26405 - Masinloc Power Partners Co., Ltd

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Environmental & Social Review Summary

Project Number

26405

Company Name

MASINLOC POWER PARTNERS CO. LTD.

Date ESRS Disclosed

Oct 9, 2007

Country

Philippines

Region

East Asia and the Pacific

Last Updated Date

Feb 19, 2017

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Nov 8, 2007
Signed : Feb 15, 2008
Invested : Apr 14, 2008

Sector

Coal - Thermal Power Generation

Industry

Infrastructure

Department

Regional Industry - INF Asia & Pac

Project Description

Masinloc CTPP is located about 250 km northwest of Metro Manila, in the north of Luzon. The site is on a peninsula that extends into the South China Sea. It is bordered on the north and east by agricultural plantations and informal rural communities, and Oyon Bay is immediately south. The plant occupies an area of about 137 ha, including 11 ha on land reclaimed from the sea. The Masinloc plant was designed and commissioned in 1998 as a two-unit, 600 MW plant. It is anticipated that in the future MPPC will undertake an expansion of the plant subject to securing all the permits and consents and economic and environmental viability. There is currently no definite plan for expansion.

The power plant consists of two 300 MW coal-fired thermal power units, providing a total output of 600 MW. Power generated is delivered at the plant’s 230 kV switchyard connected to the transmission system of TRANSCO. The plant utilizes refined coal from Australia, China, Indonesia and occasionally local coal. Coal is received at an offshore jetty, transported onshore via a 1 km conveyor system, and stored in stockpiles with a capacity of 270,000 tons. Crushed coal from the stockpiles is transferred to coal silos, to pulverizers for final grinding, and then to the boilers. Fuel oil is used for start-up and has increasingly been used as supplemental fuel at the plant. Seawater from Oyon Bay is utilized for cooling. Fly ash is collected by electrostatic precipitators (ESP) and bottom ash is collected by the boiler’s bottom hopper, prior to transfer to an onsite ash disposal area. Fly ash has historically been sold to a third party broker for use in cement; this is expected to continue under MPPC.

Overview of IFC's Scope of Review

IFC’s proposed investment will partly finance the privatization of the 600 MW Masinloc Coal-fired Thermal Power Plant (the Masinloc CTPP or MCTPP) in the Philippines and currently owned and operated by National Power Corporation (NPC). Masinloc Power Partners Co. Ltd. (MPPC) was awarded the asset in July 2007 and is currently completing its acquisition plans. MPPC plans to rehabilitate the Masinloc CTPP to improve its operating performance such as plant’s availability and to address certain environmental issues such as excess dust emissions to ensure its environmental compliance. Currently, MPPC is a wholly-owned subsidiary of AES Corporation of the US. However, AES Corporation is expected to introduce a minority partner in the near future.

Masinloc Power Partners engaged ERM-Hong Kong, Limited to conduct a Phase I Environmental Due Diligence review of the existing operations at the plant and to develop a Remedial Action Plan for Masinloc to meet Government of the Philippines (GOP) requirements and IFC’s Performance Standards within a reasonable timetable. MPPC also engaged the Asia Pacific offices of PB Power to conduct a technical condition assessment of the plant to prepare a turnaround plan to assist in planning necessary equipment and procedural upgrades. ERM and PB Power conducted site visits and interviews at Masinloc in September 2007.

ERM and PB Power’s October 2007 reports were the primary basis for IFC’s environmental and social review of the project. IFC staff also reviewed other documents provided by MPPC and developed through IFC’s due diligence. Key items beyond those included in the company’s Remedial Action Plan will be part of an Action Plan to be agreed with IFC (attached).

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
-- PS 6: Biodiversity Conservation and Sustainable Natural Resource Management

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

-- PS 5: Land Acquisition and Involuntary Resettlement - Land acquisition for the project occurred during the early 1990s, and involved agricultural and community areas. Approximately 86 families were resettled at that time. No continuing issues were reported, and no new land acquisition will be required.

-- PS 7: Indigenous Peoples - No Indigenous Peoples as defined in PS 7 are expected to be affected by the project.

-- 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: management systems and Action Plan to ensure compliance with GOP requirements and IFC’s Performance Standards within a reasonable timetable, labor and health and safety practices by the plant operator and subcontractors, control of air emissions and water discharges to GOP and IFC requirements, liability for past environmental contamination, coal supply and handling, ash disposal, emergency preparedness and protection of communities and ecosystems, impacts from potential plant expansions, and community relations.

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 Assessment and Management Systems

MPPC is a special purpose company established for the rehabilitation and operation of the Masinloc CTPP currently operated by NPC. During the current pre-handover phase, management systems are being developed by MPPC’s project implementation team. MPPC will implement social and environmental management activities at takeover and complete a formal environmental management system (EMS) as part of the Remedial Action Plan. All actions will be completed within two years of takeover, with priority items to be undertaken within initial months of MPPC management as detailed below.

MPPC is in the process of putting together a team to facilitate the transition of Masinloc CTPP to an AES business. The transition team is analyzing the various issues at the plant and preparing to correct these on a timely basis. The transition team will also be involved with the training and coaching of the Masinloc team in proper operations, maintenance, safety and environmental requirements of the business.

MCTPP is engaging with the local communities in a number of ways which are detailed below.

>> PS 2: Labor and Working Conditions

As noted, MPPC is a special purpose partnership set up for this project. As such, MPPC will need to build upon existing systems within Masinloc CTPP and adapt the human resources as well as occupational health and safety policies and procedures of AES Corporation to conform to GOP regulations and Performance Standard 2. This task will be part of the formal EMS.

Current plant employees will be transitioned to MPPC; each will have the opportunity to work under a five month contract with MPPC at the time of the sale, and MPPC will have five months to determine which employees MPPC will retain. There are approximately 281 Masinloc employees, 52 full time contractors, and 200 plus other contract staff in the plant. This workforce will be reduced to a lower level once personnel evaluations and job requirements are better defined, and will be conducted in a manner consistent with GOP labor regulations and the retrenchment provisions of IFC’s PS 2. MPPC will give priority to qualified local residents for future hiring.

MCTPP utilizes imported coal from Australia, China, and Indonesia and occasionally local coal. MPPC will establish coal procurement practices to include specific due diligence criteria and coal contract language relating to social or environmental practices by its coal suppliers.

>> PS 3: Pollution Prevention and Abatement

A draft Remedial Action Plan was prepared by MPPC’s environmental consultant, ERM, to address the key issues and actions identified during the review. MPPC’s technical consultant, PB Power, is addressing the feasibility and cost effectiveness of potential remedial solutions. It is anticipated that upon adoption of the Remedial Action Plan and acceptance by IFC, generally satisfactory performance against GOP, as well as IFC’s Performance Standards, can be achieved within a reasonable timeframe. A description of the elements of the Remedial Action Plan follows:

-- Permitting: The plant does not hold all the required valid permits for all its operations. A permit register will be established and the remaining valid permits obtained and maintained as necessary. It is anticipated the permit register can be in place by December 2007.

-- Air Emissions: The plant complies with sulfur dioxide stack emissions requirements by limiting coal sulfur content to 1%. Nitrogen oxides emissions limits are met by controlling boiler combustion. However, the electrostatic precipitators (ESPs) and fly ash conveying system at the plant are not functioning as designed and GOP air emissions standards for particulate matter of 200 mg/Nm3 are not being achieved. An Ash Emission Remediation Plan to meet GOP requirements had previously been agreed between NPC and DENR. MPPC’s consultants evaluated the technical feasibility and cost effectiveness of meeting the more stringent World Bank Guidelines for New Plants of 50 mg/Nm3 for particulate matter, and concluded that full compliance would not be cost effective. Detailed studies are ongoing to determine the particulate emissions level that can be achieved, with the expectation that levels of 150 mg/Nm3 can be met as provided for in the World Bank Rehabilitation of Existing Plants guideline. The agreed level will be specified in the Remedial Action Plan. The earliest that parts can be purchased and installed is April 2008.

The Continuous Emissions Monitoring Systems (CEMS) are also not functioning as designed, which prevents accurate and consistent measurement of stack emissions. This equipment is expected to be repaired by March 2008. Fugitive emissions sources, such as coal conveyors, ash silo hoppers, and coal stockpile sprinklers require repair and ongoing maintenance; this will be completed by April 2008.

-- Wastewater Discharge: The wastewater treatment plant (WWTP) requires replacement of equipment and other maintenance to be properly operational. A full condition survey needs to be undertaken and relevant parts purchased and installed. This equipment will be fully operational by April 2008. Stormwater discharges from the site exceed Philippine effluent discharge standards for oil & grease and chemical oxygen demand (COD). These exceedances are likely the result of waste handling practices at the plant and blockage of stormwater drains by ash. Stormwater drains will be fully operational and protected from contamination sources by May 2008.

-- Material Handling and Storage: Chemical/intermediate oils/waste drums are stored in open areas around the site. Materials and waste storage will be improved with dedicated, labeled, covered and contained storage areas provided. Storage areas will be constructed by April 2008.

-- Waste Management: The process of onsite movement of ash and the collection and offsite use of fly ash is hampered by contractor capacity and outdated procedures, resulting in ash stockpiling, contamination of runoff, and fugitive dust. Either an alternative contractor will be identified by January 2008 that can provide the necessary services or the existing processes will be improved. Existing ash piles around the plant will be cleared by October 2008. Review of the ash disposal area engineering, access routes and drainage is needed, and a re-engineering plan will be completed and implemented by end of December 2008. Domestic solid waste (trash) is currently being dumped in the ash disposal areas. A solid waste management program, including associated segregation, recycling and disposal arrangements, will be completed and implemented by February 2008.

-- Marine Impact: Releases of coal and ash could have entered Masinloc and Oyon Bays through the storm drainage system. A marine ecological assessment study is being planned to assess any environmental damage that has occurred as a result of the operation of the Plant and recommend remedial measures. This planning will be completed by December 2007. The plant’s Oil Spill Contingency Plan requires updating and spill clean up equipment needs to be provided in areas such as the coal handling jetty. This work will be completed by May 2008.

-- Contaminated Groundmass: Inappropriate storage and handling of chemicals and wastes at the plant could have resulted in contaminated soil and groundwater, as well as ecologically sensitive receivers including Oyon Bay. An investigation of soil and groundwater contamination will be conducted to identify the nature and extent of contamination as well as the need for any remedial action. A remediation plan, if required, will be available in June 2008.

-- Environmental Management: Monitoring of the plant’s impacts is a GOP requirement. The audit identified areas where existing management procedures and capabilities could be improved to minimize the risk of non-compliance as well studies required to identify any impacts on the surrounding environment and human health. This EMS would provide the framework for ensuring compliance with applicable regulations going forward. As noted above, the formal EMS will be developed and implemented by February 2008.

>> PS 4: Community Health, Safety and Security

>> PS 6: Biodiversity Conservation and Sustainable Natural Resource Management

The MCTPP plant site is zoned as industrial. Rural residential areas are located north and east of the site and a school is located about 500 m southeast of the site. There is extensive interaction between the plant and the local communities and many local people are employed at the plant on a full or part time basis. Oyon Bay, located immediately south of the site is a fish sanctuary and a protected area which is currently used for fishing activities. Stormwater runoff and treated wastewater from the plant’s wastewater treatment plant are discharged via a drainage network to Oyon Bay. The Lauis River, located 1 km north of the site, is classified by DENR as recreational waters (Class B). Because MCTPP’s operations are currently constrained by a lack of funding, the health of local residents could have been potentially compromised by fugitive dust emissions and discharges of ash and other contaminants that could have been discharged to Oyon Bay. This will be significantly improved following implementation of the Remedial Action Plan. Other than minor remedial works, MPPC does not plan any construction in Oyon Bay or other waters of the South China Sea.

Daily operations of MCTPP do not pose significant safety risks to local communities. Plant-related traffic levels are generally low. Deliveries of coal by ships follow established procedures, limiting risks to fishermen. Implementation of the capital improvements and remedial actions planned by MPPC will increase traffic and demand for temporary worker housing. MPPC will coordinate its construction plans with the local communities. MPPC will also review the plant’s existing security services and procedures for consistency with IFC’s requirements for security personnel under PS 4 and make any required upgrades and adjustments.

Stakeholder Engagement

MPPC has not yet taken over operations of the Masinloc plant, and its engagement with the community has, of necessity, been limited. As part of its environmental and social management system, to be implemented upon takeover, MPPC will establish a formal community engagement program for those aspects of its business where it interfaces with the community. Engagement will be proactive and include a grievance procedure.

MCTPP participates in a variety of community activities and supports economic development as a result of GOP requirements and through Memoranda of Understanding with local government units. As required by the Department of Energy Act of 1992, MCTPP grants financial benefits equivalent to one centavo per kilowatt hour (PhP 0.01/kWh) of total electricity sales to the host region. The benefits are allocated to funds for electrification, for development and livelihood, and for reforestation, watershed management, and health and/or environment enhancement.

For inquiries about the project contact:

Ms. Flora Zhao
Director, Business Development
AES Asia & Middle East
The Enterprise Centre
28F Tower 2, 6766 Ayala Ave. cor.
Paseo de Roxas, Makati City 1226
Philippines

Tel: +63-2-849-3887
Email: Flora.Zhao@AES.com

Client Documentation

File Name	Actions
Masinloc_Action_Plan.pdf

**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.

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