IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical, environmental and social information submitted by the Company. The following potential environment, health and safety, and social impacts of the projects were analyzed. - Environmental Management for the Existing Operation and the Project - Environmental Assessment - Site Selection and Land Acquisition - Alternative Analysis - Air Emissions and Ambient Air Quality - Water Usage and Liquid Effluents - Closed Cooling System - Solid Wastes (Ash, FGD sludge, others) - Noise - Coal Delivery and Storage - Traffic Impacts - GHG Emissions and Energy Efficiency - Health and Safety Management - Community Development - Public Consultation

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. [Further information is provided in the attached documentation.] - Environmental Management for the Existing Operation and the Project Indorama is a leading textile company in Indonesia operating a polyester plant, spinning mills and fabric facilities at three different locations (Purwakarta-the main location, Bandung and Cempaka) with about 8,000 employees. Indorama has obtained internationally recognized management system certificates for quality control, environmental management, occupational health and safety, and product quality (ISO 9001, ISO 14001, OHSAS 18001, Oeko-Tex Standard 100) in the last few years. Indorama plans to expand ISO 14001 to the captive power plant project. - Environmental Assessment Under the current Indonesian environmental assessment regulation (Government Regulation, Number 27/1999 Concerning Environmental Impacts Assessment), UKL and UPL (Environmental Management Plan, Environmental Monitoring Plan) are required for a coal-fired power plant project of less than 100MW, which is the case for the this project. Indorama retained a local environmental consulting firm to conduct a needed environmental impact assessment to prepare the UKL and UPL that are effective. English translated versions of the UKL and UPL (summaries) as well as the impact assessment report are attached to this document. UKL and UPL were submitted to the environmental regulatory authority in December 2003, and it is under review as of March 30, 2004. - Site Selection and Land Acquisition Indorama reviewed four alternative sites around their textile operation in Purwakarta and selected the one which is away from the major residential areas and adjacent to the existing textile operation plant. The land use of the selected site was mainly growing bamboo and rice paddy. A total of 15.0 ha of land was purchased from 65 landowners by cash compensation. According to the head of Cibinong village who was involved in the negotiation, the transaction was satisfactory to every landowner. The 15.0 ha site will be used by power block and associated auxiliaries (5ha), roads, parking places, office and other buildings (3ha), and ash and Flue Gas Desulfurization sludge disposal, coal storage, green belt and open space (7ha). - Alternative Analysis In proposing the captive cogeneration power plant project, Indorama reviewed alternatives including fuel selection (gas, oil, coal), combustion technologies, flue gas treatment technologies, and site selection from economical, technological, environmental and social aspects. With appropriate environmental mitigation measures, Indorama is proposing to develop a 60MW captive coal-fired steam boiler cogeneration power plant as the most economical and environmentally acceptable option. - Air Emissions and Ambient Air Quality The project, using a pulverized coal-fired boiler, will be equipped with various mitigation measures including electrostatic precipitator for particulate control, a flue gas desulfurization and use of maximum 0.8% sulfur coal for SO2 control, dry low NOx burners for NOx control, and a 120m stack to minimize ground level concentrations. The project design specifications of 50 mg/Nm3 (6%O2) for particulate, 750 mg/Nm3 (6%O2) for SOx, and 750 mg/Nm3(6%O2) for NOx, will be in compliance with the Indonesian regulation of 150 mg/m3 (3%O2), or equivalent to about 136 mg/Nm3 (6%O2) for particulate, 750 mg/m3 (6%O2), or equivalent to about 820 mg/Nm3 (6%O2) for SO2, and 850 mg/m3 (6%O2), or equivalent to about 930 mg/Nm3 (6%O2) for NOx, as well as the World Bank environmental guidelines of 50 mg/Nm3 for particulate, 2,000 mg/Nm3 and 0.2 tpd/MW for SO2, and 750 mg/Nm3 for NOx, all at 6%O2. The current baseline ambient air quality levels are monitored by Indorama, and they are in compliance with the relevant Indonesian ambient air quality standards. The pollutants from the project will be emitted through a 120m stack and according to the air dispersion modeling results submitted by Indorama, the maximum incremental impacts by the project for ground level concentrations of SPM, SO2 and NO2 are about 19.67 ug/m3, 24.59 ug/m3, 32.20 ug/m3 for maximum 24-hour average, and 18.66 ug/m3, 23.12 ug/m3, and 29.7 ug/m3 for annual average. Resulting maximum ambient air quality levels including the current baseline are estimated to be 116.48 ug/m3, 25.41 ug/m3, 33.74 ug/m3 for maximum 24-hour average, and 47.32ug/m3, 23.36 ug/m3 and 30.20 ug/m3 for annual average, far below the Indonesian standards of 230 ug/m3, 365 ug/m3 and 150 ug/m3 for 24-hour maximum and 60 ug/m3 and 100 ug/m3 for annual average of SO2 and NO2. Indorama will install a continuous emission monitoring system for particulate, SO2 and NOx and also carry out ambient air quality samplings at 8 points, for 2 hours each time, 4 times per year, to confirm ongoing compliance for PM10, SO2 and NOx. Furthermore Indorama will measure heavy metals emissions annually to demonstrate compliance with the Indonesian emission standards of relevant metals. - Water Usage and Liquid Effluents The project site is located next to a large man-made lake (Jatiluhur Lake). Six industrial users are taking water from the lake including Indorama. Indorama’s current extraction permit is for 318,000 m3/month, and the Project will need additional 300,000 m3/month. The cumulative water intake by Indorama from the lake is small compared to the lake capacity (3 billion m3). Indorama has already obtained “in principle” approval from the local authority Perum Jasa Titra II in Purwakarta for taking extra water. A short water pipeline will be constructed (1.6km) from the lake to the Project site. Effluents from the project include cooling tower blow down, neutralized water from the regeneration system of Demineralization plant, and boiler blow down. The cooling tower blow down will be partly used for dust suppression in coal handling and conveying system and partly in ash conveyance as and when required. Demineralization plant regeneration effluents will be neutralized in a neutralizing pit and settled in a tank. The treated effluent will be collected in a central collection and monitoring basin. The boiler blow down and effluents from other auxiliary units will also be routed to the central basin. Part of this water will be utilized for green belt development and subsequent maintenance. The balance will be disposed off in the existing water channel from the central basin after ensuring that the effluent quality is in compliance with both the Indonesian standards and World Bank guidelines. Treated and monitored wastewater from water channel will be finally discharged to a rivulet named Cikuda. Indorama plans to monitor effluents (BOD, COD, TSS, Phenol Total, chromium total, Ammonia Total, Sulphide, Oil and Grease, Total residual chlorine, Copper, Iron, Zinc, pH, Temperature) regularly to confirm ongoing compliance with Indonesian liquid effluents standards and World Bank liquid effluents guidelines. - Closed Cooling System The project will have a closed cooling system with total circulating amount of water of 12,000 m3 per hour. The water demand by the project is 400m3 per hour (or about 300,000 m3 per month) including the make-up water for the closed cooling system (340 m3 per hour), the make-up for the extraction for steam to the textile operation, blowdowns and leakages from the power cycle (30 m3 per hour), and additional needs for dust suppression in coal handling, ash disposal etc. (30 m3 per hour). There will be no thermal discharge to the environment. The closed cooling water system will be chlorinated in a chlorination plant to avoid growth of algae and bacteria in the system. Indorama will use chlorine and anti-scaling chemicals dosing, ensuring that the cooling tower blow down does not have residual chlorine above permissible levels (including the limit of 0.2 mg/l of total residual chlorine by the World Bank guidelines). - Solid Wastes (Ash, FGD sludge, others) Estimated maximum ash generation from the Project is 87 ton per day. A 4 ha ash disposal site will be included in the project’s layout of 15.0 ha. Indorama started discussion with potential ash users including a cement plant about 160 kms from the project site. Assuming that no ash will be utilized, the 4 ha allocated ash disposal area will be sufficient for 15 years of operation (2,600 m2 / year with 10 m ash dyke height). In addition, the selected Flue Gas Desulfurization system (spray dry system) using 5520 ton of CaO per year as absorbent will generate 11500 tons of FGD sludge annually that needs to be disposed. The current plan is to dispose FGD sludge to the various building block manufacturer in the vicinity and the balance in the lagoon within the ash dyke. Ash will be pumped to ash dyke in high concentration slurry form and the ash dyke will have a plastic liner to avoid groundwater contamination of any leachates. Indorama will prepare a detailed ash / FGD sludge management plan describing quantitative balance of generation, utilization and disposal, safety of ash dyke design, operation and maintenance, and a leak detection system and a runoff and leachate collection system to prevent impacts on nearby surface water and groundwater. Groundwater monitoring of trace metals will be conducted as part of the regular monitoring. - Noise Indorama plans to employ adequate noise abatement measures to ensure that both Indonesian ambient noise standards and World Bank noise guidelines are met. Mitigation measures include silencers for the air intake system and steam escape from boiler safety valves. Turbines will be provided with acoustic enclosures. Equipment with large capacity drives like compressors and cooling water pumps will be located in enclosed building. Although the selected site is away from the major residential area, there are some houses in the vicinity of the site boundary. Indorama plans to have a 10 m wide greenbelt to capture any fugitive dust, attenuate the noise and improve the aesthetics. Noise monitoring at relevant receptors will be conducted regularly to confirm ongoing compliance. - Coal Delivery / Storage Coal will be delivered by barges from Indonesian coal producing islands (Sumatera and / or Kalimantan) to two coal receiving ports in West Java; Port Tanjung Priok, 115 km from the project site, and Port Cirebon, 225 km from the project site. Coal will be delivered by 18-20 ton trucks (about 36 trucks per day, 720 ton per day, maximum 261,100 ton per year). Indorama is of the view that present road infrastructure is suitable for heavy vehicular traffic needed by the project. Coal will be fully covered during transportation to eliminate any dust nuisance. Maximum 21days consumption volume of coal will be stored on site in an enclosure to minimize fugitive dust. - Traffic Impacts Indorama’s current operation at Purwakarta includes 136 trucks per day for raw materials / products transportation, 119 buses per day for employees transportation. The project will add 36 trucks per day for coal delivery, and 6 trucks per day for ash and FGD sludge transportation assuming ash and sludge will be utilized offsite. Existing 255 trucks and buses per day will be increased by 36 trucks per day (6 no. of oil tankers will be reduced) . Indorama will manage both construction vehicles and operational vehicles to ensure that nuisance to the communities be minimized. - GHG Emissions and Energy Efficiency The project is estimated to generate 60MW of electricity and 17.4MWth of steam for textile operation. The electricity only efficiency is designed as 30.4% (HHV), and the overall cogeneration efficiency is designed as 36.2% (HHV). The project is estimated to use 260,200 ton of coal per year considering the worst design coal, emitting 562,600 ton CO2 per year. The project will displace some of Indorama’s current use of HFO and LFO for steam and electricity generation. This displacement will account for reduction of about 90,000 ton CO2 per year. Although the project is small in scale with limited achievable generating efficiency, the CO2 emission performance of the project is estimated to be 1,190 gCO2 per kWh, about the same level of the Indonesian average of 1,140 gCO2 per kWh (national average of larger coal-fired power plants, 2001). - Health and Safety Management Indorama has obtained Occupational Health and Safety Management System (OHSAS 18001) certificate for its textile operation in 1999. Indorama plans to apply the similar management system for the construction and operation of the project. - Community Development Indorama is the single largest employer of the Purwakarta area and is carrying out various community development programs targeting infrastructure development and educational facilities. Ongoing programs include construction and repairs of village roads, mosques, religious schools, elementary schools, distribution of foods to people in need, provision of water supply to nearby communities, and development of local entrepreneurship. In carrying out the project, Indorama plans to continue to identify and support community development needs. - Public Consultation In September 2003, Indorama made a public announcement about the project. Indorama has been conducting consultation with project affected communities and stakeholders through various channels including regular meetings with nearby villages, updating the local administrative authority about the project, and applying and obtaining relevant permits and authorizations. Indorama is of the view that the project is fully supported by the affected communities, relevant government authorities and other stakeholders. Once the UKL and UPL are approved by the Ministry of Environment, Indorama will make a public announcement about its availability as part of their ongoing consultation. In addition, this IFC’s Environmental Review Summary will be disclosed by Indorama locally and through the World Bank website by IFC to supplement the consultation and disclosure about the project.

The following supporting documents provide further details of environmental and/or social issues. - UKL / UPL (Indonesian language): IRPPAUR.pdf (2,710 KB) - UKL/ UPL (English version, summary): IRPPEENG.pdf (1,818 KB) - Supplemental air dispersion modeling report (Indonesian language): IRPPCDR.pdf (3,330 KB) - Supplemental air dispersion modeling report (English version, summary): IRPPFDENG.pdf (22 KB), IRPPDDA.pdf (1,873 KB)

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: (i) the status of implementation of any measures contained in the UKL / UPL and (ii) ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.