Concession Agreement Templates

This document has been prepared for the purposes of the  PPP IN INFRASTRUCTURE RESOURCE CENTER FOR CONTRACTS, LAWS AND REGULATIONS (PPPIRC) website.  It is a sample document FOR REFERENCE PURPOSES ONLY and SHOULD NOT BE used as a "model".  The inclusion of any legal materials on the PPPIRC website does not mean that they are in any way approved, endorsed or recommended by the World Bank Group or its affiliates.  Legal advice should be sought to determine whether a particular legal document is appropriate for any given project, and how the specific terms of the document should be adapted to fit the circumstances of that project



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CONCESSION AGREEMENT  FOR WATER AND SANITATION SERVICES


[DATE ]



BETWEEN



[COUNCIL]



AND



[CONCESSIONAIRE]




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THIS AGREEMENT is made on the [DATE] BETWEEN (1) [            ] (the "Council" which expression shall include successors and permitted assigns); and (2) [                          ] (registered number [                      ]) whose registered office is at [                           ] (the "Concessionaire" which expression shall include successors and permitted assigns).


WHEREAS:

The Council is responsible for water and wastewater services in [location].

The Council issued an RPF to select a Concessionaire to provide the water and wastewater services under a Concession in the Concession Area.

The Concessionaire submitted an offer in relation to the Concession and was selected by the Council.

The Parties will to record their agreement regarding the matters described above and do so in this Concession Agreement.


THE PARTIES AGREE AS FOLLOWS -

1. INTERPRETATION

The headings of the clauses in this Contract are for the purpose of convenience and reference only and shall not be used in the interpretation of nor modify nor amplify the terms of this Contract nor any clause hereof.  Unless a contrary intention clearly appears -

1.1. words importing –

1.1.1. any one gender include the other two genders;

1.1.2. the singular include the plural and vice versa;  and

1.1.3. natural persons include created entities (whether incorporated or unincorporated) and the state and vice versa;

1.2. the following terms shall have the meanings assigned to them hereunder and cognate expressions shall have corresponding meanings, namely -



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1.2.1. "Affiliated Company" means in relation to a company a company which is for the time being a holding company of that company or a subsidiary of that company or a subsidiary of any holding company of which that company is a subsidiary or a company in which that company holds not less than 30% (thirty per centum) of the issued shared capital directly or indirectly;

1.2.2. "Basic Sanitation" means the minimum standard of Sanitation Services necessary for the safe and hygienic and adequate collection, removal, disposal or purification of domestic water-waste and sewage from households, including informal households as may be prescribed in terms of Regulatory Provisions;

1.2.3. "Basic Water Supply" means the minimum standard of Water Supply Services necessary for the reliable Supply of [25l (twenty five litres)] of water per capita per day (or such other quantity of water that may be prescribed in terms of Regulatory Provisions) to domestic households, including informal households, to support life and personal hygiene of such a quality as may be prescribed in terms of Regulatory Provisions;

1.2.4. [1"Bulk Water Supply Agreement" means the Bulk Water Supply Agreement to be concluded between the Council and Ministry of Environment containing terms in accordance with the applicable principles and assumptions reflected in the bulk Supply agreement framework schedule annexed hereto marked Annexure [  ];]

1.2.5. “Charges” means the Charges agreed to between the Council and the Concessionaire in terms of this Contract in respect of the Supply of Water Services, as modified in terms hereof from time to time;

1.2.6. “Charge Schedule” means the Charge Schedule reflecting the Charges applicable in terms of the Contract from time to time, the first such Charge Schedule being annexed hereto marked [    ];

1.2.7. "Competent Authority" means collectively –

1.2.7.1. any Government, provincial or local government, any agency, authority, body or standard setting institution or other person or entity having jurisdiction under any law or Regulatory Provision or organ of state which supplies Potable Water or water intended to be converted to Potable Water and/or their successors in title or assigns; or

1.2.7.2. any person or entity appointed by any person or entity referred to in 1.2.7.1; or                                                  1 Appropriate where there is a bulk supply agreement(s) relevant to the supply of Water Services


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1.2.7.3. any court of competent jurisdiction;

or, if the context is appropriate any one of them;

1.2.8. "Concession Assets" means collectively the Existing Assets and the New Assets subsequent to the Council making them available to the Concessionaire in terms of this Contract or, if the context is appropriate any one of them;

1.2.9. "Concession Area" means the area within the municipal boundaries of the Council including all Developed Areas, Expansion Areas and any New Areas which may be included therein from time to time in accordance with 8.2 or, if the context is appropriate any one of them.  A map reflecting the Concession Area as at the Effective Date is annexed hereto marked [    ];

1.2.10. "Concession Fee" means the annual fee to be paid by the Concessionaire to the Council pursuant to the Concession Fee and Payment Schedule annexed hereto marked Annexure [   ];

1.2.11. "Concessionaire" means [               ]; 

1.2.12. "Concession" means the Concession for the construction, financing, design, upgrading, expansion, rehabilitation, operation, maintenance and management of the Supply of Water Services and the Works within the Concession Area as set out in this Contract;

1.2.13. "Consumer Installation" means collectively a pipeline, fitting or apparatus connected to a Service Connection Point and used by a Consumer to gain access to the Supply of Water Services (including any septic tank or other loose standing system used for such purposes but not connected to the Works) or, if the context is appropriate any one of them;

1.2.14. "Consumer Rules" means the Consumer Rules published by the Concessionaire from time to time, governing the Supply of Water Services;

1.2.15. "Consumer" means any end user within the Concession Area that is supplied with Water Services by the Concessionaire;

1.2.16. "Contract Term" means the period referred to in 9.3;

1.2.17. "Contract" means this agreement including the annexures and schedules annexed hereto;

1.2.18. "Control of the Concessionaire" means –



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1.2.18.1. the beneficial ownership of the majority of the ordinary voting shares in the issued share capital of the Concessionaire; or

1.2.18.2. the beneficial ownership of the shares in the issued share capital of the Concessionaire entitling the beneficial owner thereof to exercise less than the majority of the votes attaching to all the issued shares of the Concessionaire, but where such voting power is sufficiently dominant relative to the spread of the shareholdings that it does constitute de facto Control of the Concessionaire;  or

1.2.18.3. the right, through shareholding or otherwise, to control the composition of the board of directors of the Concessionaire and, without prejudice to the generality of the aforegoing, the composition of such board shall be deemed to be so controlled if the person or entity holding the right may by the exercise of some power, directly or indirectly, appoint or remove the majority of the directors;

1.2.18.4. the right to control the management of the Concessionaire; or

1.2.18.5. the ability to exercise a material influence over the financial and business policies of the Concessionaire;

1.2.19. "Council" means [        ];

1.2.20. "2CPI" means the weighted average of the Consumer Price Index in respect of all areas and for all items as published by [    ] from the time to time, provided that if –

1.2.20.1. such index should cease to be published, or

1.2.20.2. the basis of the calculation of such index has changed and pursuant to such change one Party has notified the other that it is not satisfied therewith, or

1.2.20.3. the Parties agree that, due to a change in circumstances, the index is no longer representative of the general inflationary changes in [country], or (in circumstances where the Parties are unable to reach such agreement) where such fact is confirmed in writing by an independent actuary in [country] (who shall act as expert and not as arbitrator) appointed for such purpose by [relevant actuarial body], whose determination shall be final and binding upon the Parties,
                                                 2 Weighted inflation index is often considered more appropriate than general index in these cases – can also modify an existing index to take certain other factors into account/ remove certain elements that are considered distorting factors if this is deemed appropriate


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then, in any such circumstances, the Parties will use such official information or index as may be available and acceptable to them, or failing such availability or acceptance, an index determined in writing as fair and reasonable by a majority decision of a panel of 3 (three) independent actuaries in country] (who shall act as experts and not as arbitrators) appointed for such purpose by the President for the time being of [relevant actuarial body], whose determination shall be binding upon the Parties. Any determination made by the majority of such panel as to the date from which any revised index shall take effect and liability for the cost of determination of the index by the panel shall be binding upon the Parties;

1.2.21. "Developed Area" means collectively the Developed Areas within the Concession Area as at the Effective Date reflected in the maps annexed hereto marked Annexure [B1] or, if the context is appropriate any one of them;

1.2.22. "Ministry" means [     ] and/or its successor in title;

1.2.23. "Effective Financial Statements" means the audited financial statements of the Council in respect of the Supply of Water Services as at and for the 12 (twelve) month period ending on the Effective Date;

1.2.24. "Effective Date" means the later of –

1.2.24.1. 10h00 of the first day of the third calendar month following the month in which this Contract is signed by the Party signing last in time; or

1.2.24.2. 10h00 of the first day of the calendar month following the month in which the conditions precedent are fulfilled or waived in terms of 4,

or 10h00 of such other date as may be agreed between the Parties and the Lenders in writing;

1.2.25. "Equity" means the paid up share capital contributions and loan contributions of the Concessionaire's shareholders to the Concessionaire;

1.2.26. "Emergency Situations" means collectively inter alia fires, floods, water pollution, droughts, operational emergencies and any other situations the magnitude of which may create danger to the health or safety of Consumers or affect the Supply of the Water Services as envisaged in this Contract and/or any other event which would qualify as such under the Bulk Water Supply Agreement or Regulatory Provisions or, if the context is appropriate any one of them;



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1.2.27. "Event of Force Majeure" means an Event of Force Majeure as contemplated in 73,

1.2.28. "Existing Assets" means collectively the movable and immovable assets that constitute the Works owned by the Council associated with or connected to the Supply of Water Services within the Concession Area as at the Effective Date or, if the context is appropriate any one of them.  The Existing Assets as at the signature date are reflected in the asset schedules annexed hereto marked [         ];

1.2.29. "Expansion Areas" means any area outside the Developed Areas but within the Concession Area, which by agreement between the Parties as envisaged in 8.2 is approved for the expansion of the Supply of Water Services pursuant to a Five Year Plan;

1.2.30. "Financial Base Case" means the financial/bankers base case model of the Concessionaire in respect of the Concession (as prepared by [        ]) a copy of which will on the signature date be lodged with and will be retained in trust for the duration of the Contract Term by the Concessionaire’s auditors;

1.2.31. "Financial Closing" means the execution of –

1.2.31.1. the Financing Agreements and the fulfilment or waiver, as the case may be, of the suspensive conditions precedent to which the Financing Agreements may be subject following legal, financial and technical due diligence to the satisfaction of the Lenders and any necessary amendments to the Contract required by the Lenders; and

1.2.31.2. Equity subscription agreements representing binding commitments for the subscription of Equity in the Concessionaire by its shareholders

  in each case in a form satisfactory to the Concessionaire and the Lenders;

1.2.32. "Financing Agreement" means any agreement and/or document entered into by or on behalf of a Lender and the Concessionaire in connection with the financing or as the case may be the re-financing of the Concessionaire's obligations under the Contract (including but not limited to the provision of security in relation thereto);

1.2.33. "Five Year Plan" means the Five Year Plan to be delivered by the Concessionaire to the Council pursuant to clause 2 of the reporting schedule annexed hereto marked Annexure [J];

1.2.34. "Government" means the central government of [country];


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1.2.35. "holding company" means a holding company as defined in [companies legislation];

1.2.36. "Industrial Effluent" means Sewage Effluent resulting from the Industrial Use of water within the Concession Area;

1.2.37. "Industrial Use" means the use of water for mining, manufacturing , generating electricity, land-based transport, construction or any other purpose not connected to the domestic use of water;

1.2.38. "Intellectual Property" means all patents, trademarks, registered designs, know-how, trade secrets, names, brands, logos, licence and distributorship agreements and copyright associated with or connected to the Works or the Supply of the Water Services as well as the underlying inventions relating to any patents in respect of the operation and maintenance of the Works;

1.2.39. "Lease Agreements" means collectively –

1.2.39.1. the Lease Agreement as amended from time to time in terms whereof the Concessionaire will lease from the Council all the Existing Assets of a movable nature as from the Effective Date annexed hereto marked Annexure B6; and

1.2.39.2. the Lease Agreement as amended from time to time in terms whereof the Concessionaire will lease from the Council all the Existing Assets of a immovable nature as from the Effective Date annexed hereto marked Annexure [B7],

  or, if the context is appropriate, any one of them;

1.2.40. "Lender" means any entity who has undertaken to provide debt financing facilities to the Concessionaire in respect of the Concession as envisaged in the Financial Base Case (specifically excluding any provider of Equity, lease or other financing) and who has entered into a Financing Agreement with the Concessionaire or who becomes a Party to a Financing Agreement (whether by assignment, novation or otherwise) for such purpose, to the extent that the repayment obligations under which Financing Agreement have not been discharged;

1.2.41. "Liabilities" means any liability, whether actual or contingent, including without limitation to the generality of the aforegoing, any claims or Liabilities as a result of any breach of Contract or any delict committed, and any liability arising from or associated with the Supply of Water Services and the Works;



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1.2.42. "Material Adverse Governmental Action" means any action or omission of a Competent Authority after the signing date hereof of whatsoever nature, the effect of which is to discriminate against or has an adverse effect on the rights, interests and/or obligations of the Concessionaire and/or water service providers in general, and/or results in any actual or prospective adverse change in the Concessionaire's costs (including, but not limited to, income or other tax) or revenues or general economic position, including but not limited to –

1.2.42.1. the introduction, application or change of any law, regulation, by-law, ordinance, policy directive, licence, decree, order or other similar provision having the force of law;  or

1.2.42.2. the failure to discharge any legally binding duty or obligation or to enforce any statutory right by any Competent Authority; and/or

1.2.42.3. any decision or judgement of a court of competent jurisdiction, 

provided that there shall not be deemed to be a Material Adverse Governmental Action to the extent that such act or omission is of general application to all proprietary limited companies in [country];

1.2.43. "Minister" means [        ] and/or his successor in title responsible for Water Services;

1.2.44. "New Area" means any geographic area situated outside the Concession Area which may in the future be incorporated into it;

1.2.45. "New Assets" means collectively the movable and immovable assets acquired or constructed by the Concessionaire during the Contract Term both within and outside of the Concession Area pertaining to the Supply of Water Services or, if the context is appropriate any one of them;

1.2.46. "Operating Agreement" means the operating and maintenance agreement concluded between the Concessionaire and the Operator in accordance with the term sheet annexed hereto marked Annexure [  ], including any amendments thereto as approved by the Council and the Lenders from time to time;

1.2.47. "Operator" means [    ], a company duly incorporated in [   ] with registration number [          ];

1.2.48. "Operator Group " means the Operator, [   ] and [any subsidiaries of the Operator from time to time];

1.2.49. "Parties" means collectively the Council and the Concessionaire;


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1.2.50. ["Pension Fund Contributions" means collectively the employer and the employee contributions payable in terms of the rules of the pension funds referred to in 24, and in terms of agreements with employees from time to time or, if the context is appropriate any one of them;]3

1.2.51. "Performance Guarantee" means the Performance Guarantee to be rendered by the Concessionaire pursuant to 26;

1.2.52. "Potable Water" means water conforming to the quality parameters prescribed in the quality specification annexed hereto marked Annexure [B4] as amended from time to time;

1.2.53. "Prevention and Emergency Plan" means the plan to be submitted in accordance with the provisions of the reporting schedule annexed hereto marked Annexure [J];

1.2.54. "Prime Rate" means the publicly quoted Prime Rate of interest of [bank] calculated on a 365 (three hundred and sixty five) day factor irrespective as to whether or not the year is a leap year;

1.2.55. "Raw Water" means water from surface or underground sources that has not been treated and/or purified into Potable Water;

1.2.56. "Regulatory Provisions" means collectively the provisions of any prevailing governing legislation, by-laws, ordinance or any regulation or notice issued pursuant to such legislation, policy directive or notice issued by a Competent Authority in respect of the Supply of Water Services, the Works and/or the activities of the Concessionaire from time to time, which apply to the Concession, the Concessionaire and this Contract or, if the context is appropriate any one of them;

1.2.57. "RFP" means the Request For Proposal issued by the Council dated [    ] including all amendments and/or clarifications issued thereto;

1.2.58. "Right of Way" means a right of passage over or under and of access and egress to any immovable property or part thereof;

1.2.59. "Sanitation Service" means collectively the metering, the collection of Tariffs, collection, removal, disposal, purification or treatment of human excreta, domestic waste-water, waste and Sewage Effluent resulting from the use of water for domestic purposes and Industrial Effluent emanating from within the Concession Area;

1.2.60. "Sanitation Services Works" means all Concession Assets built, installed or used to provide Sanitation Services within the Concession                                                  3 Relevant where there is a pension plan in place


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Area, consisting of inter alia any treatment works, conveyance pipe, pumphouse, access road, pumping installation, electricity transmission line, pipeline meter, fitting or apparatus, or, if the context is appropriate any one of them;

1.2.61. "4Sanitation Service Connection Point" means the point at which a Consumer Installation is connected to the Sanitation Services Works being –

1.2.61.1. where the sewer pipeline is situated within a property owned or occupied by a Consumer, at the inspection eye closest to the sewer pipeline or at a point [1,5 (one comma five) meters] from the nearest sewer pipeline whichever is closest; or

1.2.61.2. where the sewer pipeline is situated outside a property owned or occupied by a Consumer, at the property boundary.

1.2.62. "Service Connection Point" means collectively a Sanitation Service Connection Point and a water Supply Service Connection Point or, if the context is appropriate any one of them;

1.2.63. "Service Standards" means collectively the standards pertaining to the quality of Water Services to be supplied pursuant to the Contract and the Regulatory Provisions or if the context is appropriate any one of them;

1.2.64. "Sewage Effluent" means any domestic discharge or Industrial Effluent acceptable according to the Regulatory Provisions and the Consumer Rules or other requirements of the Concessionaire determined in terms of 35 that is received by the Sanitation Services Works;

1.2.65. "Stock" means collectively the stocks of chemicals, spare parts, equipment and raw materials held by the Council at the Effective Date including any damaged or unsaleable Stock or, if the context is appropriate any one of them;

1.2.66. "Subcontractor" means any person or entity who has Contracted with the Concessionaire for the performance of any obligations of the Concessionaire hereunder;

1.2.67. "Subcontract" means the Contract between the Concessionaire and any relevant Sub-contractor providing for the performance by the Subcontractor of some or all of the obligations of the Concessionaire in terms of the Contract;

                                                 4 Important to indicate where concessionaire's responsibility begins and ends


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1.2.68. "subsidiary" means a subsidiary company as defined in [companies legislation];

1.2.69. "Substitute Entity" means any person or entity selected by the Council or the Lenders to replace the Concessionaire and who has entered into the requisite agreements, in accordance with the provisions of 62;

1.2.70. "Supply" means the provision, conveyance and distribution of Water Services;

1.2.71. "Tariff" means collectively the Water Tariff, the Sanitation Tariff and all other Tariffs and prices approved and promulgated by the Council reflected in the Tariff Schedule applicable from time to time or if the context is appropriate any one of them;

1.2.72. “Tariff Schedule" means the Tariff schedule promulgated by the Council and published from time to time setting out the governing principles, prices, and Tariffs payable by Consumers in respect of the Supply of Water Services in force at any given time;

1.2.73. "Tender" means the offer submitted by or on behalf of the Concessionaire to the Council pursuant to the RFP;

1.2.74. "Transferring Employees" means collectively the employees of the Council associated with or connected to the Supply of Water Services within the Concession Area as at the Effective Date whose names appear on the final personnel schedule contemplated in clause 21.3;

1.2.75. ["Service Tax" means service tax charged pursuant to [relevant tax legislation]];

1.2.76. ["VIP" means a ventilated improved pit latrine;]

1.2.77. "Waste Water Treatment" means the treatment of Sewage Effluent in order that the effluent after treatment conforms to Regulatory Provisions and the specifications reflected in the quality specification annexed hereto marked Annexure [  ];

1.2.78. "Water Supply Services" means collectively the abstraction, conveyance, treatment, distribution, metering and collection of Tariff in respect of Potable Water or Raw Water intended to be converted to Potable Water or, if the context is appropriate any one of them;

1.2.79. "5Water Supply Services Connection Point" means the point at which a Consumer Installation is connected to the Water Services works,                                                  5 Important to establish where Concessionaire responsibility starts and ends


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being at the property boundary of the property owned or occupied by a Consumer;

1.2.80. "Water Source" means a source of Raw Water for subsequent use as Potable Water or other approved uses;

1.2.81. "Water Supply Services Works" means all movable and immovable Concession Assets built, installed or used to supply Water Supply Services within the Concession Area consisting of inter alia any reservoir, dam, water treatment works, well, pumphouse, borehole, access road, pumping installation, electricity transmission line, pipeline, pipeline meter, fitting or apparatus, or if the context is appropriate any one of them;

1.2.82. "Water Services" means collectively, Water Supply Services, (including Basic Water Supply), Sanitation Services (including Basic Sanitation) or, if the context is appropriate any one of them;

1.2.83. "[currency] and the symbol [  ] means the currency of [country];

1.2.84. "Works" means collectively the Water Supply Services Works and Sanitation Services Works or, if the context is appropriate any one of them.

1.3. any reference to an enactment is to that enactment as at the date of signature hereof and as amended or re-enacted from time to time;

1.4. if any provision in a definition is a substantive provision conferring rights or imposing obligations on any Party, notwithstanding that it is only in the definition clause, effect shall be given to it as if it were a substantive provision in the body of the Contract;

1.5. when any number of days is prescribed in this Contract, same shall be reckoned exclusively of the first and inclusively of the last day unless the last day falls on a Saturday, Sunday or public holiday in [country], in which case the last day shall be the next succeeding day which is not a Saturday, Sunday or public holiday in [country];

1.6. where figures are referred to in numerals and in words, if there is any conflict between the two, the words shall prevail;

1.7. expressions defined in this Contract shall bear the same meanings in schedules or annexures to this Contract which do not themselves contain their own definitions;

1.8. in the event of any conflict or ambiguity between the expressions and/or provisions of the Contract and any annexures or schedule thereto, the Contract shall govern;


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1.9. the use of any expression in this Contract covering a process available under [country] law such as a winding-up (without limitation eiusdem generis) shall, if any of the Parties to this Contract is subject to the law of any other jurisdiction, be construed as including any equivalent or analogous proceedings under the law of such defined jurisdiction;

1.10. where any term is defined within the context of any particular clause in this Contract, the term so defined, unless it is clear from the clause in question that the term so defined has limited application to the relevant clause, shall bear the meaning ascribed to it for all purposes in terms of this Contract, notwithstanding that that term has not been defined in this interpretation clause;

1.11. the expiration or termination of this Contract shall not affect such of the provisions of this Contract as expressly provide that they will operate after any such expiration or termination or which of necessity must continue to have effect after such expiration or termination, notwithstanding that the clauses themselves do not expressly provide for this;

1.12. unless expressly provided as being in the sole discretion of a Party, where approval, acceptance, consent or action by a Party is required under this Contract, such approval, acceptance, consent or action shall be in writing and shall not be unreasonably delayed or withheld;

1.13. all references to annexures and schedules are references to the annexures and schedules annexed to this Contract.



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2. NOVATION OF EXISTING AGREEMENTS AND CANCELLATION OF