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 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 visiting SPV’s manufacturing site and appraising technical and environmental information submitted by the project sponsor. The following potential environment, health and safety impacts of SPV’s existing operations and of the project were analyzed. - Occupational Health and Safety and Environmental Management; - Hazardous materials management; - Emissions to air; - Emissions to water; - Charcoal supply; - Polychlorinated biphenyls (PCBs).

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. - Occupational Health and Safety and Environmental Management SPV has a safety manager and comprehensive safety management procedures. These include measures such as risk analysis, development of safe working procedures, a work permits system, staff training in areas such as basic safety awareness, use of personal protective equipment (PPE), hazard identification, housekeeping, use of MSDSs, and fire fighting, emergency response and first aid. Every accident and dangerous occurrence is investigated to identify what happened, the causes and action necessary to prevent repetition. SPV maintains accident frequency and severity statistics: it maintains that it has a better safety record than its EU parent. Accident frequency is satisfactorily low when compared with similar industries such as paper making. Despite this background, SPV in 2003 undertook a comprehensive risk analysis and compiled a corrective action plan which will be fully implemented by the end of 2004. At the completion of this process, SPV believes that its safety management procedures will be capable of certification to OHSAS 18001 and will seek this or equivalent certification. SPV has a vice-president with responsibility for environmental matters. The most significant environmental issues are known and impacts are monitored regularly. SPV has demonstrated trends of improved environmental performance over a number of years, for example in specific consumption of energy and water. - Hazardous materials management SPV makes special provision for the safe management of hazardous material (hazmat) such as acids, alkalis and carbon disulfide (CS2), and its safety management practices described above, together with special hazmat precautions meet IFC’s requirements for a Hazardous Materials Management Plan and a Hazardous Materials Risk Management Plan as required by IFC’s Hazardous Materials Management Guidelines. SPV assumes responsibility for these chemicals at its gate. Vehicles carrying these chemicals are transported to designated parking and unloading areas, and unloading is supervised and logged by trained members of staff who are provide continuous cover of the area. All hazmat storage areas, with the exception of the “strong lye” tanks which will be bunded, have secondary containment. The secondary containment around the CS2 tanks contains water, so that any CS2 which should leak would not be in contact with air. This area, and the acid area have leak detection systems. An emergency response plan has been developed which included means to contact the surrounding village in the event of a serious event, and a joint response to fire has been agreed with surrounding manufacturing sites. The function and environmental and safety issues associated with each component of the plant are assessed using a Reliability Centered Management system. The mechanical integrity of the plant is maintained through regular inspections and test such as of pipe thickness. - Emissions to air At the conclusion of the project, emissions to air will occur as fugitive emissions from the manufacturing processes, as flue gas emissions from the power boilers and as exhaust gases discharged by the waste gas recovery (WSA) plant. SPV’s uses carbon disulfide (CS2) in one process stage, and this gas and hydrogen sulfide (H2S) are regenerated during a later process stage. CS2 and H2S are removed from the process machinery and manufacturing building by ventilation systems. The concentration of CS2 in this exhaust air depends on its source. The exhaust containing a high concentration of CS2 (rich gas) is directed to a condenser from which CS2 is recovered for reuse in the process. The more dilute exhaust stream (lean gas) is sent to the WSA plant where its sulfur content is converted to sulfuric acid which is used in SPV’s process. Aggregate CS2 recovery in the condenser and WSA plant exceeds 81% which is considered a good figure for the industry. CS2 emissions are not currently recovered from the CS2 manufacturing furnaces. This gas will be recovered and directed to the WSA plant after manufacturing plant capacity increase. Emissions of particulates, sulfur dioxide and nitrogen oxides from the WSA plant have been measured and found to be within IFC and Indonesian requirements. SPV has recently upgraded the WSA plant and is confident that it will remain within these discharge limits even with the planned capacity increase. SPV burns high calorific value, low sulfur coal, into which is mixed waste water treatment plant (WWTP) sludge, in fluidized bed boilers, the stacks of which are equipped with electrostatic precipitators. Emissions of particulates, sulfur dioxide and nitrogen oxides from these boilers have been measured and found to be within IFC and Indonesian requirements. The new power boiler to be installed as part of the project will use similar combustion and pollution abatement technology as the existing boilers, hence similar levels of discharge and continued compliance with IFC and Indonesian standards is expected. New steam-turbine based power generation will replace diesel generators currently used by SPV. Observation shows that these diesels’ exhausts are smoky, hence reduced emissions to air are expected from the additional power generation, but data to quantify this effect is not available. - Emissions to water Process effluent arising from SPV’s operations is directed to a WWTP and after treatment to the river. Effluent quality has been measured and found to be within IFC and Indonesian standards. However, in anticipation of stricter local standards, SPV has increased the effective volume and hence effluent retention time in the WWTP by removing accumulated sludge and has contingency plans to add additional treatment chambers should these be necessary. It is therefore anticipated that effluent quality will continue to meet IFC and Indonesian requirements. SPV also has storm water discharges to river, through which it also discharges clean, once-through cooling water. SPV will ensure that no other substances are discharged via storm water drains. - Charcoal supply SPV uses charcoal as raw material in manufacture of CS2. The company has recently identified suppliers of charcoal briquettes which are manufactured from sawdust which arises as sawmill waste. This supply practice will continue, reducing pressure on alternative charcoal supplies and providing a use for this wood waste. - Polychlorinated biphenyls (PCBs). SPV continues to use seven transformers, dating from 1991, which are known to contain PCBs in transformer oil. The transformers were inspected. All but one has a label warning of the presence of the PCBs. The missing label will be added. All transformers are housed in either internal switch rooms or external roofed and fenced transformer compounds, though these were not locked. They appeared to be in good physical condition and showed no evidence of leaks. Additional secondary containment will be constructed around one transformer, and drains from other secondary containment systems will be blocked. SPV will continue to monitor the condition of the transformers and if a leak should be detected the transformer will be taken out of service and handled according to the requirements of IFC’s Environmental, Health and Safety Guidelines for PCBs.

This ERS contains the full environmental and social documentation prepared for the project.

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 ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.