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.
PS5: Land Acquisition and Involuntary Resettlement.
PS6: Biodiversity Conservation and Sustainable Natural Resource Management.
The following PSs are not triggered by La Vegona Project:
PS7: Indigenous Peoples: No indigenous people (IP) or territories are affected by the Project.
PS8: Cultural Heritage: The ESIA reports pre-Columbian archaeological sites in the project’s general area, which are not expected to be directly or indirectly affected by the Project. As part of the construction environmental and social management plans (ESMPs), a Chance Find Procedure aligned with good international practice will be developed.

All the relevant environmental and social aspects have been appropriately treated in the ESIA or in subsequent studies. Since La Vegona is located downstream from El Cajón -an existing large dam and reservoir -, involves a rather small daily regulation reservoir which is sited within a very modified agricultural landscape, and the expected incremental social and environmental impacts and risks are of limited significance, this project has been categorized as a B operation. There are no impacts on critical habitats, no physical resettlement of people, nor the presence of IP or territories, cultural or historical sites or artifacts. The mitigation measures have mostly been identified, and an extensive environmental and social action plan (ESAP) has been agreed with the Company to strengthen mitigation and compensation measures in-line with best practices and IFC’s EHS Performance Standards.

PS1: Social and Environmental Assessment and Management Systems

In 2009 the Company performed an Environmental and Social Impact Assessment (ESIA – Estudio de Impacto Ambiental del Proyecto La Vegona performed by Ambitec) in compliance with local legislation. This study was presented to the Secretaría de Recursos Naturales y Ambiente (SERNA) and approved via Resolution No 1350-2010 in June 23th, 2010 and Environmental License No 081-2010 on July 19th, 2010.

La Vegona has 39-meter-high dam with a width at the crest of 340 meters. The ESIA identified that, besides the typical impacts and risks associated with any new construction and civil works (e.g. air and noise emission, wastewater, solid and hazardous waste generation), the main potential environmental and social impacts are: (a) limited terrestrial and aquatic habitat loss, including modification of ~8 km of natural river from free flowing to small lake, (b) loss of land and vegetation cover of approximately 1.17 km2 (0.51 km2 of existing river bed and 0.66 km2 of land to be flooded) for the reservoir, and additional smaller areas for quarries, borrows, and disposal areas, access roads and auxiliary facilities, and (c) potential increase of erosion processes mainly due to construction activities at construction sites, quarries and access roads. Identified potential socio-economic impacts of the project are associated with (d) the acquisition of a total of 231.687 ha of agricultural land from a total of 17 land owners/families, and any potential economic displacement thereof (PS5), (e) potential increases in water related diseases, and (f) marginal incremental risks associated to dam safety and emergency and community preparedness downstream (PS4). Furthermore, during construction, there are potential impacts associated with (g) punctual / selective dredging in ~1.1 km of riverbed after the tailrace to prevent backwaters, and (h) risks associated with the handling of explosives and hazardous wastes (PS2, PS3).

COHERSA is in-charge of the implementation and enforcement of the ESMPs. As part of the construction contract, COHERSA has included legal language to assure compliance with local environmental and health and safety norms and regulations. The existing ESMPs which are to be further detailed, developed and implemented prior to commencement of construction are: (a) health and safety management plan, (b) pollution prevention and control, including hazardous material and waste management plan, (c) traffic management plan, (d) forest clearing plan, and (e) monitoring and supervision, among others. For the operation period the ESMPs to be further developed include: (h) water quality and aquatic ecology monitoring plan, and (i) watershed management plan including a reforestation program.

As a special purpose Company, COHERSA is in the process of strengthening its organizational structure. However, in the meantime, as members of ELCOSA Group COHERSA has an acting Environmental, Social, Health and Safety (ESHS) Department, consisting of an ESHS Officer and an Environmental Compliance Officer. There is no formal training program yet, but training needs have been identified by COHERSA’s EHS Department. As condition to financing, the Lenders will require a comprehensive training program.

The ESHS department will be responsible to supervise and control contractor’s and sub-contractor’s compliance with the ESMPs. Additionally, both the SERNA and Municipality of Santa Cruz de Yojoa’s Environmental Unit (UMA) will monitor COHERSA’s compliance with the ESHS requirements per the environmental license. The SERNA requires annual ESHS compliance reports, and will visit the project site at least once a year.

As part of the ESAP agreed with the IFC, COHERSA has already (a) generated the main parts of the missing baseline data. For instance, COHERSA updated the socio-economic baseline associated with the existing and projected water-uses from the project site to the community of Santa Rita, located 25 km downstream from La Vegona. In the segments of the river from the new reservoir to Santa Rita, the company identified only two Comayagua River water users: (a) the Community of El Remolino (Yoro), 22 km downstream of La Vegona which has an irrigation system of approximately 5 ha and an average water consumption of less than 250 l/sec, and (b) a water derivation channel at Santa Rita with a 8 m3/s maximum capacity, used for banana plantation. However since La Vegona has no net water consumption and will simply pass-through the regulated releases from El Cajón, the Cumayagua River water flow will remain un-changed for these two users or any other micro-users downstream of the project.

In addition per the agreed ESAP the Company will: (b) install a Community Information and Relationship Centre (CIRC), (c) strengthen the EHS Management Framework (PS1), (d) detail the Environmental Management and Monitoring Plans (PS1/ PS3), (e) adapt the ELCOSA Human Resources (HR) policies and procedures (PS2), (f) prepare the Emergency Preparedness and Response Plan (EPRP) (PS4), and (g) develop a Community Relation and Engagement Program, including a formal third-party Grievance Mechanism.

PS2: Labor and Working Conditions.

COHERSA is a recently created company. At the time of appraisal it did not have HR Department nor specific HR policies and procedures. However it was agreed that COHERSA will use and adapt the policies and procedures from ELCOSA, an affiliate company with similar shareholders. The ELCOSA’s HR policy and procedures are documented in the HR Manual, which provides standard compliance with local labor laws, description of functions/positions and requirements, general benefits, and give guidance on employee’s selection, hiring and promoting procedures. All employees receive a copy of this manual at their first day at work. The HR policies and procedures will include among others: (a) prohibition of any type of child and/or forced labor, (b) the implementation of equal opportunity and non-discriminatory hiring and promotion policies, (c) description and full disclosure of the workers/employees rights and duties, including freedom of association and collective bargain, (d) articulation of preferential hiring to members of the local communities, (e) a non-retaliatory Grievance Mechanism to receive and process any complaints from employees on work related conflicts or issues. Compliance with these policies and procedures will be mandatory to all contractors, suppliers, and sub-contractors.

Construction is expected to last approximately 2.5 years. Total direct workforce at peak of construction is expected to be around 300 fulltime workers. During operation COHERSA’s staff will be 20 people. COHERSA formally agreed with the Municipality of Santa Cruz de Yojoa to use best efforts to identify and hire qualified people in the surrounding communities.

Occupational Health and Safety: COHERSA’s EHS Department is responsible for occupational health and safety, and an occupational health and safety manual (Manual de Seguridad, Salud y Medio Ambiente) has been developed. This Manual includes (a) organizational structure and responsibilities, (b) procedures for identification risks/ hazards associated with the different task, (c) personal protection equipment (PPE), qualification, restriction and training requirements associated with each task, (d) procedures to document and record accidents and incidents, and (e) follow-up and corrective measures. The EHS Officer is in-charge of the development of EHS procedures, maintenance of safety systems, development and implementation of safety management and training programs, and will supervise and assure compliance by the contractors. Some of the most relevant procedures detailed in the Manual, include but are not limited to: (f) training and capability of the workforce, (g) investigation of accidents, (h) housekeeping at construction site, (i) use and function of PPE, (j) rules and safety procedures for traffic and vehicles at the construction site, (k) safety procedures for blasting events, (l) procedures for working at heights and confined spaces, (m) procedures for excavation and excavation support, (n) procedures for scaffolding, (o) prevention of electrical risks, and (p) procedures for welding and cutting torches.

As part of the ESAP, COHERSA agreed to develop an additional procedure for working in and near water (throwing lines, life buoy, do not work alone near water, training on emergency procedures for the staff, etc.), and a series of workshops to raise awareness on water-related and/or communicable diseases (e.g. malaria, dengue, TBC, HIV/AIDS and STDs), covering topics like recognizing infection risks, how to recognize symptoms, what should be done in case of an infection, as well as preventive measures.

PS3: Pollution Prevention and Abatement.

Environmental pollution and control measures associated with the project La Vegona are mostly relevant during the construction period. Potential sources of pollution are those typically associated to the civil works such as (a) air, dust emissions, vibration and noise from earth movements, and the operation of vehicles and heavy equipment, (b) hazardous waste generation, (c) domestic wastewater and solid waste from construction camps, and (d) erosion and sediment runoff from diverse construction activities, including increased traffic / access roads.

Approximately 700,000 m3 of excavated material from the diversion channel and the tail race channel will be generated. The ESIA and the approving license include a waste management plan. In general terms, this plan focuses mainly on implementing waste reduction measures and re-utilization of excavation or dredging materials as much as possible. The disposal of uncontaminated excavation material will be done applying good engineering practice to reduce soil erosion and avoid its eventual sedimentation into surface waters. Solid waste generated during construction and at campsites will be separated, treated when required, and safely disposed in landfills properly authorized for that purpose by the Municipal Environmental Units. Hazardous waste (oil, lubricants, chemicals) will be stored in designated closed tanks and/or areas until they will be delivered to companies specialized in the proper disposal or recycling of those hazardous wastes. Containers have to be available at the workshops for the disposal of used filters, gaskets and other spare parts. All waste accumulated during construction and all demolishment wastes from temporary structures will have to be disposed of properly. As part of the agreed ESAP, the company will present a detail Waste Management Plan, (a) identifying the different sources, characterization / types and quantities of waste, (b) re-use, disposal and/or treatment mechanism, (c) responsibilities, (d) indicators, (e) supervision, and (f) reporting.

The ESIA presents standard pollution prevention and control measures, including use of standard industry equipment and the application of appropriate maintenance practices, noise and dust control mechanism, and water bodies and erosion control measures (e.g good housekeeping, transportation covers, road water sprinkling, engine switching off during parking periods, waste burning prohibition, truck and vehicles maintenance protocols, septic systems, minimum distances to surface waters, minimum of one chemical latrine per each 10 workers, among others). As part of the ESAP, prior to the construction commencement, COHERSA will present detailed pollution prevention, control, and monitoring plans and measures associated to the construction, outlining: (a) expected sources of pollutants including: construction air emission, noise, wastewater and solid and hazardous waste, (b) proposed emission and discharge standards to be applied, (c) pollution control and mitigation measures, (d) spill prevention and emergency response plan, and (e) monitoring and reporting procedures.

During operation, the most relevant source of contamination would be the generations of solid, liquid, and hazardous waste form power-house maintenance, and noise from the operation of the turbines. Similarly, at least one year prior to the commencement of operation, COHERSA must present a detailed pollution prevention and control for maintenance and other operation activities.
GHG: This project will result in an overall reduction of the climate footprint of Honduras energy matrix, since it is providing additional hydroelectric power into the grid. The Honduran’s national grid system consists of approximately 62.1 % of thermal power, 5.1% of renewable power (biomass) and 32.8% of hydro power. The Project is expected to reduce greenhouse gas emission by about 108,900 tons of CO2-eq per year. The forest loss associated with the project will be compensated via the reforestation program, and therefore any resulting loss of carbon sequestration is expected to be marginal and duly compensated.

PS4: Community Health, Safety and Security

To ensure the safety of the population all construction areas (construction site, excavation pits, quarries, dumping sites, waste deposits, etc.) will have restricted access and visible caution signs to avoid accidents with third party and community members. All contractor’s drivers will receive Defensive Driving training, and access road signaling and overall safety will be improved, particularly along stretches located near schools or other locations where either children or crowds may be present. Additionally, to reduce risk further, heavy construction traffic will be avoided during in-and-out school hours.

Approximately, 90 tons of explosives will be used during construction. The use, transportation, and storage of explosives are regulated by the Honduran Ministry of Defense and Public Security and the Department of Mining, and in-line with international standards. The un-authorized use of explosives at site will be strictly prohibited. During blasting events no unauthorized person will be allowed within a safety radius, and a warnings system will be implemented. All other hazardous material will be appropriately stored with standard perimetral spill containment structures.

COHERSA will assure to avoid any negative effect on the health of the population in the Project’s area of influence. Via the CIRC and as an integral part of the Community Engagement and Relation Plan included in the ESAP, the Company will include an awareness/education information booth on prevention and control of water related and transmissible diseases that affect the general Project area, such as malaria, dengue, TBC, HIV/AIDS and other STDs and/or infectious diseases.

Emergency Preparedness and Response: At the time of appraisal, COHERSA had not yet developed an Emergency Preparedness and Response Plan (EPRP) for La Vegona. As this Project will operate within the direct area of influence of El Cajón, it will be inserted within the existing EPRP for the latter. The area downstream from La Vegona is not very densely populated, and as part of the historical awareness and risk management associated with El Cajón, most people in the immediate vicinity of La Vegona, have their houses in higher lands, outside the potential inundation areas.

COPECO (Comisión Permanente de Contingencias) is a state-managed permanent contingency commission responsible of monitoring and managing any dam-integrity related emergencies, risks, and/or incidents. The COPECO has an extensive EPRP for El Cajón. This EPRP defines the different emergency situations, and dictates responses and communication responsibilities, including chain of command with contact information for each emergency type.

As part of the ESAP, La Vegona will prepare an EPRP that will specify the roles of responsible parties when expected flow (operational or emergency) releases threatens downstream life, property, and/or economic activities, including (a) types of emergencies/ contingencies, both natural and man-made (e.g. earthquakes, flooding, hurricanes, extraordinary flows, etc), (b) direct area of influence in case of La Vegona’s extraordinary flows, (c) an early warning system for emergency situations, as well as operational unusual and/or maintenance planned releases, and (d) community / third party communication and emergency identification / evacuation training. La Vegona’s EPRP will also define its strategic insertion within COPECO’s EPRP. Additionally, COHERSA will propose improvements to COPECO’s EPRP in the following areas: (e) clear statements on the responsibility for dam operations decision making and for the related emergency communications; (f) maps outlining inundation levels for various emergency conditions; (g) flood warning system characteristics; and procedures for evacuating threatened areas and (h) mobilizing emergency forces and equipment. COHERSA is expected to become a full partner of the existing monitoring and early warning and emergency response plan.

Security Personnel Requirements: Given the importance of El Cajón to Honduras, it is guarded by the national arm forces. La Vegona is within El Cajón’s area of influence, and therefore access to La Vegona’s project area can only be reached through existing army checkpoints. Additional checkpoints and security will be established at La Vegona site. Access to the construction site will be restricted and visitor permits will be needed. All visitors will get an entrance card, will be provided a safety and emergency induction brief, and will be provided with applicable PPE. Since the project is located in a remote area which is sparsely populated, the interaction of La Vegona’s security personnel as well as the El Cajón’s army contingent with third party or the general population will be limited. Local communities’ access to the river and other natural resources will be un-altered by La Vegona’s operation.

PS5: Land Acquisition and Involuntary Resettlement

The project will affect a total of thirty one (31) properties, own by twenty one (21) individuals.
The reservoir will affect seventeen (17) properties belonging to sixteen (16) owners. All of the negotiations have been managed under friendly terms and in all cases market-based prices have been agreed upon. No issues or legal disputes are foreseen, and the Lenders have been provided with the totality of the land purchase contracts. To assess any significant economic displacement, as part of the agreed ESAP, COHERSA compiled a detailed relation of all the properties affected, presenting evidence that all but one landowner maintained ownership of productive lands of 9 ha or more (ranging from 9-180 ha, with an average of approximately 60 ha). With a portion of the payment received from the purchase, the only landowner that sold the totality of her land (approximately 13 ha) purchased a productive 10-ha property on the locality of her choosing.
The transmission line and new access road required right of way (ROW) easement of a total of 14 properties owned by 9 of the owners also affected by the reservoir, and only 5 additional owners. ROW easement involves very small sections (<0.5 ha) of these properties (ranging from 0.04-3.5 ha, average 1 ha). Easement contracts have also been negotiated in friendly–market-base terms with the totality of the property owners, and imply little to no reduction on their productivity.
There are no temporary agricultural workers in that region, therefore no temporary or tenants economical displacement of workers is expected. Some artisan fishing takes place in the project’s area of influence, but this activity is not expected to be affected and will continue to take place during project construction and operation.

PS6: Biodiversity Conservation and Sustainable Natural Resource Management.

The project is located in a modified habitat. The natural ecosystem dynamic was impacted with the construction of El Cajón, so any potential impact of La Vegona on the aquatic ecology will be marginal and quite limited. Upon IFC’s request, the aquatic and terrestrial ecological baseline was strengthened, and additional biological field surveys were undertaken following IFC’s appraisal visit. These surveys confirmed that there is no endemic nor endangered species in the Project area of influence, and the ecosystem composition is characteristic of an agricultural riparian environment, with isolated patches of secondary gallery forest.

The river flow is currently regulated on a daily basis by the discharges of El Cajón at an average flow of 100 m3/sec (ranging from 50-180m3/sec). Even though La Vegona’s environmental license has determined a minimum release flow of 11 m3/sec (approximately 10% of the annual average flow), such low flow is unlikely to occur. Given the limited storage capability of La Vegona’s reservoir, the existing flow pattern from El Cajon will not be modified by the operation of La Vegona, and therefore the incremental ecological impacts and risk associated with the project are limited and for the most part confined to its direct footprint. The most significant impacts on the river’s aquatic ecology have already taken place with the construction of El Cajón and its operation for over 25 years.

Generally, the main point of concern with this type of projects in the tropics is associated with the loss of forest cover and eventual biomass flooding. Approximately 0.66 km2 of terrestrial vegetation will be flooded. The plant community in the Project’s area is characteristic of a highly modified environment due to agricultural activities and husbandry. On both sides of the Comayagua River there are 6-meter-wide sections of degraded gallery forest. Primary forest is essentially gone, and can be found only in some very steep and inaccessible areas. Affected tree species will be compensated on a 1/10 ratio.

No endemic animal species are reported for the project area of La Vegona: nine (9) mammals, fifty two (52) bird species, two (2) reptiles, two (2) amphibians, twelve (12) fish species, two (2) mollusks and one (1) crustacean were reported in the supplemental field surveys. Eight (8) species are listed as of “special concern” for the country but just one is categorized as vulnerable, the Cocodrylus acutus (American Crocodile). However, the latter has been introduced to the river due to a crocodile breeding upstream of El Cajón, and therefore is not a native species to the area. Four (4) species are listed as least concern: Odocoileus virginianus (White Tailed Deer), Tayassu tajacu (Collared Peccary), Agouti paca (Spotted Paca) and Cairina moschata (Muscovy Duck). Two (2) of the fish species, Joturus pichardi (Mulet Bobo) and Agonostomus monticola (Mountain Mullet), are listed as of national concern. And for the Lutra longicaudis (Neotropical Otter) there are not sufficient data available for a classification.

No protected areas are within the project area. The National Park Pico Pijol is located in a distance of about 14 km. The project will not have any negative impact on this national park. Water courses are not connected.

As part of the ESAP, the Company will develop a (a) water quality and aquatic ecology monitoring plan, (i) watershed management plan, including a reforestation program, which (iii) will assure to identify, avoid, mitigate, compensate, and/or if needed eventually offset any significant degradation of the habitat detected as a result of the Project’s construction and /or operation.

The project is located on the border of the municipalities of Santa Cruz de Yojoa in Cortes and Victoria in Yoro. The municipalities have been informed about the projects and several meetings have been carried out as part of the ESIA process. On March 2009 and on July 2010 COHERSA signed agreements with both Municipalities, where COHERSA committed to maintain the nearby communities informed about the project, have active lines of communication, provide responses to their concerns and inquiries, and to the extent of its possibilities cooperate with efforts to improve local electricity supply. Additionally, COHERSA agreed to use best effort to hire locally.

As part of the ESAP, COHERSA has committed to install a Community Information and Relations Centre (CIRC) within the project premises, and it is in the process of developing a Community Engagement and Relation Plan. Via the CIRC, the Company will provide nearby communities and the public in general (a) general project information: posters, diagrams and short easy-to-read explanations of project features, and environmental and social impacts, risk and benefits associated with the project, (b) local hiring job opportunities and recruitment mechanisms, and (c) and the explanation of the mechanism to present complaints or request (external Grievance Mechanism). The latter is in the process of being developed and formalized and it is an integral part of the ESAP required for Financial Closing.

Furthermore, the Education Program outlined in the ESIA and agreed with the local authorities, includes an integrated environmental and reforestation management program, which will incorporate the local communities. Additionally, as part COHERSA’s CSR activities, it will (d) support local government with the periodical mobilization of health teams, to improve the health situation in the Project area of influence, and (e) participate in the construction of a rural Health Care Centre for the community of La Bolsita. The land for this center has already been made available by the community.

COHERSA
Filadelfo Canales
Gerente de Proyecto
3er ave. 11 y 12 cll No, Edificio las Acacias
Barrio Las Acacias
San Pedro Sula, Honduras
fcanales@hydrohn.com.
Telephones (504) 561-4630