26041 - Magat Hydro

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Environmental & Social Review Summary

Project Number

26041

Company Name

SN ABOITIZ POWER-RES, INC.

Date ESRS Disclosed

Jul 30, 2007

Country

Philippines

Region

East Asia and the Pacific

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Sep 6, 2007
Signed : Sep 28, 2007
Invested : Oct 22, 2007

Sector

Large Hydro - Renewable Energy Generation

Industry

Infrastructure

Department

Regional Industry - INF Asia & Pac

Project Description

Magat dam was completed in 1983 as part of the World Bank financed Magat River Multipurpose Project (MRMP) in northern Luzon, about 350 km north of Manila. MRMP’s primary objective was to expand the existing Magat River Irrigation System (MARIS) to triple rice production in the Cagayan River basin in an effort to attain the country’s self-sufficiency in staple food supply. The dam is about 3,150 m long and is of rock fill construction. It was constructed as a multi-purpose project, for both irrigation and electricity generation. Currently about 85,000 ha of land is irrigated, and irrigation daily requirements (IDR) are discharged on a priority basis.

Irrigation activities are conducted by the National Irrigation Authority (NIA), and the 117 km2 reservoir, dam, and intake gates for the Magat hydroelectric plant are owned, operated and maintained by NIA. NIA is also responsible for management of the watershed upstream of the dam. The four-unit powerhouse has a rated capacity of 360 MW with a water head of 81 m. Until privatization, the hydroelectric facilities were owned and operated by the National Power Corporation (NPC), under agreement with NIA. Water used for electricity generation is regulated by the NIA’s MARIS dam about 5 km downstream, prior to entering into the distribution canal system.

Magat operates as a peaking power plant, and water stored in the reservoir is equivalent to about 2 months of typical electricity generation. Inflow and outflow follow the seasonal patterns of rainfall in the country (rainy season from June to October and dry season from November to May), and the corresponding irrigation schedules. The reservoir experiences significant sedimentation, the rate of which has increased following the Luzon earthquake in 1990 as well as from deforestation in the watershed. However, a recent survey done by NIA showed the rate of sedimentation has slowed down significantly.

The Magat hydroelectric facilities were privatized through an international tender process as part of the Electric Power Industry Reform Act (EPIRA) of 2001. The project company, SNAP, took over the hydropower facilities on April 26, 2007. Under the privatization scheme, the dam itself continues to be owned and managed by NIA. The proposed IFC loan will partly finance the privatization. SNAP will put in place new management procedures, implement deferred maintenance, and address technical issues such as sedimentation and operational improvements. SNAP will also suggest, advise, and assist NIA with respect to the operations, repair, and maintenance of the Dam under the Operations and Maintenance Agreement entered into between SNAP and NIA. Magat was originally planned for the possible addition of two generating units, and SNAP is considering the feasibility of such an addition, among others.

Overview of IFC's Scope of Review

The Magat Hydroelectric Power Plant in the Philippines was privatized in April 2007, and is now owned by SN Aboitiz Power Inc. (SNAP), a joint-venture between SN Power Invest (SN Power) of Norway and Aboitiz Equity Venture (AEV) of the Philippines. IFC’s proposed investment will be in parallel with additional financing from Nordic Investment Bank and local banks and will support the privatization.

IFC and NIB jointly engaged SKM Consulting of New Zealand to conduct a technical and environmental review of the existing operations at Magat, assess SNAP’s plans and progress since take over, and work with SNAP to develop an social and environmental Action Plan for Magat to meet IFC’s Performance Standards within a reasonable timetable. SKM conducted visits and interviews at Magat in June 2007, together with investment staff from IFC and NIB.

SKM’s June 2007 draft final report was the primary basis for IFC’s staff review of the project. IFC staff also reviewed other documents, including the World Bank appraisal reports for the Magat River Multipurpose Project, various environmental due diligence reports, and Information Memorandum for the Project.

E & S Project Categorization and Applicable Standard

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security

As explained below, the following PSs are not applicable or minimally relevant:

-- PS 5: Land Acquisition and Involuntary Resettlement - Resettlement and land acquisition for the Magat dam occurred over 25 years ago, and SNAP’s due diligence did not disclose outstanding land ownership or resettlement issues, other than a lack of clarity as to the exact location of the boundary between the two host provinces. No new land acquisition will be required. Previously resettled communities are part of the group of host communities that benefit from the Energy Regulations 1-94 community development scheme and from SNAP’s community fund.

-- PS 6: Biodiversity Conservation and Sustainable Natural Resource Management - While there has been no recent assessment of significant species, communities or habitats in the vicinity, or the impact of operation of the Magat power station on such components of local or regional biodiversity, in this modified environment, the risks to biodiversity from the power station’s operation are considered low. There will be no new impacts to biodiversity resulting from private operation of the facility.
The community fund and the Energy Regulations 1-94 fund are potential mechanisms to protect and enhance biodiversity.

-- PS 7: Indigenous Peoples – The upper Magat watershed includes populations of Indigenous Peoples and resettlement and land acquisition for Magat dam, which occurred approximately 25 years ago, is understood to have affected Indigenous Peoples. Some of the fisherfolk who use the Magat reservoir are also understood to be Indigenous. SNAP’s improvement and operation of the power generation facilities at Magat is not expected to adversely affect Indigenous Peoples; those present will benefit from planned community development activities.

-- PS 8: Cultural Heritage - No issues of cultural heritage have been identified in this project.

IFC''s review of this investment identified the following issues: environmental and social management capacity of the project company, SNAP, and the expected technical support from the sponsors; existing environmental liabilities from past operations, and planned corrective actions; impacts of possible expansion plans (up to two additional units); environmental upgrade plan; dam and reservoir safety; water rights and water use and uses other than irrigation.

None of the identified issues are expected to result in significant impacts, and this is a Category B project according to IFC’s Environment and Social Review Procedure because potential environmental or social impacts attributable to the private project are limited.

Environmental and Social Mitigation Measures

-- PS 1: Social and Environmental Management Systems

Many facets of a social and environmental management system are in place at Magat, but need to be formalized in a comprehensive manner. Environmental improvement projects are being implemented, as identified from the November 2005 Due Diligence report (GHD, 2005) and to comply with environmental laws. SNAP plans for an integrated Safety, Health, Environment and Quality System (SHEQS) once takeover activities are complete.

A possible expansion of the Magat power plant by two units may include expansion of Maris Reservoir and operation of the two new units in pumped storage mode. Social and environmental impacts associated with expansion of the plant will be subject to review under the Philippine EIS process as well as additional review by IFC.

The Magat plant monitors its environmental and social performance and reports on such data as pollution discharges and waste management quarterly for the DENR and reporting the outcomes of community projects under the Energy Regulations 1-94 scheme to the DENR. More comprehensive monitoring and reporting of environmental and social aspects against the company’s policies and objectives will be undertaken over time and included in the SHEQS when implemented.

IFC’s consultant found that SNAP is generally operating in accordance with the requirements of Performance Standard 1, although a formalized system will take some time to put in place. The existing team of staff dedicated to environmental and social management will receive additional assistance or expertise to set up the SHEQS, either from SN Power or from external consultants. SNAP is engaging with the host communities in a number of ways which are detailed below.

-- PS 2: Labor and Working Conditions

Employment policies and practices at Magat are in transition, due to the recent takeover by SNAP, and will be based on experience by the sponsors, SN Power and AEV. The health and safety program has already been expanded, including risk identification and controls, site inductions for staff and visitors, suitable personal protective equipment and signage.

-- PS 3: Pollution Prevention and Abatement

SNAP has programs to reduce the impacts from the four key areas of pollution from the power station: solid waste disposal, hazardous waste disposal and sewage effluent, including the clean up of dumps. SNAP is proposing to construct new housing facilities for operational staff which will include sewage treatment, reticulated water and waste collection. SNAP submits a quarterly self monitoring report of hazardous waste generation and disposal and standby diesel generator operating hours to the DENR Environmental Management Bureau.

SNAP is also assisting to address water pollution in the reservoir as part of the Magat Task Force, a group of agencies addressing water quality impacts from fish farming in the reservoir.

-- PS 4: Community Health, Safety and Security

At Magat, as at most large dams, the key risk to community health, safety and security is flooding and/or sudden water level changes affecting the safety of downstream land owners and river users, fish farmers on the reservoir and land users and occupiers at the edge of the reservoir. It is recognized that these risks and responsibilities lie entirely with NIA and Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA).

In terms of the risk to fish farmers, SNAP is working on issues through the Magat Task Force. The group is used as a forum to discuss issues relating to water level changes and flood warnings. The Task Force coordinates with the police to keep the fish cages back from the dam to avoid safety risks and risks to the operation of the dam.

There is a dam release warning system for downstream users, operated by NIA, and warnings are provided six hours before a release. Communities bordering the river have requested additional time to move stock from the river bed and banks or otherwise prepare for the release. The system needs to be updated, and SNAP will assist NIA and PAGASA on the design and implementation of the system as well as the development of a community wide emergency response plan. PAGASA with assistance from SNAP and the Norwegian government is also investigating a flood forecasting and warning system that would be linked to rainfall and hydrology in the upper areas of the Magat dam watershed. The warning system would be able to provide more time for downstream river users to prepare for a flood event.

A comprehensive dam safety inspection has not been undertaken in recent years; at the request of the Lenders, SNAP will commission a dam safety inspection review.

Stakeholder Engagement

SNAP is actively engaging with the community and developing relationships, and including community needs into decision making for budget spending. Community engagement is occurring through three separate areas, the Magat Task Force, the regulated 1-94 community fund as a percentage of sales and SNAP’s voluntary CSR fund.

-- Magat Task Force:

This group is made up of government institutions, fisheries industry bodies, NIA, SNAP and Luzon State University. Its purpose is to address water quality, fisheries yields, training, security and other issues regarding aquaculture in the reservoir. The Task Force funds a monitoring program for nutrient enrichment and bacteriological contamination from fish farm discharges. The Task Force does not appear to have people from the fish cage operators as part of the membership, although they are consulted by the Task Force.

--Energy Regulations 1-94 Fund:

SNAP are obliged under the Energy Regulations 1-94 to contribute 1 centavo per kilowatt-hour of electricity sales to a fund which can be accessed by the host communities. The purpose and operation of the fund is prescribed in the regulations, is structured for support of electrification projects, development and livelihood projects, and reforestation, watershed management, health and / or environment enhancement projects. Projects are presented by the host communities and pre-approved by the Community Relations Officer at SNAP prior to submission to the DoE. Examples of projects funded by the Magat scheme include garbage trucks, orange plantations, road improvements, cattle raising, a day care building, plant nursery development and communal vans for village transport. SNAP’s Community Relations Officer assists communities to find extra funding from external sources if the 1-94 Fund cannot support their project in its entirety.

-- Corporate Social Responsibility Fund:

SNAP has dedicated an annual fund to support host community projects and support local government initiatives. This amount will be reviewed annually depending on community need and budget availability. Projects funded this year include a field school for fisher folk, sponsorship of a tilapia festival and foundation day festivities, and Magat Reservoir Clean Up Drive. SNAP is currently developing criteria to distribute the funds in future, using the SN Power’s CSR policies and procedures as a starting point. A process has been started to undertake a baseline survey of community needs (by surveying all host communities) and a review of past community projects funded by 1-94 funds. A strategic approach to funding should result.

IFC’s consultant has recommended that SNAP and NIA direct a greater proportion of community funds towards projects that would both benefit the community and begin to address sedimentation and water quality issues, e.g., reforestation, habitat restoration and erosion stability. The consultant also recommended that SNAP’s engagement program be extended to cover communities downstream of the Magat dam and that a grievance mechanism be established. SNAP has agreed to implement these recommendations.

Information about the project and the community engagement programs described above can be obtained from:

SNAP Management
HERCO Center 2nd floor
114 Beavidez St.
Legaspi Village, Makati City 1200
Philippines

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

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.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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Environmental & Social Review Summary

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E & S Project Categorization and Applicable Standard

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Environmental and Social Categorization and Rationale

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Environmental and Social Mitigation Measures

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