26529 - PNOC-EDC Loan

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Environmental & Social Review Summary

Project Number

26529

Company Name

ENERGY DEVELOPMENT CORPORATION

Date ESRS Disclosed

Jun 3, 2008

Country

Philippines

Region

East Asia and the Pacific

Last Updated Date

Jun 18, 2026

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jul 3, 2008
Signed : Nov 25, 2008
Invested : Jan 5, 2009

Sector

Geothernal - Renewable Energy Generation

Industry

Infrastructure

Department

Gbl Infrastructure & Natural Resources

Project Description

PNOC-EDC is an integrated geothermal steam and electric power producer with its core activities being the exploration, development, and production of geothermal energy. The company has five existing geothermal production fields: Bacon-Manito Geothermal Production Field (150MW), Leyte Geothermal Production Field (701MW), Southern Negros Geothermal Production Field (192.5MW), Mindanao Geothermal Production Field (106MW), Northern Negros Geothermal Production Field (49.4MW), totaling 1,199 MW, which is over 60% of the country’s total installed geothermal capacity of 1,905MW. The company is an existing IFC client and is seeking financing to support their medium term capital expenditure program. The proposed IFC investment will be a $100 million A loan and potentially a $100 million B loan. The proceeds of the loans will be used to partially finance the company’s medium term capital expenditure program.

Overview of IFC's Scope of Review

This is an IFC’s second investment in the PNOC Energy Development Corporation (PNOC EDC or the company). The previous investment was made in December 2006 (Project Number 25389). IFC’s review for this investment consisted of a desk review of the updated information on environmental and social assessment and management systems of the company. Documents reviewed include:

- the revised Corporate Environmental Policy and the Environmental Management System Manual approved by the company on August 21, 2007
- HESS (Health, Environment, Safety & Security) Reports dated February 19, 2008 and March 25, 2008
- examples of the quarterly Self- Monitoring Reports (SMRs) submitted by the company’s geothermal field sites to the Philippine Department of Environment and Natural Resources – Environmental management Bureau Regional Offices
- examples of Environmental Compliance Certificates (ECCs) secured in 2007

E & S Project Categorization and Applicable Standard

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

Considering the nature of the corporate investment to partially support the company’s medium term capital expenditure program, which is not targeted to any specific geothermal production field development projects, the other Performance Standards (PS5 – Land Acquisition and Involuntary Resettlement, PS6 – Biodiversity Conservation and Sustainable Natural Resource Management,
PS7 – Indigenous Peoples, and PS8 – Cultural Heritage) are not directly applicable to this investment.

Notwithstanding, a condition of IFC’s repeat investment in the company will be that any and all activities undertaken by PNOC-EDC shall assess and manage all relevant social and environmental risks and impacts associated with each of these additional Performance Standards in the course of implementing specific geothermal field development projects.

The project will help the company to continue its transition to being a leading global large-scale clean renewable energy producer. The investment will partially support the company’s medium term capital expenditure program, which may consist of rehabilitation or expansion of existing geothermal production fields or development of new geothermal production field projects. IFC determined that this corporate investment project is a Category B project with potentially limited environmental or social impacts due to the following reasons:

- IFC’s investment is not targeted to any specific geothermal production field development projects;
- Use of geothermal resources, if carefully designed and maintained, is inherently more environmentally friendly than use of conventional fossil fuels or large hydro projects; and
- The company’s environmental and social assessment and management system is functioning well to operate the existing facilities effectively and to develop new projects in a manner that is consistent with IFC Performance Standards.

Environmental and Social Mitigation Measures

Considering the nature of the corporate investment project in a renewable energy company, the key issues reviewed by IFC are the company’s E&S assessment and management systems to manage both existing operations and development of new projects in accordance with IFC Performance Standards on Social and Environmental Sustainability. Detailed appraisal findings of the previous investment #25389 can be found at PNOC-EDC, Environmental & Social Review Summary, disclosed on October 30, 2006:

IFC’s appraisal has confirmed that the company is managing E&S performance of existing operations effectively and addressing potential E&S impacts of new development projects in a manner that is consistent with IFC’s Performance Standards. Since IFC’s investment is to partially support the company’s capital expenditure without targeting to any specific individual development projects, IFC will agree with the company on the overall monitoring and reporting framework of the company’s E&S performance including that of individual new development projects, to confirm ongoing compliance with the IFC’s Performance Standards. Key areas reviewed are summarized below.

PS1 – SOCIAL AND ENVIRONMENTAL ASSESSMENT AND MANAGEMENT SYSTEMS:

Environmental Management System:

The company has an established environmental and social management organization, headed by Vice President, Environment & External Affairs, and supported by Environmental Management Department, Community Partnerships Department, and Public Relations Department. In August 2007, the PNOC EDC Board approved the revised Corporate Environmental Policy and the Environmental Management System (EMS) Manual. This action was in line with its plan to be accredited under ISO 14001 by 2009. The company also established the Health, Environment, Safety and Security (HESS) Committee in January 2008 to strengthen the company’s mandate to conduct the integrated assessment, planning, management and monitoring of the health, environment, safety and security concerns of the company inclusive of the impacts of the company’s operation to the employees and the community. The company will formally adopt all of IFC’s Performance Standards as part of the legal and other requirements in the Corporate Policy and EMS to ensure that the PSs will be taken into account for all capital expenditure activities.

Environmental Audits:

Environmental audits are being conducted by the Multi-Sectoral Monitoring Team (MSMT) at all the existing geothermal production fields. The MSMTs are represented by DENR (Department of Environment and Natural Resources), Local Government Units (LGUs), local NGOs, concerned government agencies and the proponents (PNOC-EDC and power plant operators).

Environmental Impact Assessment:

The Philippines has detailed environmental impact assessment requirements by PD 1586 (Philippine Environmental Impact Assessment Law) and DAO 2003-30 (Latest Implementing Rules and Regulations of PD 1586). Following preparation of Environmental Impact Assessment (EIS) Report or Initial Environmental Examination (IEE) Report, stakeholder consultation, and information dissemination, the company needs to secure relevant environmental permits, including the major one called Environmental Compliance Certificate (ECC) from DENR. Hydrogen Sulfide Dispersion Modeling is conducted as a standard EIA tool for all of its geothermal projects. Where indigenous peoples are affected, the company needs to follow the requirements of the Philippine Indigenous Peoples rights Act (IPRA) of 1997. The practice by the company generally satisfies the requirements of IFC Performance Standards.

Depending on the location of future geothermal production fields, development of new projects may need to address impacts on natural habitats / indigenous peoples. Examples include:

- Mindanao 3 Project (50MW expansion) being developed within the existing Mt Apo geothermal reservation which is embraced within the ancestral domain of Manobo (tribal people), and
- Northern Negros Geothermal Project (49 MW) of which use of buffer zone next to the Mr. Kanlaon Natural Park is attracting stakeholders’ attention.

On the Mindanao 3 Project, the company conducted extensive assessment and consultations with indigenous peoples prior to their obtaining the Environmental Compliance Certificate in July 2007. On the Northern Negros Geothermal Project, the company is responding to local concerns about the use of buffer zone next to the Natural Park. Adopting IFC’s Performance Standards as part of the Company’s Corporate Policy will ensure any impacts on natural habitats and/or indigenous peoples will be properly managed.

Other Environmental and Social Regulations and Standards:

In addition to the above EIA regulations, the company ensures to comply with all the relevant regulations and standards including Philippine Clean Air Act, Noise Control Regulations, Philippine Clean Water Act, Toxic Chemicals and Hazardous and Nuclear Wastes Control Act of 1990, Ecological Solid Waste Management Act of 2000, Philippine Forestry Code, National Integrated Protected Areas System Act of 1992, Comprehensive Agrarian Reform Law of 1998 (Amended), Indigenous Peoples Rights Act of 1997, Philippine Water Code, Fire Code of the Philippines, Sanitation Code of the Philippines, Department of Labor and Employment (DOLE) Occupational Health & Safety Standards (As Amended, 1989), and Revised Geothermal Safety and Health Rules & Regulations & Codes of Practice (1999, DOLE). In addition, the company has indicated its commitment to conducting its business in accordance with IFC’s Performance Standards on Social and Environmental Sustainability (April 30, 2006).

Environmental Monitoring Program:

The company is implementing detailed environmental monitoring programs at existing geothermal production fields. Parameters such as pH, Boron, Chlorine and Heavy Metals (Arsenic, Cadmium, Chromium, Lead, Mercury) are monitored for river water, groundwater and project effluents (brine water, condensate, cooling tower blowdown). Total Suspended Solids is also monitored for river water and Total Dissolved Solids for groundwater and project effluents. For air quality, both noise and Hydrogen Sulfide are monitored at work areas and communities. The pH and Heavy Metals are also monitored for river sediment and project wastes (scales, sludge, waste chemicals, etc.). In addition, specifies inventory and diversity indices are monitored in aquatic biota and terrestrial flora and fauna. The company has presented data explaining that the monitoring results are in compliance with the relevant environmental and occupational standards of the Philippines.

Reporting of Environmental and Social Performance:

In its corporate annual reports, the company reports their sustainability initiatives including environmental and watershed management activities and community enhancement programs. The company’s annual reports have a detailed section on Corporate Social Responsibility summarizing the activities conducted each year. PNOC EDC reports its E&S related activities and concerns to First Gen (the new owner of PNOC EDC) through the weekly management meetings and monthly Board meetings.

PS2: LABOR AND WORKING CONDITIONS:

Human Resources / Retrenchment Management:

The company has undergone a Manpower Reduction Program (MRP) in February 2005 by voluntary separation of 10% of the employee population (or equivalent to 298 personnel). The company is proactively working to reach Collective Bargaining Agreements with labor unions. All these are consistent with IFC Performance Standard 2 on Labor and Working Conditions.

Occupational Health and Safety Performance:

The company is using International Safety Rating Standards to manage heath and safety performance. The safety records of the company shows high performance achieved every year. Detailed occupational health and safety performance of each geothermal production field are recorded and analyzed including Lost Time Accidents of Fatal and Non-Fatal, Number of Days Lost, Frequency Rate, Severity Rate, Physical Injury Cost, Major / Minor / Preventable / Non-Preventable Vehicular / Equipment Accidents etc. The company’s Safety Management Office and Safety Officers of the project sites are conducting seminars, trainings and orientations on various aspects of occupational health and safety and emergency response.

PS3: POLLUTION PREVENTION AND ABATEMENT:

Heavy Metals Mitigation:

Geothermal energy generation entails the tapping of deep geothermal fluids which may naturally contain traces of heavy metals leached from the surrounding rocks. PNOC EDC has instituted measures to address potential environmental impacts arising from this inherent characteristic of geothermal brine such as the installation of Zero Discharge System facilities (i.e. Fluid Collection and Recycling System pipelines, hot water / condensate canals, thermal ponds, and reinjection wells). Cooling tower sludge from geothermal power plant operations may also contain some heavy metals. Sludge containing these heavy metals are treated and disposed at a specially designed disposal facility. Sludges are mixed with an appropriate ratio of cement to immobilize the metals. The cemented sludge is disposed in a cemented cellar as permanent resting place. A monitoring well is drilled downslope of the cellar to check on potential leakages that may occur after emplacement of the treated sludge.

Use of Reinjection:

PNOC EDC does not discharge geothermal brine into rivers. All of the separated brine produced by PNOC EDC is re-injected back into the geothermal reservoir through reinjection wells achieving zero discharge. Reinjection wells typically range from 1,000 to 3,000 meters from the surface. Based on a typical reinjection well casing design, a slotted liner is set at 1,500 meters from the surface, or way below the water table in the project areas. The water table is found at the average depth of 30 to 100 meters from the surface. The upper levels of the reinjection well from 0 to 1,500 meters are either cased by steel, cemented, or both to prevent brine leakage. The company’s reinjection capacity of the existing geothermal production fields exceeds the brine load of each operating field. Effectiveness of these mitigation measures is monitored through regular monitoring of groundwater springs and water wells drilled by communities for drinking and other household use.

Sinking of Land:

PNOC EDC has no historical record of any subsidence or sinking of land issues arising from hot water extraction. The company explains that the precise leveling surveys conducted by the company in the operating geothermal production fields did not show any significant land subsidence that can be attributed to fluid extraction. Such results, according to the company’s analysis, are indicative of the competent or hard nature of the rocks underlying the project sites (mostly volcanic rocks) and the effectiveness of brine injection as a means of maintaining the pressure support within the reservoir, thereby arresting potential ground subsidence.

Greenhouse Gas Emissions:

In 2007, the company’s existing geothermal production fields generated about 6,333 GWh of energy. The Philippine’s oil-fired electricity generation sector emits about 700 gCO2/kWh (average of 2003-2005, the latest 2007 International Energy Agency statistics). Using this performance, the company’s geothermal electricity generation in 2007 is estimated to have replaced 4.4 million ton CO2 per year. The company has signed an Emission Reduction Purchase Agreement for one of the company’s new geothermal projects (Nasulo Geothermal Project) with the World Bank, as trustee of the Netherlands Clean Development Mechanism (CDM) Facility. The Facility is expected to purchase a minimum of 440,000 tons of carbon dioxide between 2008 and 2012.

PS4: COMMUNITY HEALTH, SAFETY AND SECURITY

Emergency Prevention, Preparedness and Response Arrangement:

All the geothermal production fields of PNOC EDC have an Emergency Response Plan (ERP) consisting of the structure, communication and reporting protocols, major guidelines during critical emergencies, emergency procedures for specific incidents, contact numbers of major hospitals, Philippine National Police stations and other agencies involved in the ERP. The plan also has various specific contingency plans including Contingency Plan for Separated Geothermal Brine and Blowdown / Condensate Spills, Fire Emergency Plan, Typhoon Emergency Plan, and Earthquake Emergency Plan.

Security Service:

The company uses security service providers for its industrial / internal security concerns and also coordinates its needs with the national security personnel such as the Armed Forces of the Philippines (AFP) and the Philippines National Police (PNP) to protect vital installations. As a standard company requirement, all guards are oriented on the Code of Ethics and Code of Conduct. In addition, the company provides in-house training supervised by the internal on-site security officer to teach the company policies and law enforcement-related subjects to ensure continual skill development. With regard to AFP / PNP, they have their Standard Operating Procedures in the discharge of their individual duties and functions. On-site security offers of the company are monitoring to ensure that security service arrangements are in compliance with the company’s policy.

Stakeholder Engagement

The Resident Managers of existing geothermal production fields have overall responsibility for community engagement. With the support of Environmental Officers designated by the Environmental Management Department, Resident Managers implement public consultation programs and disseminate information about environmental performance to the local communities and other interested stakeholders. Resident Managers also oversee community development initiatives implemented with the support of Chief Officers designated by the company’s Community Partnerships Department, including efforts to maintain good relations with local communities, identify their most pressing needs, and help them formulate projects.

For all new investment projects, the company carries out Environmental Impact Assessments (EIAs), discloses project information to local communities, consults with them, and obtains the necessary environmental permits in accordance with the Philippine Environmental Impact Assessment Law (PD 1586) and its latest Implementing Rules & Regulations of PD 1586 (DAO 2003-30). Projects that impact indigenous peoples can only proceed with the free and prior informed consent (FPIC) of these peoples, as required by the Indigenous Peoples Rights Act (RA 8371). Environmental and social information about the company’s operations is also disclosed through the company’s website (http://www.energy.com.ph/). Furthermore, in March 2006, the company initiated its first PNOC EDC Stakeholders’ Meeting to inform its stakeholders about the company’s accomplishments, to strengthen mutual trust, and to secure stakeholders’ continued support. Various stakeholders were invited, including host communities, Local Government Units and NGOs. A Report to Stakeholders was published on March 2, 2006.

The company regularly remits royalty payments to the national and local government, which are required by law. For 2006, actual royalty payments to the DOE and Local Government Units (LGUs) amounted to PhP 0.5 billion.

The company established its CSR Policy in June 2004, which states that PNOC EDC is committed to promote social and environmental prosperity through the implementation of a comprehensive, responsive and sustained corporate program on social responsibility (CSR), in partnership with its stakeholders and in keeping with its energy objectives. Various CSR projects are being implemented, including Balik-Kalusugan (Health and Sanitation) project, Balik-Galing (Education) project, Balik-Kabuhayan (Livelihood) project, Balik-Kalikasan (Environment) project, and 2006 Energy Camp project.

When Environmental Impact Assessment Reports or Initial Environmental Examination Reports are prepared for any new development projects, the reports are disclosed locally at each relevant community of the project affected areas. Various environmental and social information about the company’s performance are also disclosed at PNOC EDC’s website: http://www.energy.com.ph/

**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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Overview of IFC's Scope of Review

E & S Project Categorization and Applicable Standard

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Environmental and Social Categorization and Rationale

Environmental and Social Mitigation Measures

Environmental and Social Mitigation Measures

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Stakeholder Engagement

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