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LOAN NUMBER 1823 BR
Loan Agreement
(Southern States Water Supply and Sewerage Project)between
INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT
andBANCO NACIONAL DA HABITAqAO
andCOMPANHIA DE SANEAMENTO DO PARANA - SANEPAR
andCOMPANHIA CATARINENSE DE AGUAS E SANEAMENTO - CASAN
andCOMPANHIA RIO GRANDENSE DE SANEAMENTO - CORSAN
andSTATE OF PARANA
andSTATE OF SANTA CATARINA
andSTATE OF RIO GRANDE DO SUL
Dated LL , 1980
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LOAN NOMBER 1823 BR
LOAN AGREEMENT
AGREEMENT, dated , 1980, betweenINTERNATIONAL BANK FOR RECONS CTION AND DEVELOPMENT (hereinaftercalled the Bank) and BANCO NACIONAL DA HABITAQAO (hereinaftercalled the Borrower) and COMPANHIA DE SANEAMENTO DO PARANA -SANEPAR (hereinafter called SANEPAR) and COMPANHIA CATARINENSE DEAGUAS E SANEAMENTO - CASAN (hereinafter called CASAN) andCOMPANHIA RIO GRANDENSE DE SANEAMENTO - CORSAN (hereinafter calledCORSAN) and STATE OF PARANA and STATE OF SANTA CATARINA and STATEOF RIO GRANDE DO SUL.
WHEREAS (A) Plano Nacional de Saneamento (hereinafter calledPLANASA) constitutes a water supply and sewerage program forBrazil which has been established under the direction of theBorrower, and which, in the opinion of the Bank, forms an accept-able basis for a specific financing operation of the Bank inBrazil;
(B) The Project described in Sche-:ule 1 to this Agreementwill be carried out and financed as part of PLANASA;
(C) The Federative Republic of Brazil (hereinafter calledthe Guarantor), the State of Parana, the State of Santa Catarinaand the State of Rio Grande do Sul (hereinafter called the ProjectStates) and the Borrower have requested the Bank to assist in thefinancing of the Project by making the Loan to the Borrower ashereinafter provided;
(D) Parts A, B and C of the Project will be carried out bySANEPAR, CASAN and CORSAN, respectively, with the assistanceof the Borrower and also with the assistance, with resources otherthan the proceeds of the Loan, of the State of Parana, the Stateof Santa Catarina and the State of Rio Grande do Sul, respec-tively, and, as part of such assistance, the Borrower will makeavailable the proceeds of the Loan as hereinafter provided;
(E) Parts D and E of the Project will be carried out by theBorrower with the assistance, with resources other than theproceeds of the Loan, of the State of Parana, the State of SantaCatarina and the State of Rio Grande do Sul;
(F) SANEPAR, CASAN and CORSAN have agreed to undertakecertain obligations towards the Bank in respect of the Projectbeing financed hereby as hereinafter in this Agreement set forth;
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(G) The State of Parana, the State of Santa Catarina and theState of Rio Grande do Sul have agreed to undertake certainobligations towards the Bank (including the provision of funds) ,nrespect of the Project being financed hereby and related to thecarrying out of the Project as hereinafter in this Agreement setforth;
(H) The State of Parana, the State of Santa Catarina and theState of Rio Grande do Sul each warrants and represents that it isauthorized to undertake its respective obligations in this Agree-ment set forth;
(I) The Bank is willing to make the Loan available uponthe terms and conditions set forth hereinafter, and in theGuarantee Agreement, of even date herewith, between the Guarantorand the Bank;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable to Loanand Guarantee Agreements of the Bank, dated March 15, 1974, withthe same force and effect as if they were fully set forth herein,subject, however, to the modifications thereof set forth inSchedule 5 to this Agreement (said General Conditions Applicableto Loan and Guarantee Agreements of the Bank, as so modified,being hereinafter called the General Conditions).
Section 1.02. Wherever used in this Agreement, unless thecontext otherwise requires, the several terms defined in theGeneral Conditions and in the Preamble to this Agreement havethe respective meanings therein set forth and the followingadditional terms have the following meanings:
(a) "Project State" means any of the following States of theGuarantor: State of Parana, State of Santa Catarina and State ofRio Grande do Sul, as parties to this Agreement, for the purposeof carrying out the Project;
(b) "Company" means any of the following water supplyand sewerage companies: (i) Companhia de Saneamento do Parana -SANEPAR, a mixed economy water supply and sewerage corporation,
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created by Law No. 4.684 dated January 23, 1963 of the State
of Parana, established on December 30, 1963 in Curitiba by publicdocument filed with the Junta Comercial Estado on January 9,
1964 under number 37602 and published in the Diario Oficial of
the State of Parana on January 11, 1964; (ii) Companhia
Catarinense de Aguas e Saneamento - CASAN, a mixed economy water
supply and sewerage corporation, created by Law No. 4.547 of theState of Santa Catarina, dated December 31, 1970, and "Estatutos
Sociais" means, in respect of CASAN, its statutes as approved bythe extraordinary meeting of its shareholders held on July 2, 1971
and published in the Dialrio Oficial of the State of SantaCatarina on August 2, 1971; and (iii) Companhia Rio Grandense de
Saneamento - CORSAN, a mixed economy water supply and sewerage
corporation, created by Law No. 5.167 of the State of Rio Grande
do Sul, dated December 21, 1965, and "Estatutos Sociais" means, in
respect of CORSAN, its statutes as approved by the extraordinarymeeting of its shareholders held on March 28, 1966 and published
in the Diario Oficial of the State of Rio Grande do Sul on
April 1, 1966; such companies hereinafter sometimes collectivelycalled the "Project Companies".
(c) "State Bank" means any of the following commercialbanks: (i) Banco do Estado do Parana, a bank of which the State
of Parana is the majority shareholder; (ii) Banco do Estado da
Santa Catarina, a bank of which the State of Santa Catarina is
the majority shareholder; and (iii) Banco do Estado do Rio Grande
do Sul, a bank of which the State of Rio Grande do Sul is the
majority shareholder; such banks hereinafter sometimes collec-
tively called the "Project State Banks".
(d) "Sub-project" means a project included in PLANASA
consisting in the provision of water supply or sewage collectionand disposal, or both, which will be carried out by a Companyin any of the Project States and which the Borrower and such
Project State propose to finance out of the proceeds of the
Loan.
(e) "free-limit Sub-project" means a Sub-project, as so
defined, which qualifies as a free-limit Sub-project pursuant
to the provisions of Section 2.02 (b) of this Agreement.
(f) "Approved Sub-project" means a Sub-project, as so
defined, which the Bank has approved or L free-limit Sub-project
as so defined, for which the Bank has authorized withdrawals
from the Loan Account, and which are consistent with the criteria
set forth in Schedule 4 to this Agreement.
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(g) "BNH loans" means the loans from the Borrower to a
State Bank referred to in Section 3.03 (ii) (A) of this Agree-
ment.
(h) "FINEST II" means a credit program established by the
Borrower's Resolution No. 49/76 (particularly Articles 1.1 (b)
and 3 thereof) under which a Project State receives financial
assistance for purposes of financing the carrying out of water
supply and sewerage projects within such Project State, and which
can be substantially described as follows: (i) the Borrower makes
loans to its financial agent (normally a State Bank controlled by
such Project State) which in turn relends the proceeds of such
loans to such Project State; (ii) the amount of such loans does
not exceed the equivalent of the aggregate of funds that such
Project State has made, or proposes to make, available to the
Company operating in such Project State for purposes of the
carrying out of the above-mentioned projects in Small Communities
within such Project State; (iii) such Project State deposits the
proceeds of such loans in the water supply and sewerage financing
fund referred to in the Applicable PLANASA Agreement (as such term
is defined below); and (iv) such Company retains a determined
percentage of the funds referred to in (ii) above as an equity
contribution from such Project State while it pays the balance of
such funds within a certain period into the above-mentioned fund;
"FINEST II Sub-project" means a Sub-project, as so defined,
which is financed under FINEST II; and "Approved FINEST II Sub-
project" means an Approved Sub-project as so defined, which is
financed under FINEST II.
(i) "FINEST III" means a credit program established by the
Borrower's Resolution No. 49/76 (particularly Articles 1.1 (c) and
4 thereof) under which a Company receives financial assistance for
purposes of carrying out water supply and sewerage projects for
Small Communities within the Project State in which such Company
operates, and which can be substantially described as follows: (i)
the Borrower makes loans to a financial agent (normally the State
Bank controlled by such Project State) which in turn relends the
proceeds of such loans to such Project State; (ii) such Project
State undertakes to make available such proceeds, together with an
equivalent amount of funds of such Project State (originated other
than in loans from the Borrower), to such Company for purposes of
the carrying out of the above-mentioned projects; and (iii) a
determined percentage of the aggregate of the proceeds and the
funds referred to in (ii) above is retained by such Company as an
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equity contribution from such Project State, while the balance ispaid back by such Company to such Project State within a certainperiod; "FINEST III Sub-project" means a Sub-project, as sodefined, which is financed under FINEST III; and "Approved FINESTIII Sub-project" means an Approved Sub-project, as so defined,which is financed under FINEST III.
(j) "Applicable PLANASA Agreement" means any of the follow-ing agreements: (i) in the case of Sub-projezts for purposesof Part A of the Project, the agreement between, inter alia,the Borrower and the State of Parana and Banco do Estado doParana and SANEPAR, dated March 23, 1972, as such agreement hasbeen renewed to encompass all operations of SANEPAR in respect ofPLANASA, and the term includes each financing contract coveringspecific Sub-projects entered or to be entered into by the sameparties to such agreement pursuant to paragraph 3 of clause 3thereof (each such financing contract hereinafter called CTN-Parana); (ii) in the case of Sub-projects for purposes of Part Bof the Project, the agreement between, inter alia, the Borrowerand the State of Santa Catarina and Banco do L :tado da SantaCatarina and CASAN dated September 17, 1971, as a .zh agreement hasbeen renewed to encompass all operations of CASAN in respect ofPLANASA, and the term includes each financing contract coveringspecific Sub-projects, entered or to be entered into by the sameparties to such agreement pursuant to paragraph 3 of clause 3thereof (each such financing contract hereinafter called CTN-SantaCatarina); and (iii) in the case of Sub-projects for purposes ofPart C of the Project, the agreement between the Borrower and theState of Rio Grande do Sul and Banco do Estado do Rio Grande doSul and CORSAN dated December 22, 1975, as such agreement hasbeen renewed to encompass all operations of CORSAN in respect ofPLANASA, and the term includes each financing contract coveringspecific Sub-projects, entered or to be entered into by the sameparties to such agreement pursuant to paragraph 3 of clause 3thereof (each such financing contract hereinafter called CTN-RioGrande do Sul).
(k) "CTN" means, as applicable, each CTN-Parana or eachCTN-Santa Catarina or each CTN-Rio Grande do Sul.
(1) "Superintendencia" means Superintendencia do SistemaFinanceiro de Saneamento, a superintendencia of the Borrowerentrusted with the Borrower's financing and technical functionsconcerning sanitation of urban areas in Brazil, or any successorthereto.
(m) "Small Community" means a community within a ProjectState which, in accordance with the Guarantor's census applicableat the date of appraisal of a Sub-project, has an urban populationof not more than 5,000 inhabitants.
(n) "Medium-size City" means a city within a Project State,excluding the capital city of such Project State, which, inaccordance with the Guarantor's census applicable at the date ofappraisal of a Sub-project, has an urban population of more than5,000 inhabitants.
(o) "Law" means the Guarantor's Law No. 6528, published inthe Guarantor's Didrio Oficial on May 12, 1978, and "Decree"means the Guarantor's Decree No. 82587, published in the Guaran-tor's Diario Oficial on November 7, 1978, which regulates theLaw, the Law and the Decree hereinafter sometimes called the
Legislation.
(p) "Fiscal Year" means the fiscal year of SANEPAR, CASANor CORSAN.
(q) "UPC" means a constant monetary unit which is revaluedquarterly on the basis of the National Treasury Bond Index ofthe Guarant6r.
(r) "EVG" means a five-year investment and financing planprepared by each Company which is annually updated and furnishedto the Borrower for approval.
ARTICLE II
The Loan
Section 2.01. The Bank agrees to lend to the Borrower,on the terms and conditions in the Loan Agreement set forth orreferred to, an amount in various currencies equivalent to onehundred thirty million dollars ($130,000,000).
Section 2.02. (a) The amount of the Loan may be withdrawnfrom the Loan Account for:
(i) 54% of the amounts disbursed, after the dateof this Agreement, by the Borrower under BNH loansin respect of reasonable expenditures made by aCompany for goods or civil works or services (or
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any combination thereof) required for carrying outan Approved Sub-project;
(ii) 27% of the amounts disbursed, after the dateof this Agreement, by the Borrower in respect ofloans made to a Project State according to Section3.03 (ii) (B) of this Agreement in respect ofreasonable expenditures made by a Company for goodsor civil works or services (or any combinationthereof) required for carrying out an ApprovedFINEST II Sub-project;
(iii) 54% of the amounts disbursed, after the dateof this Agreement, by the Borrower in respect ofloans made to a Project State according to Section3.03 (ii) (C) of this Agreement in respect ofreasonable expenditures made by a Company for goodsor civil works or services (or any combinationthereof) required for carrying out an ApprovedFINEST III Sub-project;
(iv) 54% of the amounts disbursed, after the date ofthis Agreement, by the Borrower for consultingservices with respect to Part D of the Project;and
(v) 100% of the foreign costs for consulting serviceswith respect to Part E of the Project;
provided, however, that, in the case the amounts disbursed by theBorrower may qualify for withdrawals from the Loan Account undersub-paragraphs (ii) and (iii) of paragraph (a) above, withdrawalsfrom the Loan Account shall be made, at the Borrower's choice,under any of such sub-paragraphs but not under both.
(b) A free-limit Sub-project shall be a Sub-project, theestimated total investment cost of which shall not exceed thesum of $2,000,000 equivalent, which has been previously approvedby the Borrower and which will be located in a Medium-size City orSmall Community for which no Approved Sub-project has been or isbeing carried out.
(c) Except as the Bank and the Borrower shall otherwiseagree, the aggregate amount of payments made out of the proceedsof the Loan for purposes of: (i) Part A of the Project, shall not
exceed the equivalent of $54,750,000; (ii) Part B of the Project,
shall not exceed the equivalent of $27,800,000; (iii) Part C of
the Project, shall not exceed the equivalent ci $46,750,000;
(iv) Part D of the Project, shall not exceed the equivalent of
$500,000; and (v) Part E of the Project, shall not exceed the
equivalent of $200,000; provided, however, that should the Bank
and the Borrower agree on a different allocation of the proceeds
of the Loan for each Part of the Project described in Schedule 1
to this Agreement, the allocation set forth herein shall be
changed accordingly.
(d) Except as the Bank and the Borrower shall otherwise
agree, no withdrawals shall be made on account of:
(i) expenditures made by a Company before the date
of this Agreement;
(ii) expenditures made by a Company, other than the one
taken into account for purposes of Section 8.01 (a)
of this Agreement, unless evidence satisfactory to
the Bank shall have been furnished to the Bank that
the execution and delivery of this Agreement, on
behalf of such onpany and on behalf of the Project
State where suci. Company operates, have been duly
authorized or ratified by all necessary corporate
or governmental action. As part of such evidence,
the Bank shall be furnished an opinion or opinions
catisfactory to the Bank of counsel acceptable to
the Bank showing: (A) that this Agreement has been
duly authorized or ratified by, and executed and
delivered on behalf of, such Company and such
Project State and is legally binding upon such
Company and such Project State in accordance with
its terms; and (B) that all necessary acts, con-
sents and approvals to be performed or given by the
Guarantor and by such Project State, by their
political subdivisions 'other than such Project
State) or agencies, by any agency of any such
political subdivisions, or otherwise to be per-
formed or given in order to authorize the carrying
out of each Part of the Project related to such
Project State and to enable such Project State, the
Borrower and the Company operating in such Project
State to perform all of the obligations of each of
them contained in this Agreement (including the
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obligations thereof relating to procurement)together with all necessary powers and rights inconnection therewith, including the full power andauthority of such Company to construct and operatethe Sub-projects, have been performed or given;and
(iii) disbursements made by the Borrower to financeexpenditures incurred (other than expendituresin respect of const-uction) by a Company in respectof a Sub-project subject to the Bank's approval, ifsuch expenditures shall have been made more thanone hundred twenty days prior to the date onwhich the bank shall have received in respect ofsuch Sub-project the application and informationrequired by Section 2.03 (a) of this Agreement or,in respect of a free-limit Sub-project, more thanone hundred twenty days prior to the date on whichthe Bank shall have received in respect of suchfree-limit Sub-project the request and informationrequired by Section 2.03 (b) of this Agreement.
(e) If the Bank shall have reasonably determined thatthe: (A) procurement of any item is inconsistent with the proce-dures set forth or referred to in this Agreement; or (B) selectionand approval by the Borrower of a Sub-project, or -he manner inwhich an Approved Sub-project is being carried out, are notconsistent with the criteria set forth in Schedule 4 to thisAgreement, no expenditures therefor shall be financed out of theproceeds of the Loan and the Bank may, without in any way re-stricting or limiting any other right, power or remedy of theBank under the Loan Agreement, by notice to the Borrower, cancelsuch amount of the Loan as, in the Bank's reasonable opinion,represents the amount of such expenditures which would otherwisehave been eligible for financing out of the proceeds of theLoan.
Section 2.03. (a) When presenting a Sub-project (other thana free-limit Sub-project) to the Bank for approval, the Borrowershall furnish to the Bank an application, in form satisfactoryto the Bank, together with (i) an appraisal (including economicand financial analysis) of the Sub-project, including a descriptionof the expenditures proposed to be financed out of the proceeds ofthe Loan; (ii) the proposed financial terms and conditions for
I
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such Sub-project, including the CTN or CTNs covering such Sub-
project; and (iii) such other information as the Bank shall
reasonably request.
(b) Each request by the Borrower for authorization to
make withdrawals from the Loan Account in respect of a free-limit
Sub-project shall contain: (i) a summary description of the
Sub-project, including a description of the expenditures proposed
to be financed out of the proceeds of the Loan; (ii) the financial
terms and conditions for such Sub-project, including the CTN or
CTNs covering such Sub-project; and (iii) such other information
as the Bank shall reasonably request.
(c) Except as the Bank and the Borrower shall otherwise
agree, applications and requests made pursuant to the provisions
of paragraphs (a) and (b) of this Section shall be presented to
the Bank on or before March 31, 1983.
Section 2.04. The Closing Date shall be June 30, 1983,
or such later date as the Bank shall establish. The Bank shall
promptly notify the Borrower and the Guarantor of such later
date.
Section 2.05. Except as the Bank shall otherwise agree,
procurement of the goods and civil works required for the Project
shall be governed by the provisions of Schedule 3 to this Agree-
ment.
Section 2.06. The Borrower shall pay to the Bank a commitment
charge at the rate of three-fourths of one per cent (3/4 of
1%) per annum on the principal amount of the Loan not withdrawn
from time to time.
Seztion 2.07. The Borrower shall pay interest at the rate
of eight and twenty-five hundredths per cent (8.25%) per annum on
the principal amount of the Loan withdrawn and outstanding from
time to time.
Section 2.08. Interest and other charges shall be payable
semiannually on April 1 and October 1 in each year.
Section 2.09. The Borrower shalj repay the principal amount
of the Loan in accordance with the awortization schedule set forth
in Schedule 2 to this Agreement.
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ARTICLE III
Execution of the Project
Section 3.01. SANEPAR shall carry out Part A of the Project,CASAN shall carry out Part B of the Project, CORSAN shall carryout Part C of the Project, the Companies and the Borrower shallcarry out Part D of the Project, and the Borrower shall carry outPart E of the Project, all with due diligence and efficiency andin conformity with appropriate administrative, financial, ecologi-cal and public utility practices.
Section 3.02. (a) The Borrower and each of the Project Statesshall provide the Company in question with such funds (additionalto the proceeds of the Loan), facilities, services and otherresources as shall be necessary or appropriate to enable suchCompany to carry out the Approved Sub-projects which such Companyshall carry out under the Project.
(b) The Borrower shall: (i) relend the proceeds of the Loan,as and when needed for purposes of the Project, to the State Bankcontrolled by the Project State where each Approved Sub-projectwill be located; (ii) cause such State Bank to relend such pro-ceeds for purposes of each such Approved Sub-fp.roject to (A) theCompany operating in such Project State, if such Approved Sub-project is financed under a BNH loan, or (B) to such Project Statefor the purposes of (1) replenishing a fund designated by suchProject State in the Applicable PLANASA Agreement to finance watersupply and sewerage projects, in the case of an Approved FINEST IISub-project, or (2) making such proceeds available to such Com-pany, in the case of an Approved FINEST III Sub-project, all in amanner consistent with the Applicable PLANASA Agreement.
(c) The Borrower shall, in addition to its obligations underparagraph (a) above, provide such funds, facilities, services andother resources as shall be necessary or appropriate for thecarrying out of Parts D and E of the Project.
(d) The obligations of the Borrower and of the ProjectStates under Section 3.02 (a) shall be several and shall besubject to Sections 3.03 and 3.04 of this Agreement, respectively.
Section 3.03. The Borrower, with due diligence and efficiencyand for the purposes of complying with its obligations under
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Section 3.02 (a) of this Agreement, shall: (i) assist each Company
in the preparation and appraisal of each Sub-project; and (ii)
make (A) loans to each State Bank in respect of a Sub-project in
an amount equal to one-half of the amount of the loan or loans
made (or to be made) by such State Bank to sucli Company for
purposes of such Sub-project, 'or (B) loans to the State Bank
controlled by the Project State where such Company operates in an
amount equivalent to the amounts made available by such Project
State to such Company for the financing of FINEST II Sub-projects,
and cause such State Bank to relend the proceeds of such loans to
such Project State, or (C) loans to the State Bank controlled by
the Project State where such Company operates in an amount equi-
valent to one-half of the amounts made available by such Project
State to such Company for the financing of a FINEST III Sub-
project, and cause such State Bank to relend the proceeds of such
loans to such Project State, all in a manner consistent with the
obligations of such Company under Section 5.07 of this Agreement
and of such Company and the Borrower under the Applicable PLANASA
Agreement.
Section 3.04. Each Project State shall, for the purposes of
complying with its obligations under Section 3.02 (a) of this
Agreement, make available to the Company operating in such Project
State, partly as loans and partly as equity contributions into
such Company's equity: (i) amounts equivalent to the loans refer-
red to in Section 3.03 (ii) (B) and (C) of this Agreement; (ii)
the proceeds of the loans referred to in Section 3.03 (ii) (C) of
this Agreement; and (iii) cause the State Bank controlled by such
Project State to make to the Company operating in such Project
State, the loans referred to in Section 3.03 (ii) (A) of this
Agreement, all in a manner consistent with the obligations of slich
Company under Section 5.07 o. this Agreement and of such Company
and such Project State under the Applicable PLANASA Agreement.
Section 3.05. (a) In order to assist the Companies and the
Borrower in the carrying out of Parts D and E of the Project, the
Companies and the Borrower shall employ consultants whose qualifi-
cations and experience, as well as the terms and conditions of the
contract under which the services of such consultants shall be
performed, shall be satisfactry to the Bank.
(b) SANEPAR, CASAN and CORSAN shall, not late, than Decem-
ber 31, 1980, furnish through the Borrower to the Bank a plan on
their part, satisfactory to the Bank, such plan to include, inter
alia, the terms of reference, manpower estimates and a schedule
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for execution, for the carrying out of Part D (1), (2) and (3) ofthe Project, respectively, and shall thereafter take all suchaction as shall be necessary on their part for the carrying out ofPart D (1), (2) and (3) of the Project, respectively, in accor-dance with the schedule referred to herein.
(c) The Borrower shall, not later than June 30, 1980,furnish to the Bank, a plan, satisfactory to the Bank, such planto include, inter alia, the terms of reference, manpower estimatesand a schedule for execution, for the carrying out of Part E ofthe Project, and shall thereafter take all such action as shall benecessary for the carrying out of Part E of the Project, inaccordance with the schedule referred to herein.
Section 3.06. (a) Each Company undertakes to insure, ormake adequate provision for the insurance of, the imported goodsto be financed out of the proceeds of the Loan against hazardsincident to the acquisition, transportation and delivery thereofto the place of use or installation, and for such insurance anyindemnity shall be payable in a currency freely usable by suchCompany to replace or repair such goods.
(b) Except as the Bank shall otherwise agree, such Companyshall cause all goods and services financed out of the proceedsof the Loan to be used exclusively for Approved Sub-projects.
Section 3.07. (a) Each Company shall furnish through theBorrower to the Bank, promptly upon their preparation, the plans,specifications, reports, contract documents and construction andprocurement schedules for the Project, and any material modifica-tions thereof or additions thereto, in such detail as the Bank orthe Borrower shall reasonably request.
(b) Each Company: (i) shall maintain records and proceduresadequate to record and monitor the progress of the Project and ofeach Approved Sub-project carried out thereunder by each suchCompany (including their cost and the benefits to be derived fromthem), to identify the goods and services financed out of theproceeds of the Loan, and to disclose their use in each ApprovedSub-project; (ii) shall enable the Bank's accredited representa-tives to visit the facilities and construction sites included ineach such Approved Sub-project and to examine the goods financedout of the proceeds of the Loan and any relevant records anddocuments in respect of each such Approved Sub-project; and (iii)shall furnish through the Borrower to the Bank every three months
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all such information as the Bank shall reasonably request con-cerning the Project and each such Approved Sub-project, their cost
and, where appropriate, the benefits to be derived from them, theexpenditure of the proceeds of the Loan and the goods and servicesfinanced out of such proceeds.
(c) Promptly after completion of the Project, but in any
event not later than four months after the Closing Date or suchlater date as may be agreed for this purpose between the Borrowerand the Bank, each Company shall prepare a report satisfactory tothe Bank on the execution and initial operation of the Part ofthe Project that shall be carried out by each Company. On thebasis of these reports, the Borrower shall prepare and furnish tothe Bank, not later than six months after the Closing Date, a
report, of such scope and in such detail as the Bank shall reason-ably. reque.t, on the execution and initial operation of theProject, its cost and the benefits derived and to be derived fromit, the performance by the Borrower, each Company, each ProjectState and the Bank of their respective obligations under the LoanAgreement and the accomplishment of the purposes of the Loan.
(b) The Borrower and each Company shall enable the Bank'srepresentatives to examine all plants, installations, sites,works, buildings, property and equipment of the Borrower or ofeach such Company and, in respect of each Approved Sub-project,any relevant records and documents.
Section 3.08. (a) The Borrower shall not furnish to theBank, either for approval thereof or for authorizations to makewithdrawals from the Loan Account therefor, a Sub-project whichhas not been previously approved by the Borrower, nor shall theBorrower approve a Sub-project to be financed out of the proceeds
of the Loan which is not consistent with the criteria set forth in
Schedule 4 to this Agreement.
(b) Each Company shall select each Sub-project being fur-
nished by each such Company to the Borrower for approval in amanner consistent with the criteria referred to in (a) above
and shall ensure that such criteria are being consistently applied
by each such Company in the carrying out of each Approved Sub-project which each such Company is carrying out under the Project.
ARTICLE IV
Additional Covenants of the Borrower
Section 4.01. The Borrower shall conduct its operations
and affairs in respect of the Project in accordance with sound
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financial and administrative standards and practices, with quali-fied management and personnel, and in accordance with Laws No.4,380 of August 21, 1964; No. 5,762 of December 14, 1971; andDecree No. 75,512 of July 23, 1973.
Section 4.02. The Borrower shall maintain records adequateto reflect in accordance with consistently maintained soundaccounting practices its operations and financial conditionin respect of PLANASA and the Project.
Section 4.03. The Borrower shall: (i) have its accountsand financial statements (balance sheets, statements of incomeand expenses and related statements) for each fiscal year audited,in accordance with sound auditing principles consistently applied,by independent auditors acceptable to the Bank; (ii) furnish tothe Bank as soon as available, but in any case not later thanfour 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 such audit by said auditors, of such scope and insuch detail as the Bank shall have reasonably requested; and(iii) furnish to the Bank such other information concerning suchaccounts and financial statements and the audit thereof as theBank shall from time to time reasonably request.
Section 4.04. (a) The Borrower represents that at the dateof this Agreement no lien exists on any of its assets as securityfor any debt except as otherwise currently reported to the Bankor stated in writing.
(b) The Borrower undertakes that, except as the Bank shallotherwise agree: (i) if the Borrower shall create any lien onany of its assets as security for any debt, such lien will equallyand ratably secure the payment of the principal of, and interestand other charges on, the Loan, and in the creation of any suchlien express provision will be made to that effect, at no costto the Bank; and (ii) if any statutory lien shall be created onany assets of the Borrower as security for any debt, the Borrowershall grant, at no cost to the Bank, an equivalent lien satisfac-tory to the Bank to secure the payment of the principal of,and interest and other charges on, the Loan; provided, however,that the foregoing provisions of this paragraph shall not applyto: (A) any lien created on property, at the time of purchasethereof, solely as security for the payment of the purchase priceof such property; or (B) any lien arising in the ordinary courseof banking transactions and securing a debt maturing not more thanone year after the date on which it is originally incurred.
- 16 -
Section 4.05. The Borrower shall take all such action as
shall be necessary or advisable to enable each of the Companies
and the Guarantor, as the case may be, to comply with their
respective obligations under Section 5.07 of this Agreement and
Section 3.02 (b) of the Guarantee Agreement.
Section 4.06. The Borrower shall:
(a) continue its studies on the appropriate technical
methods for extending water supply services and waste disposal
systems into low-income areas and into areas where conventional
systems are not technically feasible or economically affordable by
the users; and
(b) provide to the Bank for review and comment the results
of such studies and the proposals of the Borrower for applying
the techniques adopted on the basis of such results to other
such areas, including, inter alia, those within the Project
States.
Section 4.07. The Borrower shall furnish to the Bank,
promptly, but in any event not later than 45 days after receipt
from any Project Company, the information referred to in Sections
3.07, 5.05, 5.09 and 5.11 of this Agreement.
ARTICLE V
Additional Covenants of the Project Companies
Section 5.01. Each Company shall at all times manage its
affairs, maintain its financial position, plan its future expan-
sion and conduct its business and undertaking, all in accordance
with sound business, financial and public utility practices, and
under the supervision of experienced and competent management
assisted by adequate and competent staff.
Section 5.02. Each Company shall:
(a) at all times take all necessary steps to maintain its
existence and its right to carry on operations, and to acquire
and retain all rights, powers, privileges and franchises which are
necessary or useful for the purpose of complying with its obliga-
tions under this Agreement or for the efficient conduct of its
business and undertaking;
- 17 -
(b) at all times operate and maintain the plants, machinery,equipment and other property owned or operated by it and promptlymake all necessary repairs and renewals thereof, all in accordancewith sound engineering and public utility practices; and
(c) not sell, lease, transfer or otherwise dispose of any ofthe property or assets owned or operated by it, if such sale,lease, transfer or disposition would materially and adverselyaffect the efficient carrying out of the Project.
Section 5.03. Each Company shall make provision satisfactoryto the Bank for insurance against such risks and in such amountsas shall be consistent with sound public utility practices.
Section 5.04. Each Company shall maintain records adequateto reflect in accordance with consistently sound ac-ountingpractices its operations and financial condition.
Section 5.05. Each Company shall: (i) have its accounts andfinancial statements (balance sheets, statements of income andexpenses and related statements) for each fiscal year audited, inaccordance with sound auditing principles consistently applied, byindependent auditors acceptable to the Bank; (ii) beginning withthe 1979 fiscal year, furnish through the Borrower to the Bank assoon as available, but in any case not later than four monthsafter the end of each such year, (A) certified copies of suchfinancial statements for such year as so audited, and (B) thereport of such audit by said auditors, of such scope and in suchdetail as the Bank shall have reasonably requested, which reportshall include a statement of compliance during each such year byeach Company of the covenants contained in this Agreement; and(iii) furnish through the Borrower to the Bank such other informa-tion concerning the accounts and financial statements of each suchCompany and the audit thereof as the Bank shall from time to timereasonably request. In addition, each such Company shall, notlater than March 31 in each year until the Closing Date, furnishthrough the Borrower to the Bank five-year financial projectionsexpressed in local currency and UPCs and set forth in an incomestatement, statement of cash flow, balance sheet and calculationof fixed assets in operation, in such detail as the Bank shallreasonably request.
Section 5.06. Each Company shall correct the monetary valueof its fixed assets in service at the end of each fiscal year inaccordance with the provisions of Article 185 of the Guarantor'sLaw No. 6404.
- 18 -
Section 5.07. (a) Except as the Bank shall otherwise agree,the Borrower and each of the Companies shall take all such action(including action with respect to the filing of appropriateapplications with respect to the setting or adjustment of theCompany's rates for its water supply and sewerage services) asshall be necessary or advisable to cause the Company's rates forsuch services to be set and maintained at such levels as willproduce revenues, as permitted by the Legislation, which shall besufficient, fter covering the Company's operating costs and
depreciation charges in accordance with sound water supply andsewerage utility and financial practices, as required by theLegislation, to enable the Company to earn an annual rate of
return (taxa de remuneragao autorzada) on permissible invest-ment (investimento reconhecido), as such terms are defined in the
Legislation, such taxa to be set or increased gradually every yearso that, by 1983, the taxa applicable for that year and all yearsthereafter shall be not less than that provided in the Legisla-tion.
(b) The term "operating costs and depreciation charges"includes, as provided in the Legislation: (i) operating costs(despesas de exploragao); (ii) provision for bad debts (provisao
para devedores); (iii) straight-line depreciation of assets basedon the useful lives of depreciable assets in operation (quotas de
depreciaiao); and (iv) amortization of capitalized operating
costs (amortizagoes de despesas).
Section 5.08. Each Company shall:
(a) prepare with the Borrower, in accordance with theLegislation, a proposal for tariffs for sewage collection andtreatment services, including a schedule for putting into effectsuch tariffs;
(b) not later than January 31, 1981, furnish such proposalthrough the Borrower to the Bank for approval; and
(c) not later than January 31, 1982, put into effec- suchproposal according to such schedule.
Section 5.09. Each Company shall, not later than December 31,
1980, furnish through the Borrower to the Bank for review and
comment a plan for production metering for each major water system
operated by the respective Company, including a schedule for
execution, and shall thereafter put such plan into effect.
- 19 -
Section 5.10. CORSAN shall, not later than December 31, 1981,establish and adequately staff, and shall thereafter maintain, aninternal audit office satisfactory to the Bank.
Section 5.11. Each Company shall, not later than June 30,1980, establish a system of monitoring indicators satisfactory tothe Borrower and the Bank and shall furnish through the Borrowerto the Bank, not later than two months after the end of eachquarter, a progress report which shall include such itformation asthe Bank shall reasonably request, including the following:
(a) progress of Project execution, including, in addition tothe information required under Section 3.07 (b) (iii) of thisAgreement, details on design completion, physical execution of theworks, and disbursements;
(b) statistical data on the number of water and sewerconnections, volume of water produced, volume of water andsewerage billed and average rates; and
(c) preliminary financial statements setting forth signifi-cant operating and financial ratios separately for water supplyand sewerage.
ARTICLE VI
Additional Covenants of Statesof Parana, Santa Catarina and
Rio Grande do Sul
Section 6.01. Each Project State covenants and warrants thatthe Project is of paramount importance to its economic developmentand the social welfare of its inhabitants, and that it willfully support ths Project by cooperating with the Company operat-ing in each such Project State in the execution of the Project andby providing, promptly as needed, the funds, facilities, servicesand other resources on its part required for the operation andmaintenance of the facilities and services included in the Proj-ect.
Section 6.02. Each Project State shall take or cause itsagencies and instrumentalities to take all such action as shall berequired to assist the Company operating in each such ProjectState in the performance of the obligations of such Company under
- 20 -
this Agreement, including the obligations of such Company speci-
fied in Sections 3.01, 3.05 (b)l 5.07, 5.08, 5.09, 5.10 and 5.11
of this Agreement.
ARTICLE VII
Remedies of the Bank
Section 7.01. For the purposes of Section 6.02 of the General
Conditions, the following additional events are specified pursuant
to paragraph (k) thereof:
(a) the Borrower or any of the Project Companies or the
Project States or the Project State Banks shall have failed
to perform any of its respective obligations (i) under the Appli-
cable PLANASA Agreement, or (ii) in respect of any of the Project
States or Project Companies under this Agreement;
(b) any authority having jurisdiction shall have taken
any action for the dissolution or disestablishment of any of the
Project Companies or for the suspension of its operations;
(c) any of the Estatutos Sociais shall have been amended so
as to materially and adversely affect the carrying out of the
Project or the operations or financial condition of thf Company in
question;
(d) an event shall have occurred or any action shall have
been taken, Licluding any action by the Guarantor or any of the
Project States, which will materially and adversely affect PLANASA
or the carrying out of the Project or the financial condition or
operations of the Borrower or the financial condition or opera-
tions, including the setting or adjustment of the rates charged
for its services, of any of the Project Companies;
(e) a change shall have been made in any of the Applicable
PLANASA Agreements which will materially and adversely affect the
carrying out of any Approved Sub-project, the operations of the
Company or of the State Bank which are parties to such Applicable
PLANASA Agreement or which will result in a substantive modifi-
cation of the financial conditions under which Approved Sub-
projects are financed; and
(f) an extraordinary situation shall have arisen which
shall make it improbable that aiy of the Project Companies or
- 21 -
Project States will be able to perform its respective obligationsunder this Agreement or exercise its respective rights under theApplicable PLANASA Agreement; provided, however, that if the eventreferred to in this paragraph (f) shall have occurred and becontinuing, the Bank may suspend the right of the Borrower to makewithdrawals from the Loan Account only in respect of amountsallocated under Section 2.02 of this Agreement to any part of theProject for the respective Company or Project. State to which suchevent has occurred.
Section 7.02. For the purposes of Section 7.01 of the Gen-eral Conditions, the following additional events are specifiedpursuant to paragraph (h) thereof:
(a) any of the events specified in paragraphs (b), (c) or(d) of Section 7.01 of this Agreement shall occur; and
(b) any of the events specified in paragraphs (a) or (e) ofSection 7.01 of this Agreement Ohall occur and shall continue fora period of sixty days after notice thereof shall have been givenby the Bank to the Borrower, to the Project State in question andto the Company operating in such Project State.
ARTICLE VIII
Effective Date; Termination
Section 8.01. The following events are specified as addi-tional conditions to the effectiveness of the Loan Agreementwithin the meaning of Section 12.01 (c) of the General Conditions:
(a) that the execution and delivery of this Agreementon behalf of one of the Project States and of the Company operat-ing in such Project State have been duly authorized or ratified byall necessary governmental and corporate action; and
(b) that this Agreement has been duly registered by BancoCentral do Brasil.
Section 8.02. The following are specified as additionalmatters, within the meaning of Section 12.02 (c) of the GeneralConditions, to be included in the opinions to be furnished tothe Bank:
(a) that this Agreement has been duly authorized or ratifiedby, and executed and delivered on behalf of, the Project State
- 22 -
taken into account for purposes of Section 8.01 (a) of this
Agreement and of the Project Company operating in such Project
State, and is legally binding upon them in accordance with its
terms; and
(b) that all necessary acts, consents and approvals to
be performed or given by the Guarantor and by the Project State
referred to in paragraph (a) above, by their political sub-
divisions (other than such Project State) or agencies, by any
agency of any such political subdivisions, o. otherwise to be
performed or given in order to authorize the carrying out of each
Part of the Project related to such Project State and to enable
such Project State, the Borrower and the Company operating in such
Project State to perform all of the obliga:ions of each of them
contained in this Agreement (including the obligations thereof
relating to procurement) together with all necessary powers and
rights in connection therewith, including the full power and
authority of such Company to construct and operate the Sub-
projects, have been performed or given.
Section 8.03. The date a L (s ( is hereby speci-
fied for the purpose of Secti 12. of the General Conditions.
ARTICLE IX
Addresses
Section 9.01, The following addresses are specified for
the purposes of Section 11.01 of the General Conditions:
For the Bank:
International Bank forReconstruction and Development
1818 H Street, N.W.
Wrshington, D.C. 20433United States of America
Cable address: Telex:
INTBAFRAD 440098 (ITT)
Washington, D.C. 248423 (RCA) or64145 (WUI)
- 23 -
For the Borrower:
Banco Nacional da Habita-oAv. Republica do Chile 23020000 Rio de Janeiro, R.J.Brazil
Cable address: Telex:
HABITAgAO 2121335Rio
For SANEPAR:
Companhia de Saneamento doParana
Rua Eng. Reboucas, 1376Curitiba, ParanaBrazil CEP 80000
Telex:
(041) 5913
For CASAN:
Companhia Catarinense de Aguase Saneamento
Rua Emilio Blum, X0 11Florianopolis, Santa CatarinaBrazil CEP 88000
Telex:
(048) 2243 CASNBR
For CORSAN:
Companhia Rio Grandense deSaneamento
Rua Caldas Junior, 120-180 andarPorto Alegre, Rio Grande do SulBrazil CEP 90000
- 24 -
For the State of Parana:
Exmo. Sr. Governador do Estado
Estado do Parana
Palacio IguaquCuritiba, ParanaBrazil
Telex:
041 5156
For the State of Santa Catarina:
Exmo. Sr. Governador do Estado
Estado da Santa Catarina
Palacio do GovernoPraca 15 de NovembroFlorianopolis, Santa Catarina
Brazil
Telex:
0482-171
For the State of Rio Grande do Sul:
Exmo. Sr. Governador do Estado
Estado do Rio Grande do Sul
Palacio dos A§orianosRio Grande do Sul
Brazil
Telex:
051 1123
Section 9.02. Any action required or permitted to be taken,
and any documents required or permitted to be executed, under
this Agreement on behalf of one of the Project States may be taken
or executed b- the Governor of such Project State o- such other
person or persons as he shall designate in writii., and such
Project State shall furnish to the Bank sufficient evieence of the
authority and the authenticated specimen signature of each such
person.
- 25 -
Section 9.03. Any action required or permitted to be taken,and any document required or permitted to be executed, underthis Agreement on behalf of one of the Project Companies may betaken or executed by its President or such other person or personsas he shall designate in writing, and such Company shall furnishto the Bank sufficient evidence of the authority and the authenti-cated specimen signature of each such person.
Section 9.04. Whenever the Bank, one of the Project States orone of the Project Companies shall, for purposes of the Project,write to each other or take any action or give any notice, asrequired or permitted as the case may be, they shall simul-taneously furnish to the Borrower copies of all correspondence ordocuments or other information in respect thereof.
IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this4grpement to b esigned in th ryespective names in the City of
Federative Republicof Brazil, as of he day and year f rst above written.
INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT
ByRegional Vice President
Latin America and the Caribbean
BANCO NACIONAL DA HABITAQAO
ByAuthorized Representative
ByAuthorized Representative
- 26 -
STATE OF PARANA
ByAuthorized Representative
STATE OF SANTA CATARINA
ByAuthorized Representative
STATE OF RIO GRANDE DO SUL
ByAuthorized Representative
COMPANHIA DE SANEAMENTO DO PARANA - SANEPAR
Authorized Representative
-Au-t-horiz ed.Jeprese.ntat.ir
COMPANHIA CATARINENSE DE AGUAS E SANEAMENTO -
CASAN
ByAuthorized Representative
ByAuthorized Representative
- 27 -
COMPANHIA RIO GRANDENSE DE SANEAMENTO -
CORSAN
ByAuthorízed Representative
ho~4-ps-n-t--v
- 28 -
SCHEDULE 1
Description of the Project
The Project comprises Sub-projects included or to be includedin PLANASA and technical assistance to the Project Companies toenhance their present and future role in the carrying out ofPLANASA. The Project consists of the following Parts:
Part A: Execution of Approved Sub-projects in theState of Parana
(1) Approved Sub-projects for the city of Curitiba.
(2) Approved Sub-projects for about 32 Medium-size Citiesand about 135 Small Communities within the State ofParana.
(3) Approved Sub-projects for production and consumptionmetering.
(4) Engineering services for detailed design and construc-tion supervision of the works under the Project, includ-ing the preparation of a master plan for the city ofCuritiba.
Part B: Execution of Approved Sub-projects in theState of Santa Catarina
(1) Approved Sub-projects for the city of Florianopolis.
(2) Approved Sub-projects for about 34 Medium-size Citiesand about 40 Small Communities within the State of SantaCatarina.
(3) Approved Sub-projects for production and consumptionmetering.
(4) Engineering services for detailed design and construc-tion supervision of the works under the Project, includ-ing the preparation of a master plan for the city ofFlorianopolis.
- 29 -
Part C: Execution of Approved Sub-projects in theState of Rio Grande do Sul
(1) Approved Sub-projects for about 82 Medium-size Citiesand about 35 Small Communities within the State of RioGrande do Sul.
(2) Approved Sub-projects for production and consumption
metering.
(3) Engineering services for detailed design and construc-tion supervision of the works under the Project.
Part D: Strengthening of the financial planning and managerialcapabilities of SANEPAR, CASAN and CORSAN and for thispurpose, technical assistance services will be provided,inter alia, in the following areas:
(1) SANEPAR: Physical and Financial Planning
(2) CASAN: Physical and Financial Planning
Internal Audit Controls
Physical Works Control and Supervision
Information Systems
(3) CORSAN: Information Systems
Part E: Improving the internal information system, projectappraisal procedures and supervisory capability of theSuperintendencia and for this purpose, technical assis-tance services will be provided.
The Project is expected to be comAleted by December 31, 1982.
- 30 -
SCHEDULE 2
Amortization Schedule
Payment of Principal
Date Payment Due (expressed in dollars)*
On each April 1 and October 1
beginning October 1, 1983
through October 1, 1994 5,415,000
On April 1, 1995 5,455,000
* To the extent that any portion of the Loan is repayable in
a currency other than dollars (see General Conditions,
Section 4.02), the figures in this column represent dollar
equivalents determined as for purposes of withdrawal.
- 31 -
Premiums on Prepayment
The following percentages are specified as the premiumspayable on repayment in advance of maturity of any portion ofthe principal amount of the Loan pursuant to Section 3.05 (b)of the General Conditions:
Time of Prepayment Premium
Not more than three yearsbefore maturity 1.65%
More than three years but notmore than six years beforematurity 3.30%
More than six years but notmore than eleven yearsbefore maturity 6.00%
More than eleven years but notmore than thirteen yearsbefore maturity 7.15%
More than .hirteen yearsbefore maturity 8.25%
- 32 -
SCHEDULE 3
Procurement
A. International Competitive Bidding
1. Except as provided in Part C hereof, goods and civil works
shall be procured under contracts awarded in accordance with
procedures consistent with those set forth in 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 and works to be procured on the basis of inter-
national competitive bidding, and in addition to the requirements
of paragraph 1.2 of the Guidelines, each Company 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 tender made by each such Company or prequalification
documents relating thereto, as the case may be, a general procure-
ment notice, in such form and detail and containing such informa-
tion 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 and works in question. Each such Company shall provide
the necessary information to update such notice annually so long
as any goods or works remain to be procured on the basis of
international competitive bidding.
3. Identical or similar equipment and materials shall be grouped
together for purposes of bidding, such groups to be of a size
satisfactory to the Bank, the Borrower and the Company in ques-
tion.
4. For the purpose of evaluation and comparison of bids for
the supply of goods to be procured on the basis of international
competitive bidding: (i) bidders shall be required to state
in their bid the c.i.f. (port of entry) price for imported goods,
or the ex-factory price for domestically manufactured goods;
(ii) customs duties and other import taxes on imported goods,
and sales and similar taxes on domestically supplied goods, shall
be excluded; and (iii) the cost to the Company in question of
inland freight and other expenditures incidental to the delivery
of goods to the place of their use or installation shall be
included.
- 33 -
B. Preference for Domestic Manufacturers
In the procurement of goods in accordance with the procedures
described in Part A of this Schedule, goods manufactured in
Brazil 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 will 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 classifiedin one of the following two groups:
(1) Group A: bids offering goods manufactured in
Brazil if the bidder shall have established to the
satisfaction of the Borrower and the Bank that
such goods contain components manufactured in
Brazil equal to at least 50% of the value of
the complete goods.
(2) Group B: bids offering any other goods.
3. All evaluated bids in each group shall be first compared
among themselves, excluding any customs duties and other import
taxes (including merchant fleet renewal and port improvement
taxes) on goods to be imported and any sales or similar taxes
on goods to be supplied domestically, to determine the lowest
evaluated bid of each group. Such lowest evaluated bids shall
then be compared with each other, and if, as a result of thiscomparison, a bid from group A is the lowest, it shall be selected
for the award.
4. If, as a result of the compatison under paragraph 3
above, the lowest bid is a bid from group B, all group B bids
shall be further compared with the lowest evaluated bid from group
A after adding: (i) to the evaluated bid price of the importedgoods offered in each group B bid, for the purpose of this further
comparison only, an amount equal to: (A) 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
B bid; or (B) 15% of the c.i.f. bid price of such goods if saidcustoms duties and taxes exceed 15% of such price; and (ii) to the
- 34 -
evaluated bid price of the domestically supplied goods offered in
each group B bid an amount equal to (A) the amount of customtduties and other import taxes which would be levied on such goodsif they originated from the same foreign country as the goods
involved in a group B bid which enjoy the lowest customs duties
and other import taxes or (B) 15% of the ex-factory 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, itshall be selected for the award; if not, the bid from group Bwhich as a result of the comparison under paragraph 3 is the
lowest evaluated bid shall be selected.
C. Contracts for equipment estimated to cost less than the
equivalent of $400,000 and contracts for civil works estimated to
cost less than the equivalent of $3,000,000 shall be procured inaccordance with locally advertised bidding procedures satisfactory
to the Bank.
D. Review of Procurement Decisions by the Bank
1. Review of prequalification. Each Company shall, before
qualification is invited by each such Company, inform the Bank in
detail of the procedure to be followed, and shall introduce such
modifications in said procedure as the Bank shall reasonablyrequest. The list of prequalified bidders, together with a state-
ment of their qualifications and of the reasons for the exclusionof any applicant for prequalification shall be furnished by eachsuch Company to the Bank for its coments before the applicantsare notified of the Borrower's decision, and each such Companyshall make such additions to, deletions from, or modifications in,
the said list as the Bank shall reasonably request.
2. Review of invitations to bid and of proposed awards and
final contracts:
With respect to all contracts for equipment estimated to cost
the equivalent of $1,000,000 or more, and to all contracts for
civil works estimated to cost the equivalent of $4,000,000 or
more:
(a) Before bids are invited by a Company, such Company
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 proce-dures to be followed for the bidding, and shall make such modifi-
cations in the said documents or procedures as the Bank shall
- 35 -
reasonably request. Any further modification to the biddingdocuments shall require the Bank's concurrence before it is issuedto the prospective bidders.
(b) After bids have been received and evaluated, suchCompany shall, before a final decision on the award is made,inform the Bank of the name of the bidder to which it intends toaward the contract and shall furnish to the Bank, in sufficienttime for its review, a detailed report on the evaluation andcomparison of the bids received, and such other information as theBank shall reasonably request. The Bank shall, if it determinesthat the intended award would be inconsistent with the Guidelinesor this Schedule, promptly inform such Company and state thereasons for such determination.
(c) The terms and conditions of the contract shall not,without the Bank's concurrence, materially differ from thoseon which bids were asked or prequalification invited.
(d) Two conformed copies of the contract shall be furnishedto the Bank promptly after its execution and prior to the sub-mission to the Bank of the first application for withdrawalof funds from the Loan Account in respect of such contract.
3. With respect to each contract not governed by the precedingparagraph, each Company shall furnish to the Bank, promptly afterits execution and prior to the submission to the Bank of thefirst application for withdrawal of funds from the Loan Accountin respect of such contract, two conformed copies of such con-tract, together with the analysis cf the respective bids, recom-mendations for award and such other information as the Bank shallreasonably request. The Bank shall, if it determines that theaward of the contract was not consistent with the Guidelines orthis Schedule, promptly inform each Company and state the reasonsfor such determination.
- 36 -
SCHEDULE 4
Preparation, Eligibility and Execution Criteriafor Sub-projects
(a) For each Sub-project:
(i) The Sub-project has been included in the mostrecent EVG of the respective Company approvedby BNH and accepted by the Bank.
(ii) Total Sub-project cost will not be substantiallyhigher than that included in the respectiveEVG. If the Sub-project scope or costs are substan-tially different from those contemplated in theEVG, satisfactory evidence will be presented to theBorrower and to the Bank that such inclusion andfinancing will not deteriorate the Company'sfinancial position.
(iii) When preparing appraisals (including relatorios andprojetos t&cnicos) for Sub-projects, each Companywill follow the Borrower's guidelines in effect asof November 1, 1978, as the same may be amendedfrom time to time. The relatorio and the projetotecnico for each Sub-project will include theconstruction schedule, cost estimates, investmentschedule and costs and revenues projections pre-pared in accordance with methods satisfactory tothe Bank and the Borrower.
(iv) The design will be in conformity with sound engi-neering practices.
(v) The least-cost solution should be selected inaccordance with generally accepted economic analy-sis techniques.
(b) In addition to the above, for each water supply or watersupply and sewerage Sub-project to be carried out in a Medium-sizeCity or in a capital city, the internal financial rate of returnshould be at least equal to the average cost of capital to therespective Company, provided it does not substantially deterioratethe financial position of the Company as established in the EVG;if not, the Sub-project will be eligible for financing under the
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Loan only if the social and economic justification provided for inthe report referred to in paragraph (a) (iii) herein is satisfac-tory to the Bank and the Borrower.
(c) For each Sub-project which consists only of sewerageworks, in addition to fulfilling the criteria refefred to in (a)above, the Borrower and the Bank will be furnished with economicand sound justification, satisfactory to the Borrower and theBank, for the carrying out of such Sub-project.
(d) For purposes of paragraph (b) above, "internal finan-cial rate of return" means a discount rate calculated by equaliz-ing the value of incremental revenues estimated to be generatedby the Sub-project during the life of such Sub-project and thevalue of capital invested in, plus the value of incrementaloperating, maintenance and administrative costs of, such Sub-project, both in the same period referred to above; such incre-mental revenues and costs to be projected in constant pricesand in accordance with methods satisfactory to the Bank and theBorrower.
(e) For each Sub-project which will be carried out in aSmall Community, in addition to the criteria referred to in (a)above:
(i) the construction costs of such Sub-project, dividedby the number of inhabitants to be served by suchSub-project, will be less than the equivalent of$180;
(ii) such Sub-project will be in conformity with theBorrower's standard technical designs for SmallCommunities;
(iii) if the cost referred to in (i) above exceeds theequivalent of $180, the Sub-project will be rede-signed in accordance with lower acceptable stand-ards or staged in such a way to fulfill suchcriterion; and
(iv) if after the above-mentioned redesign, the Sub-project does not fulfill the above-mentionedcriteria, the Borrower and the Bank should beprovided with satisfactory social and economicjustification for the carrying out of such Sub-project.
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SCHEDULE 5
Modifications of General Conditions
For the purpose of this Agreement, the provisions of theGeneral Conditions are modified as follows:
(1) Section 6.03 is deleted and replaced by the followingnew Section:
"Section 6.03. Cancellation by the Bank. If (a) theright of the Borrower to make withdrawals from the LoanAccount shall have been suspended with respect to any amountof the Loan for a continuous period of thirty days, or (b) bythe date specified in paragraph (c) of Section 2.03 of theLoan Agreement no applications or requests permitted underparagraphs (a) and (b) of such Section shall have beenreceived by the Bank in respect of any portion of the Loan,or naving been so received, sh-zll have been denied, or (c)after the Closing Date an amount of the Loan shall remainunwithdrawn from the Loan Account, or (d) the Bank shall havereceived notice from the Guarantor pursuant to Section 6.07with respect to an amount of the Loan, the Bank may by noticeto the Borrower terminate the right of the Borrower to submitsuch applications or requests or to make withdrawal- from theLoan Account, as the case may be, witi, respect to stch amountor portion of the Loan. Upon the giving of such notice suchamount or portion of the Loan shall be cancelled."
(2) Section 9.01 is deleted and replaced by the followingnew Section:
"Section 9.01. Cooperation and Information. (a) TheBank, the Borrower, the States of Parana, Santa Catarina andRio Grande do Sul, SANEPAR, CASAN, CORSAN and the Guarantorshall cooperate fully to assure that the purposes of the Loanwill be accomplished. To that end, the Bank, the Borrower,the States of Parana, Santa Catarina and Rio Grande do Sul,SANEPAR, CASAN, CORSAN and the Guarantor shall from time totime, at the request of any one of them:
(i) exchange views through their representativeswith regard to the progress of the Project,the benefits derived therefrom and theperformance of their respective obligations
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under the Loan Agreement and the GuaranteeAgreement and other matters relating to thepurposes of the Loan; and
(ii) furnish to the other party all such informa-tion as it shall reasonably request withregard to the progress of the Project, thebenefits derived therefrom and the generalstatus of the Loan.
(b) The Bank, the Borrower, the States of Parana,Santa Catarina and Rio Grande do Sul, SANEPAR, CASAN andCORSAN and the Guarantor shall promptly inform each other ofany condition which interferes with, or threatens to inter-fere with, the progress of the Project, the accomplishment ofthe purposes of the Loan, the maintenance of the servicethereof or the performance by any one of them of its obliga-tions under the Loan Agreement and the Guarantee Agreement,as the case may be.
(c) The Guarantor and the States of Parana, SantaCatarina and Rio Grande do Sul shall afford all reasonableopportunity for accredited representatives of the Bank tovisit any part of its respective territories for purposesrelated to the Loan."
(3) The words "SANEPAR, CASAN, CORSAN, each of the ProjectStates" are added between the words "Borrower" and "and" inthe second line of Section 10.01.
(4) The words "and the parties to the Loan Agreement otherthan the Bank and the Borrower" are added after the word "Guaran-tor" in paragraph (b), in the third line of paragraph (c) and inthe fifth line of paragraph (i), all of Section 10.04.
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 ofLZI(v , 1990.
FOR SECRETARY