Проектное соглашение (Российская Федерация: проект реконструкции системы водоснабжения и охраны окружающей среды г. Калининграда) между Европейским банком реконструкции и развития, Российской Федерацией и Калининградским муниципальным предприятием коммунального хозяйства «Водоканал» (operation NUMBER 758) [англ.]

(Заключено в г. Калининграде 04.07.1999)

PROJECT AGREEMENT (RUSSIAN FEDERATION: KALININGRAD WATER AND ENVIRONMENTAL SERVICES REHABILITATION PROJECT) BETWEEN EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT AND KALININGRAD MUNICIPAL WATER AND WASTE WATER SERVICES ENTERPRISE «VODOKANAL» WITH THE RUSSIAN FEDERATION AS A PARTY FOR SPECIFIED PURPOSES

(Kaliningrad, 4.VII.1999)

Agreement dated 4 July 1999 among:

(1) the European Bank for Reconstruction and Development (the «Bank»);

(2) the Russian Federation <*> (the «Borrower»); and

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<*> A party for the purposes of Section 5.01(b) of the Project Agreement only.

(3) Kaliningrad Municipal Water and Waste Water Services Enterprise «Vodokanal» (the «Project Entity»).

Preamble

(A) Whereas by a loan agreement dated 4 July 1999 between the Borrower and the Bank (the «Loan Agreement»), the Bank has agreed to make available to the Borrower a loan (the «Loan») on the terms and conditions set forth in the Loan Agreement, but only on condition that the Project Entity agrees to undertake such obligations toward the Bank and the Borrower as are set forth in this Project Agreement;

(B) Whereas by the Subsidiary Loan Agreement between the Borrower, the Project Entity, the City and the Region, the proceeds of the Loan will be made available to the Project Entity for the purposes of carrying out the Project; and

(C) Whereas the Project Entity, in consideration of the above, has agreed to undertake the obligations set forth in this Project Agreement.

Now, therefore, the parties hereby agree as follows:

Article I. STANDARD TERMS AND CONDITIONS; DEFINITIONS; HEADINGS

All the provisions of the Standard Terms and Conditions dated February 1999 are hereby incorporated into and made applicable to the Project Agreement with the same force and effect as if they were fully set forth herein (said provisions being hereinafter called the Standard Terms and Conditions).

Wherever used in the Project Agreement or the Schedule(s) hereto, except where stated otherwise, the terms defined in the Preamble to the Project Agreement have the respective meanings ascribed therein, and the terms defined in Loan Agreement and in the Standard Terms and Conditions have the respective meanings ascribed therein.

The headings of Articles and Sections, as well as the Table of Contents, are inserted for convenience of reference only and shall not be used to interpret the Project Agreement.

Article II. EXECUTION OF THE PROJECT

The Project Entity shall carry out the Project. For this purpose, except as the Bank shall otherwise agree:

(a) all references in Section 4.02 of the Standard Terms and Conditions to «the Borrower» shall be read as the Project Entity and the responsibilities set forth therein shall be applied, mutatis mutandis, to the Project Entity;

(b) the Project Entity shall take or cause to be taken all additional action necessary to provide adequate funds for the completion of the Project.

The Project Entity shall duly perform all its obligations under the Subsidiary Loan Agreement and any Co-Financing Agreements to which the Project Entity is a party. Except as the Bank shall otherwise agree, the Project Entity shall not take or concur in any action that would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provisions thereof, save for any amendments of a non-material nature of which the Bank has been given prior written notice (and, without prejudice to the generality of the foregoing, amendments relating to Article III(a)(i) to (iii) of the Loan Agreement are agreed to be material for this purpose).

For the purposes of Section 4.03 of the Standard Terms and Conditions, the following provisions shall, except as the Bank shall otherwise agree, govern procurement of goods, works and services required for the Project and to be financed out of the proceeds of the Loan:

(a) Goods, works and services (excluding consultants' services, which are included within subsection (c) below) shall be procured through open tendering.

(b) For purposes of subsection (a), above, the procedures for open tendering, are set out in Chapter 3 of the EBRD Procurement Policies and Rules.

(c) Consultants to be employed by the Project Entity to assist in the carrying out the Project shall be selected in accordance with the procedures set out in Chapter 5 of the EBRD Procurement Rules.

(d) All contracts shall be subject to the review procedures set out in Annex 1 to the EBRD Procurement Policies and Rules.

(a) In order to assist in the implementation of the Project, the Project Entity shall, unless otherwise agreed with the Bank, employ and use the Management Contractor to carry out conceptual design of the Project, the procurement of goods, works and services for the Project, and to assume responsibility for contract administration, progress monitoring and cost control. The qualifications, experience and terms of reference of the Management Contractor shall be satisfactory to the Bank and in the Project Entity's procurement of the Management Contractor, the Project Entity shall follow the procurement rules of the relevant funding agencies.

(b) The Project Entity shall provide, without charge, to any consultants engaged to assist in matters relating to the Project or the operations of the Project Entity, including the Management Contractor and the Lenders Agent, all facilities and support necessary for the carrying out of their functions, including office space, telecommunication facilities and transportation, as well as all documents, materials, and other information as may be relevant to their work.

In order to monitor performance of the Management Contractor and administer procurement, the Project Entity shall establish and at all times during execution of the Project operate a Contract Administration and Monitoring Unit («CAMU») with adequate resources and suitably qualified personnel, under terms of reference acceptable to the Bank.

Unless the Bank shall otherwise agree, the Project Entity shall:

(a) not later than 12 months after the date of the Project Agreement enter into an agreement in form and substance satisfactory to the Bank with a corporate partner acceptable to the Bank and the Borrower, appointing such corporate partner to assist the Project Entity in reviewing the Project Entity's activities and developing and implementing the Corporate Development Plan;

(b) not later than 6 months after the date of the effectiveness of the agreement with the Corporate Partner referred to in Section 2.06(a) of the Project Agreement and with the assistance of the Corporate Partner, adopt and thereafter implement a corporate development plan which will integrate the key development activities necessary for transforming the Project Entity into a cost effective and competitive utility company, which shall be in form and substance satisfactory to the Bank and which shall include targets in respect of, amongst other things, the following:

(i) autonomous: the strengthening of the ability of the Project Entity to function as an autonomous and financially accountable legal entity;

(ii) budget control: the Project Entity to establish an accounting and management information system enabling it to exercise appropriate budget control;

(iii) tariff collection rate: the Project Entity to increase the tariff collection rate in accordance with Section 3.03(e) of the Project Agreement;

(iv) cash collection rate: the Project Entity to ensure that the cash collection rate is in accordance with Section 3.03(f) of the Project Agreement;

(v) account receivables: the Project Entity to reduce account receivables;

(vi) efficiency: the Project Entity to improve operational and financial efficiency; and

(vii) tariffs — general: the Project Entity to work with the City and the Region as necessary to ensure a tariff system for water and waste water services based on the principle of full cost recovery for all consumer categories is in place by the start of the year 2003 as provided in the Presidential Decree on Russian Housing Reform (No. 425 of 28 April 1997).

Without limiting the generality of Sections 4.02(a), 4.04(a)(iii), and 5.02(c)(iii) of the Standard Terms and Conditions, the Project Entity shall:

(a) Environment — general: carry out the Project in accordance with the environmental regulations and standards in effect from time to time in the jurisdiction in which the Project is located;

(b) Environment — first year: develop within the period of one year from the signing of the Project Agreement, a programme to achieve compliance with Russian, HELCOM and European Union environmental standards, with details and timeframe to be agreed with the Bank, and implement such programme in accordance with such timeframe; and

(c) Sludge Disposal: develop and agree with the Bank a programme to address the issue of sludge disposal.

(a) Annual environmental report: As soon as available but, in any event, within 60 days after the end of each FY, the Project Entity shall furnish to the Bank a report, in form and scope satisfactory to the Bank, on environmental, health and safety issues arising in relation to the Project during such FY, including:

(i) the status of compliance with the Environmental Standards, including an update on permit status and any incidents of non-compliance, fines, results of inspection reports, and remedial action relating thereto;

(ii) copies of significant information on environmental matters submitted by the Project Entity to the environmental regulatory authorities; and

(iii) a summary of the health and safety records, including accident rate and any related initiatives implemented or planned during the reporting period.

(b) Incident reporting: Immediately upon the occurrence of any incident or accident, relating to the Project Entity or the Project, likely to have a material adverse effect on the environment, health or safety, the Project Entity shall give the Bank notice thereof by facsimile transmission or telex specifying the nature of such incident or accident and any steps the Project Entity is taking to remedy the same. Without limiting the generality of the foregoing, an incident or accident is likely to have a material adverse effect on the environment, health or safety if:

(i) any applicable law requires notification of such incident or accident to any governmental authority;

(ii) such incident or accident involves fatality or multiple serious injuries requiring hospitalisation; or

(iii) has become public knowledge whether through media coverage or otherwise.

(c) Quarterly reports: The periodic Project reports referred to in Section 4.04(a)(iv) of the Standard Terms and Conditions shall be submitted by the Project Entity quarterly, within thirty (30) days after the end of the period being reported on, until the Project has been completed. Such reports shall include the following specific features:

(i) the following general information:

(1) the physical progress accomplished in the implementation of the Project to the date of report and during the reporting period;

(2) actual or expected difficulties or delays in the implementation of the Project and their effect on the implementation schedule, and the actual steps taken or planned to overcome the difficulties and avoid delays;

(3) expected changes in the completion date of the Project;

(4) key personnel changes in the staff of the Project Entity, the CAMU and the Manager Contractor;

(5) matters that may affect the Project cost; and

(6) any development or activity likely to affect the economic viability of any part of the Project;

(ii) financial statements showing details of the expenditures incurred under each part of the Project and the drawdowns from the Loan, together with a statement showing:

(1) original cost estimates;

(2) revised cost estimates, if any, with reasons for changes;

(3) original estimated expenditures to date;

(4) reasons for variations of (3) above from actual expenditures; and

(5) estimated expenditure for remaining quarters of the year;

(iii) a brief statement of the status of compliance with each of the covenants of the Project Agreement.

(d) Semi-annual reports: the Project Entity shall submit semi-annual reports on implementation of the Corporate Development Plan. Such reports shall be submitted within 30 days after the end of the 6 month period being reported on and shall include information on the targets listed at (i) to (vii) of Section 2.06(b) of the Project Agreement.

Article III. FINANCIAL AND OPERATIONAL COVENANTS

(a) The Project Entity shall maintain procedures, records and accounts adequate to reflect in accordance with internationally accepted accounting standards the operations and financial condition of the Project Entity and its subsidiaries, if any, and adequate to monitor and record the progress of the Project (including its costs and the benefits to be derived from it).

(b) The Project Entity shall:

(i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements), and the records, and financial statements of its subsidiaries:

(A) for each FY until and including the FY in which the Effective Date falls, the Project Entity shall ensure that independent auditors acceptable to the Bank review all relevant records, accounts and financial statements in order to give documentary evidence, in form and substance satisfactory to the Bank, as to whether there are, or are not, arrears in excess of 60 days on the balance sheet of the Project Entity; and

(В) for each FY thereafter, audited in accordance with internationally accepted auditing principles and standards consistently applied, by independent auditors acceptable to the Bank;

(ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each fiscal year, (A) certified copies of its financial statements for such fiscal year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, and (C) a statement of all financial transactions between the Project Entity and each of its subsidiaries and affiliates; and

(iii) furnish to the Bank such other information concerning such records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request.

(a) The Project Entity shall not, except as the Bank and the Borrower shall otherwise agree, take any one of the following actions, other than in the ordinary course of business, and shall provide to the Bank all such information thereon as the Bank shall reasonably request:

(i) enter into any agreement or arrangement to guarantee or in any way or under any condition to become obligated for all or any part of any financial or other obligation of another person, including any subsidiary or affiliate;

(ii) enter into any transaction with any person except in the ordinary course of business, on ordinary commercial terms, and on the basis of arm's length arrangements, or establish any sole and exclusive purchasing or sales agency, or enter into any transaction whereby the Project Entity might pay more than the ordinary commercial price for any purchase or might receive less than the full ex-works commercial price (subject to normal trade discounts) for its products;

(iii) enter into any partnership, profit-sharing or royalty agreement, or similar arrangement whereby the Project Entity's income or profits are, or might be, shared with any other person;

(iv) sell, transfer, lease, or otherwise dispose of all or a substantial part of its assets (whether in a single transaction or in a series of transactions, related or otherwise) save for any disposal of assets which are not essential or desirable for the smooth operation of the primary business of the Project Entity and which in aggregate do not exceed US dollar 500,000; or

(v) undertake or permit any merger, consolidation, or reorganisation (save for any internal reorganisation that improves efficiency and/or financial condition).

(b) The Project Entity shall not, unless it shall have informed the Bank at least thirty (30) days in advance, take any one of the following actions other than in the ordinary course of business, and shall provide to the Bank all such information thereon as they shall reasonably request:

(i) enter into any management contract or similar arrangement whereby its business or operations are managed by any other person, including any-subsidiary or affiliate; or

(ii) form any subsidiary, or make or permit to exist loans or advances to, or deposits (except deposits with commercial banks in the ordinary course of business) with other persons or investments in any person, including any subsidiary or affiliate; provided, however, that the Project Entity may invest in investment grade short-term marketable securities acquired solely to make use of its unutilised resources.

Without limiting the generality of Section 3.02 of the Project Agreement, the Project Entity shall:

(a) generate funds: generate sufficient funds to cover:

(i) the Project Entity operating and maintenance costs;

(ii) the Project Entity's debt requirements; and

(iii) after the Last Availability Date, the capital expenditures necessary to maintain and improve the level of water and waste water services in Kaliningrad, taking into account funds provided by the City and the Region.

(b) Debt Service Coverage Ratio: from the beginning of year 2002 onwards maintain a Debt Service Coverage Ratio of no less than 1.2, Debt Service Coverage Ratio being Free Cash Flow/Debt Service <*>.

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<*> Free cash flow is defined as annual EBDIT [Earnings plus depreciation, +/- non-cash expense/amortisation] plus/minus the change in working capital minus agreed on capital expenditure: divided by (ii) annual debt service [interest paid plus on amortisation of principal on all debt].

(c) Debt Service Reserve Account: establish and maintain until the Loan is fully repaid a debt service reserve account at a bank acceptable to the Bank and the Borrower and:

(i) from the date 6 months before the first repayment date in respect of the Loan pursuant to Section 2.02(d) of the Loan Agreement, each month on or before the 15th day of the month pay into the Debt Service Reserve Account an amount which corresponds to on sixth (1/6) of the debt service to the Borrower under the Subsidiary Loan Agreement due on the next Interest Payment Date, unless otherwise authorised by the Bank and the Borrower; and

(ii) use the sums on the account only for debt service under the Subsidiary Loan Agreement, unless otherwise authorised by the Bank and the Borrower; and

(d) current liabilities: discharge its current liabilities as and when due or within 60 days of them falling due.

(e) tariff collection rate: Unless the Bank has given its prior written consent otherwise, the Project Entity shall increase the average monthly tariff collection rate over a FY to not less than 70 percent by the end of the 2000 FY, not less than 73 percent by the end of the 2001 FY, not less than 75 percent by the end of the 2002 FY, and not less than 80 percent by the end of any subsequent FY;

(f) cash collection rate: Unless the Bank has given its prior written consent otherwise, the Project Entity shall ensure that the average monthly cash collection rate over a FY is not less than 45 percent by the end of the 2000 FY, not less than 50 percent by the end of the 2001 FY, not less than 55 percent by the end of the 2002 FY and not less than 60 percent thereafter;

(g) tariffs — general: Unless the Bank has given its prior written consent otherwise, the Project Entity shall work with the City and the Region as necessary to ensure a tariff system for water and waste water services based on the principle of full cost recovery for all consumer categories is in place by the year 2003 as provided in the Presidential Decree on Russian Housing Reform (No 425 of 28 April 1997).

The Project Entity undertakes that, except as the Bank shall otherwise agree:

(a) if the Project Entity creates any lien on any of its assets as security for any debt, such lien will equally and rateably secure the payment of the principal amount of, and interest and other charges on, the Subsidiary Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and

(b) if any statutory lien is created on any assets of the Project Entity as security for any debt, the Project Entity shall grant at no cost to the Bank an equivalent lien satisfactory to the Bank to secure the payment of the principal amount of, and interest and other charges on, the Subsidiary Loan;

(c) the foregoing undertakings shall not apply to:

(i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of that property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and

(ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

The Project Entity shall, except as the Bank shall otherwise agree,

(a) conduct its business and operations (i) in accordance with sound administrative, financial, engineering, and other relevant standards and practices, (ii) with due regard to ecological and environmental factors, and (iii) with due regard to all its principal operating policies;

(b) promptly take all action within its powers to maintain its legal existence, to carry on its operations, and to acquire, maintain, and renew all rights, properties, powers, privileges, and franchises that are necessary for the conduct of its business, including the carrying out of the Project;

(c) promptly notify the Bank of any proposal to amend, suspend, or repeal any provision of its Statutes and shall afford the Bank an adequate opportunity to comment on such proposal prior to taking any action thereon;

(d) take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank in respect of, insurance of its property against such risks and in such amounts as shall be consistent with appropriate practice in the Russian Federation;

(e) at all times operate and maintain its plant, facilities, equipment, and other property in good working order and promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound business and financial practice;

(f) enter into a service agreement with the City on or before the date 6 months after the effectiveness of the agreement with the Corporate Partner referred to in Section 2.06(a) of the Project Agreement and take full operational responsibility for the water supply and waste water services in the Kaliningrad service area under such agreement;

(g) implement the Project essentially as described in Schedule 1 to the Loan Agreement; and

(h) ensure that the key management positions in the Project Entity are at all times staffed by appropriately qualified and experienced individuals.

Article IV. EFFECTIVE DATE; TERMINATION; CANCELLATION AND SUSPENSION

The Project Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective.

The Project Agreement and all obligations of the Bank, the Borrower and the Project Entity hereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the Project Entity and the Borrower thereof.

All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under Article IV of the Loan Agreement.

Article V. MISCELLANEOUS

(a) The following addresses are specified for the purposes of Section 10.01 of the Standard Terms and Conditions:

For the Project Entity:

Kaliningrad Municipal Water and Waste Water Services Enterprise «Vodokanal»

Attention: The Director General of the Project Entity

Komsomolskaya Street 12

Kaliningrad, 136000

Russian Federation

Telephone: 007 0112 21 47 94 Telefax: 007 0112 21 92 18

For the Bank:

European Bank for Reconstruction and Development

Attention: Operation Administration Unit

One Exchange Square

London EC2A 2JN

England

Telephone: (44-71) 338 6000

    Telefax:   (44-71) 338 6100
    Telex:     881 2161

(b) The Bank and the Project Entity agree that each notice or request that they send to each other in accordance with Section 10.01 of the Standard Terms and Conditions shall be copied to the Borrower at the Borrower's address specified in the Loan Agreement, or at any other address as the Borrower shall have specified in writing to the party giving the notice or making the request. Except as otherwise provided in the EBRD Disbursement Handbook (for Drawdown applications and related matters), such delivery may be made by hand, mail, telex or facsimile transmission. Deliveries made by telex or facsimile transmission shall also be confirmed by mail.

In witness whereof the parties hereto, acting through their duly authorised representatives, have caused the Loan Agreement to be signed in six copies and delivered at London, England as of the day and year first above written.

(Follow the signatures)

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