25472 - La Confluencia

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Environmental & Social Review Summary

Project Number

25472

Company Name

Hidroelectrica La Confluencia S.A.

Date ESRS Disclosed

Aug 8, 2007

Country

Chile

Region

Latin America and the Caribbean

Last Updated Date

Sep 11, 2024

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Oct 4, 2007
Signed : Oct 23, 2007
Invested : Dec 29, 2008

Sector

Large Hydro - Renewable Energy Generation

Industry

Infrastructure

Department

Regional Industry INF LAC & EUR

Project Description

The project consists of the development, construction (approximately 3 years), and operation of a 158 MW run-of-river hydro power plant to be located on the Tinguiririca, Portillo and Azufre Rivers in the VI Region of Chile. The project area is located in the foothills of the Andes Mountains, approximately 75 km southeast of the city of San Fernando. La Confluencia is upstream of the La Higuera Project (IFC#21315); the two projects are designed to operate in cascade, and both projects can operate independently in the event of closure of either plant. The project sponsors for the Tinguiririca Joint Venture are Pacific Hydro Pty Ltd., through its 100% subsidiary, Pacific Hydro Chile S.A., and Statkraft Norfund Power Invest AS, through its 100% subsidiary SN Power Holding Chile Pte. Limited.

The project combines water from the Tinguiririca and the Portillo Rivers and their tributaries. The Portillo branch consists of a low diversion weir, open canals and an 11 km tunnel. The Portillo branch tunnel also collects waters of Azufre, Los Humos and Riquelme Rivers. The Tinguiririca branch consists of a low diversion weir, an off-river regulation pondage of 1.2 million m3 live storage, and a 9.3 km long tunnel. The Tinguiririca branch tunnel also collects waters from El Ciruelo and La Gloria streams. The Tinguiririca and Portillo branch tunnels terminate at a concrete lined vertical shaft dropping to the above ground La Confluencia powerhouse via a concrete and steel lined high pressure tunnel. This water will then be discharged directly into the conveyance system for La Higuera for additional power generation. An 18 km transmission line will connect the project to the Tinguiririca Substation at La Higuera.

Several assets of the two projects will be shared, and governed by a Shared Services Agreement:

- Back-up Plant:

The project will utilize La Higuera’s 60 MW Colmito gas/diesel back-up plant (Colmito), which is currently being constructed in V Region under an Engineering, Procurement, and Construction (EPC) contract. It is expected to be completed in 2008.
- La Higuera Transmission Line:

The project will utilize the 38 km transmission line that will connect the La Higuera project to the grid. The transmission line is being developed for, and will be owned by, the La Higuera project.

- Roads:

The project will utilize existing private and public roads used for La Higuera project’s construction to access the site. In addition, permanent and temporary construction roads will be created specifically for the works within the site boundaries.

- Tinguiririca Substation:

The project will connect to and use the substation currently being built for La Higuera.

- Pondage:

La Confluencia will own an off-river regulation pondage of 1.2 million m3 live storage, to be shared with the La Higuera project.

- La Higuera headworks and regulation pondage:

The project will discharge flow from the project powerhouse into the La Higuera headworks (re-regulation pondage and pressure culvert).

The project is expected to sell about 50-55% of its energy production under a power sales agreement with Chilectra, the largest distribution company in Chile. The balance of the project’s energy will be sold in the spot market. Being a run-of-river hydropower plant, the project will generate power at a very low cost and will be among the first power plants in the system to be dispatched. As the project’s water inflows are primarily determined by snow melting, La Confluencia’s hydrology is uniquely different from that of the system’s rain-fed hydropower projects. During the dry season, La Confluencia will be supplied by snow melting, and during the wet season from rainfall. Hence, it is expected that La Confluencia will be available to dispatch at full load during the dry season, when the hydrology in the system is below average and the cost of generation tends to be higher.

Overview of IFC's Scope of Review

IFC invested in the 155 MW La Higuera hydroelectric project in Chile’s VI Region in October 2005. La Higuera, now under construction, is being developed by the Tinguiririca Joint Venture (the company) and is the first of two phases of hydroelectric development planned for this location; the second being the current project, La Confluencia. An Environmental and Social Impact Assessment (ESIA) for both La Higuera and La Confluencia was prepared by the company and approved by the Chilean environmental agency CONAMA (Comisión Nacional del Medio Ambiente) in August 2004. The ESIA was reviewed and disclosed by IFC in December 2004. The company also completed a cumulative impacts analysis of the Rio Tinguiririca basin as part of IFC’s investment in La Higuera.

The company consulted with CONAMA regarding the changes to La Confluencia since 2004, and was directed to prepare a Declaración de Impacto Ambiental (DIA) given the relatively modest changes that have occurred. The company submitted the DIA in October 2006 to the Chilean environmental agency CONAMA with updated analysis to reflect the evolution of La Confluencia since 2004, and have also submitted three Adenda in response to agency reviews (January 2007, March 2007, July 2007). The La Confluencia DIA was approved by COREMA (Comisión Regional del Medio Ambiente) on July 24, 2007.

IFC reviewed La Confluencia against IFC’s Sustainability Policy and Performance Standards. IFC social, environmental, and technical staff visited the project site in December 2006 as part of a supervision visit for La Higuera and an appraisal visit for La Confluencia. The team met with the company’s construction, general, environmental, and human resources managers, the Lenders’ independent monitors, the Regional Director of CONAMA VI Region, and the provincial governor.

Staff reviewed the DIA and Adenda for La Confluencia, progress reporting by the company for La Higuera, and quarterly reports on the technical, social, and environmental performance of the La Higuera project prepared for the Lenders by an independent consulting firm.

E & S Project Categorization and Applicable Standard

Performance Standards (PS) that are applicable for this project include:

- PS1: Social and Environmental Assessment and Management System;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety and Security;
- PS5: Land Acquisition and Involuntary Resettlement;
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management; and
- PS8: Cultural Heritage.

PS7: Indigenous Peoples does not apply as none are present within the project area of influence.

Development of the hydroelectric potential of the Rio Tinguiririca will be realized by the implementation of two run-of-river projects – La Higuera and La Confluencia. The ESIA for the combined project was approved in 2004 and reviewed and accepted by IFC. The company also completed a cumulative impacts analysis of the Rio Tinguiririca. La Higuera, now under construction, was categorized as A by IFC at appraisal in 2004.

La Confluencia is a planned second project in the same area of influence and by the same company as La Higuera. IFC''s review identified the following potential environmental, social, health and safety issues:

- social and environmental management systems;
- labor and working conditions;
- impacts of river diversion;
- liquid and solid wastes, including tunnel spoil disposal;
- vulnerability of the project facilities to natural hazards and dam safety;
- land acquisition and economic displacement;
- impacts on tourism and recreational activities;
- local employment and in-migration;
- construction of access roads and induced impacts of such roads;
- community relations and benefits; and
- cultural property.

As noted above, the company consulted with the Chilean environmental regulator regarding the changes to La Confluencia since 2004, and was directed to prepare a DIA, given the relatively modest changes that have occurred through evolution of the project. Based on review of the DIA and addenda and the site visit, the project has been categorized as B.

Environmental and Social Mitigation Measures

- PS1: Social and Environmental Assessment and Management Systems

The organization and capacity of the Tinguiririca Joint Venture have evolved with the development of the two projects in the Rio Tinguiririca basin. Overall management includes the company’s construction, technical, environmental, health and safety, human resources, and community relations managers. Separate and parallel organizations have been formed for implementation of the two projects and for monitoring and supervision of the respective EPC contractors. Necessary procedures are in place and requirements are extended to the EPC contractors. Tinguiririca Joint Venture coordinated with the CONAMA and Lenders’ independent monitors.

- PS2: Labor and Working Conditions

Under the overall management of the Tinguiririca Joint Venture, La Confluencia and La Higuera will share a number of staff positions in order to strengthen the assessment and management of risk, as well as contract management. The two projects combined are likely to have up to 50 direct company employees during the construction period. During operation, each company is likely to employ about 10 persons. According to the DIA, La Confluencia will generate approximately 700 jobs at the peak of the construction period. The average number of workers to be employed by the EPC contractor during the approximately 3 years of construction is expected to be about 300. These numbers are similar to those for La Higuera; due to staggered construction schedules many of the staff will likely transfer from La Higuera to La Confluencia over time.

A Human Resources Manager from Pacific Hydro has been seconded to the Tinguiririca Joint Venture, and the company is developing a Human Resources Policy, based on that of Pacific Hydro. The policy will take into account the requirements of Chilean legislation and Performance Standard 2, and will include procedures in the following areas: recruitment and selection of employees, health and safety training, performance management, and grievance redress. As has been the case with La Higuera, La Confluencia will require the EPC contractor to hire at least 30% of the workforce locally, mainly from the nearby community of Puente Negro and the town of San Fernando. The construction of La Higuera is currently sourcing 50% of its employees from the VI Region, and more than 30% from the local area. La Confluencia would add significantly to this amount and further boost economic stimulus in the local area and VI Region.

The protection offered to workers by the Chilean legal framework is consistent with PS2. Chile has ratified the main ILO Conventions on trade union rights (Conventions No. 87 and No. 98), forced labor (Conventions No. 29 and 105), child labor (Conventions 138 and 182) and discrimination (Convention No. 100 and No. 111). National law offers protection in each of these areas. Chile’s Labor Code stipulates that the employer is obligated to take all measures necessary to effectively protect the lives and health of workers, maintain adequate safety and health conditions, and provide the necessary tools to prevent occupational accidents and diseases.

La Confluencia will require its construction contractors to comply with all relevant requirements of Chilean legislation (including laws and regulations on acceptable conditions of work, monthly minimum income and maximum permissible workweek) and IFC’s Performance Standard 2. Construction and other contracts will specify occupational health and safety commitments to be observed by the contractors and subcontractors, as well as monitoring responsibilities.

- PS3: Pollution Prevention and Abatement

La Confluencia will have both surface and underground construction, and environmental management issues will be similar to those of La Higuera. The La Confluencia EPC contractor will be required to have appropriate plans and capacity in place for liquid and solid waste management, traffic management, fire protection, implementation of measures for protected species and native forest areas, and other programs agreed with Chilean regulators. Tinguiririca Joint Venture will monitor the performance of the EPC contractor and ensure coordination with the work for La Higuera.

The project will also have a positive environmental impact through displacement of thermal generation. It is estimated that approximately 328,000 tons of CO2 emissions would be avoided each year due to the project.

- PS4: Community Health, Safety and Security

With relatively poor local infrastructure and employment opportunities available in the region, the project will provide needed employment, economic stimulus and improved infrastructure. The majority of potential impacts to community health, safety and security will occur during the approximately three-year construction period. The EPC contractor will have office, shops, lodging, and production facilities at several locations in a project area that overlaps and intersects with the project area for La Higuera. Although impacts will be reduced due to staggering of construction for the two projects, close coordination will be required between Tinguiririca Joint Venture, the two contractors, local governments, and the affected communities. Tinguiririca Joint Venture is engaging additional internal and external staff to manage and coordinate community relations and community safety. A key issue will be traffic management in local communities as well as on the public I-45 road, which was upgraded as part of La Higuera. Tinguiririca Joint Venture will coordinate with the EPC contractor on security measures during construction; these are expected to parallel those that have been successfully used for La Higuera.

Day-to-day effects on communities will be minimal during operation of the project. La Confluencia and La Higuera are expected to share much of the Tinguiririca Joint Venture operational staff, who will live in local communities and San Fernando. Traffic types and volumes will be light except during periodic plant maintenance. Plant operational times and the resulting variations in river levels will be relatively predictable and will be communicated to downstream residents. The project stores only small volumes of water in surface impoundments, which have been designed for the active seismicity of the area. Communities will be consulted in the development of the plant’s emergency plans. Only small properties will be off limits to the public during plant operation.

- PS5: Land Acquisition and Involuntary Resettlement

Land required for the La Confluencia project site is privately owned and consists mostly of fragments of large parcels used mainly for livestock grazing. The land will be purchased or leased and, in some cases, La Confluencia will obtain easements or rights of way. Most of the owners who will grant land rights to La Confluencia have already completed land transactions with La Higuera. Land acquisition for La Confluencia will not affect any dwellings or other types of occupied structures.

In addition to the project site, La Confluencia will acquire the right of way for 18 km long transmission line, which will connect with the 38 km long transmission line planned as part of La Higuera and, through this line, with Chile’s central grid at San Fernando. La Confluencia will also build low voltage transmission lines (between 13.2 and 22 kV); however, these lines will not require right of way acquisition, since they run parallel to the access road (I-45) and an existing rural road (the Adriazola road).

La Confluencia will follow the Land Acquisition Procedure (Procedimiento de adquisición de terrenos) that was prepared for IFC as part of the loan for La Higuera. According to this procedure, land will be acquired through negotiations with the land owners or through expropriation or imposition of easements, if the negotiations fail. Compulsory acquisition can take place following procedures specified in Chile''s Electricity Law, however, La Confluencia expects that it can negotiate land transactions (purchases, leases and right of way acquisition) for all the plant facilities, and that compulsory methods will not be necessary.

There is some use of the Rio Tinguiririca by both informal and organized rafting and kayaking. Use of the river for water sports takes place mainly in summer, when river flows are highest, and occurs downstream of the La Higuera powerhouse. Sport fishing in the Rio Tinguiririca (and in the Rio Clarillo) is also focused in the reach below the La Higuera powerhouse. As La Confluencia will be located upstream of La Higuera and overall flow in the Rio Tinguiririca will remain the same, river recreation is not expected to be affected by the project. Other recreation and tourist activities occur well upstream and are accessed by road I-45 which will remain open during construction.

- PS6: Biodiversity Conservation and Sustainable Natural Resource Management

The project will be located within the area of influence assessed in the 2004 ESIA. Modifications to the project have been addressed in subsequent DIAs and Adendas. Ecological flows for the both phases have been negotiated with CONAMA. Transfers of water will occur only short distances upstream from stream confluences and the effects of inter-basin transfers will be minimal. A Forest Management Plan and a Fire Prevention Manual have been negotiated as part of CONAMA''s review. Baseline and subsequent surveys for the project have delineated the habitat of the protected bird species (Tricahue Parrot), and project designs and construction procedures have been changed to mitigate potential impacts.

- PS8: Cultural Heritage

The Rio Azufre basin was the historic location of small mining operations and various ruins are present. There are also pre-historic sites at higher elevations nearby to the project. During May to September 2006, a comprehensive archaeological survey was carried out in all areas that could be affected by the construction of La Confluencia. Two sites with archaeological interests were identified. La Confluencia has committed to protect these sites in the DIA. The two sites will be fenced and appropriate signs will be posted.

Before any construction activity, La Confluencia will implement a protocol, led by an archaeologist, to ensure that cultural property is not affected. In case of chance finds, construction activities will be suspended until the authorities have been notified and adequate protections have been put in place. La Confluencia will also adhere to the procedures specified in the Cultural and Archeological Property Management Plan, prepared as part of the ESIA for the overall development.

Stakeholder Engagement

Year-round population in the La Confluencia project site area is limited to a few households and a small monastery. There are also seasonal properties that are accessed via the site area. The closest established settlement (population 600) is Puente Negro, about 35 km west of La Confluencia project site. The closest town with services is San Fernando (population 70,000), located about 55 km west of La Confluencia project site.

CONAMA conducted four public meetings for the “Proyecto Hidroeléctrico La Higuera”, comprising La Higuera and La Confluencia projects. Two meetings took place in San Fernando and Puente Negro in 2002, and two in the same locations in 2004. The various concerns raised at the meetings, as well as the responses of the company, have been documented in three adenda to the Environmental Impact Assessment (May 2004, June 2004, July 2004). IFC disclosed the EIA and Adenda as well as the company’s land acquisition & resettlement procedures and the cumulative effects assessment on December 21, 2004. The overall project was approved in Chile on August 31, 2004.

Environmental documentation is available at the following locations:

- Oficinas CONAMA, Región Metropolitana, Teatinos 254, Santiago Centro, Chile
- Oficinas COREMA, VI Región, Rancagua, Hermano Claudio 364, Rancagua, Chile
- Oficinas Municipalidad, San Fernando, Carampange 845, San Fernando, Chile

Since 2004, the company has implemented a community engagement program (Plan de Participación Ciudadana) and has a full-time Community Liaison Officer on staff to assist with communications and with implementing community projects. The construction contractor for La Higuera has also implemented activities to support local communities and respond to their concerns, but these activities have not been coordinated with those of the company. Going forward, the company will implement a joint community engagement program in coordination with the construction contractors.

The company has conducted numerous meetings with affected people and local communities throughout the recent preparation of the DIA and Adenda. IFC staff observed two such meetings during the appraisal trip in December 2006 and concluded that the company enjoys good relations with them.

Documents related to La Confluencia can be found on the CONAMA website at the following location:

http://www.e-seia.cl/expediente/ficha/publica/documentos.php?id_expediente=1763812&idExpediente=1763812

For additional information on La Confluencia, please contact:

Mr. Claudio Montes Dessy, General Manager
Tinguiririca Joint Venture
Av. Isidora Goyenechea 3520, Piso 10
Las Condes, Santiago, Chile

Telephone: 56-2-519-4300
Website: www.hlh.cl

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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