof America, as of the day and year first above written.

INTERNATIONAL DEVELOPMENT ASSOCIATION

By /s/ M. ShoaibVice President

PERUSAHAAN UMUM LISTRIK NEGARA

By /s/ Admono SurjoAuthorized Representative

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SCHEDULE 1

Procurement

1. With respect to equipment, materials and supplies described in Categories Ithrough III set forth in the table in paragraph I of Schedule 1 to the DevelopmentCredit Agreement, identical or similar items to be procured shall be groupedtogether to the extent practicable for the purposes of inviting bids, and suchgrouping of items shall be subject to the approval of the Association.

2. With respect to any contract for such equipment, materials and suppliesestimated to cost the equivalent of $50,000 or more:

(a) Before bids are invited, PLN shall furnish to the Association, for itscomments, the text of the invitations to bid and the specifications and other biddingdocuments, together with a description of the advertising procedures to be followedfor the bidding, and shall make such modifications in the said documents orprocedure as the Association shall reasonably request. Any further modificationto the bidding documents shall require the Association's concurrence before it isissued to the prospective bidders.

(b) After bids have been received and evaluated, PLN shall, before a finaldecision on the award is made, inform the Association of the name of the bidderto whom it intends to award the contract and shall furnish to the Association,in sufficient time for its review, a detailed report, by the consultants referred toin Section 2.02 of this Agreement, on the evaluation and comparison of the bidsreceived, together with the recommendations for award of the said consultants,and the reasons for the intended award. The Association shall, if it determinesthat the intended award would be inconsistent with the procedures set forth orreferred to in Section 2.04 of this Agreement, promptly inform PLN and statethe reasons for such determination.

(c) The terms and conditions of the contract shall not, without theAssociation's concurrence, materially differ from those on which bids were asked.

(d) Two conformed copies of the contract shall be furnished to theAssociation promptly after its execution and prior to the submission to theAssociation of the first application for withdrawal of funds from the Credit Accountin respect of any such contract.

3. With respect to any other contract for such equipment, materials and supplies,PLN shall furnish to the Association, promptly after its execution and prior to

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the submission to the Association of the first application for withdrawal of fundsfrom the Credit Account in respect of any such contract, two conformed copiesof such contract, together with the analysis of bids, recommendations for awardand such other information as the Association shall reasonably request. TheAssociation shall, if it determines that the award of the contract is not consistentwith the procedures set forth or referred to in Section 2.04 of this Agreement,promptly inform PLN and state the reasons for such determination.

4. For the purpose of evaluating bids for such equipment, materials and supplies,bid prices shall be determined and compared in accordance with the followingrules:

(a) the term "Local Bid" means a bid submitted by a manufacturerestablished in the territories of the Borrower for goods manufactured or processedto a substantial extent (as reasonably determined by the Association) in suchterritories; any other bid shall be deemed to be a "Foreign Bid";

(b) the bid price under a Local Bid shall be the sum of the followingamounts:

(i) the ex-factory price of such goods; and

(ii) inland freight, insurance and other costs of delivery of suchgoods to the place of their use or installation;

(c) for the purpose of comparing any Foreign Bid with any Local Bid,the bid price under a Foreign Bid shall be the sum of the following amounts:

(i) the c.i.f. landed price of such goods;

(ii) the amount of any taxes on the importation of such goods intothe territories of the Borrower which generally apply tonon-exempt importers, or 15% of the amount specified in(i) above, whichever shall be the lower; and

(iii) inland freight, insurance and other costs of delivery of suchgoods to the place of their use or installation.

5. Pursuant to paragraph 1.2 of the Guidelines, it is agreed that the procurementof spare parts and components needed for replacement on equipment utilized inor procured for the Project may be made without resort to international competitivebidding. In lieu thereof, the following procedure shall apply: quotations for the

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supply of such items shall be requested from more than one competing supplier,where possible. Lists of such items to be procured, indicating the quotationsreceived and the proposed suppliers thereof, shall be sent to the Associationperiodically for its approval. A conformed copy of each purchase agreement relatingto such procurement shall be sent to the Association promptly after its executionand prior to the date of the first application for withdrawal of proceeds of theCredit in respect thereof.