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- PS7: Indigenous PeoplesPS8 Cultural Heritage does not apply for the purpose of this review because a preliminary survey done through the National Archeology and History Institute (INAH), as mandated by Mexican law, found no evidence of presence of physical cultural heritage in the project’s site and has therefore granted permission to proceed with the proposed activities. Additionally, with almost all construction activities near completion no archeological artifacts have been found to date. As a precautionary measure the client’s environmental procedures include provisions to avoid impacts on any sites of cultural interest and, if any such sites were encountered, access to the area will be restricted and works will be stopped until authorization is received from the responsible government agency.

The project has been classified as a Category A project according to IFC’s Environmental and Social Review Procedure primarily because of the project being located on communal lands (Ejido) and potential biodiversity (especially ornithological) impacts. Even thought the total project area is large, its footprint does not directly impact or touch any protected area/habitat and will affect less than 1% of total Ejido lands. Based on migration patterns the space above the wind farms may at times constitute natural habitat critical to migratory species. Sections of the Isthmus, particularly coastal areas and the Sierra Tolistoque mountain range, form part of a bird migration corridor which connects the Atlantic and Pacific Coasts. According to results of bird monitoring activities carried out in 2007 and 2008 the Project’s site is not located within a high bird traffic zone in either the fall or spring seasons. The project entails no involuntary physical resettlement and only marginal economic displacement. All land (for turbines and access roads that the project is located on was formerly agricultural land and/or existing roads) is being leased by Eurus at above market rates on voluntary basis and a small parcel of land was purchased, at markets rates, for the substation as required by SENER. Land for the T-line is located within an existing right of way (ROW) and will replace an existing T-Line and entails no displacement or additional impact.

Key environmental, health, safety and social (EHSS) issues associated with this project include:- environmental assessment and management;- labor policy and contractor management;- management of construction activities and wastes;- temporary traffic disruption and community safety during construction;- land lease arrangements and public consultation;
- biodiversity impacts; and - worker health and safety during construction and operations phases.Generating electricity from a renewable resource the project is otherwise of obvious positive benefit as it will displace greenhouse gas emissions. The impacts associated with these additional issues can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Eurus has completed an independent EIA, independent Supplementary EA, independent ornithological assessment, public consultation and will conduct additional studies and consultation as defined below. Eurus has committed to conduct its activities in accordance with measures contained within these studies and reports and will, upon implementation of the management plan and specific additional measures described below, comply with the IFC Performance Standards on Social and Environmental Sustainability.

PS1: Social and Environmental Assessment and Management Systems:As required under Mexican law an independent EIA was completed to obtain applicable local and national permits. Whilst these documents addressed a range of environmental and social issues, in order to meet IFC Performance Standards and the requirements of the IDB, an independent supplementary analysis and avian study was also completed to cover the wind park, substations, and transmission line (T-Line). Thes associated supplementary reports include a discussion of environmental and social management, land negotiations, public consultation, site selection, noise impacts, drainage, and project and cumulative avian impacts. The key tool for achieving the requirements and mitigation measures identified in the EA documentation are an Social and Environmental Management System (SEMS) that Eurus will develop, and Integrated Social Management Plan (ISMP), and (an Avian) Monitoring and Shutdown System.

Construction on site is being completed by Acciona Energía (AE – Spain) the turbine supplier, Acciona Energía Mexico (AEM) the EPC Contractor and Siemens for substation and T-Line work. These groups are working to their international corporate standards which have detailed requirements related to waste management, safety and human resources management. Construction activities on site are almost complete, and no significant environmental liability has been reported. The most important environmental and social management activities still to be completed are the revegetation of the areas temporary affected by construction, and more generally land reinstatement, including restoring an adequate drainage and erosion control system, cleaning up of any soil contamination, and, as defined below more bird and bat monitoring. This additional monitoring, as defined below under PS6, will inform completion of ongoing Collision Risk Assessment (CRA) and modification of Monitoring and Shutdown systems. The Company has established nurseries to assist with replanting. Eurus carried out consultation with each of the owners regarding irrigation or drainage systems in order to discuss and understand how their systems had been working. This information was used as the basis to design the access roads, and channels and culverts which cross these roads.

With respect to site selection, Eurus ensured that the sites chosen for individual turbines factored in:

Existing agricultural plot lines;
Forested areas (of which none were cleared)
Irrigation channels (all have been maintained)
Existing roads (with proper drainage and erosion control)
Proximity to dwellings (no houses have been moved and all are beyond 600 m and thus noise impact range)The sponsor will develop and adopt an Environmental Health and Safety (EHS) Management system that will address all potential environmental impacts and health and safety risks (both occupational and for the communities) related to the project’s operation. The EHS Management System will cover organizational responsibilities, training, auditing, monitoring, and reporting arrangements, and resources to be made available to ensure adequate implementation of the environmental, health and safety plans and programs. Based on implementation of this system and the specific action and mitigation plans this project is expected to be designed, constructed and operated consistent with the applicable requirements of the IFC Performance Standards.

PS2: Labor and Working Conditions
During construction works, there have been an average of about 400 to 500 workers from different contractors on site, including approximately 200 workers from La Venta, and the total workforce peaked at about 1300 workers. Over 95% of workers have been locals since the Company proactively informs local communities about job opportunities and gives priority to local hires (particularly those directly affected by the project) when skills match available jobs. The Company has also entered into an agreement with La Venta’s Worker’s Union through which it also sources most transport trucks and some machinery. Approximately 40 full time people will be required for the operation and maintenance of the project and most positions are expected to be filled by locals. All construction contractors and its subcontractors are in compliance with Mexican labor laws. Eurus will revise its Human Resources policy for operations and include a clause requiring compliance with local labor laws and PS2 in all future contracts with contractors and subcontractors.

Eurus has in place robust occupational, health and safety (HS) procedures, based on Acciona’s corporate HS policies and experience, to assess and manage risks and continuously improve the HS management of its construction and operation activities. Eurus has in place detailed procedures for different types of activities including work at heights, work with electrical equipment, and erection of towers. Accidents are dully documented and investigated and corrective actions identified. All construction activities are constantly supervised by Eurus and all contractors are contractually required to abide by the project’s HS policies and procedures. Employees receive continuous training and are provided, as evidenced during appraisal, with the necessary training and safety equipment as required for their respective responsibilities and duties.

PS3: Pollution Prevention and AbatementThe project is implicitly a net benefit from a pollution perspective as it will generate electricity from a renewable resource and help facilitate the Government of Mexico’s goal to reduce its greenhouse gas (GHG) emissions by 50 percent by 2050. The project itself is expected to lead to emissions reductions of approximately 600,000 tpa of GHG equivalent.

Construction and maintenance will nevertheless generate a limited amount of general waste (packaging, metals, plastics, filters, oils etc.) which will be disposed of in designated places by contractors. Road maintenance and expansion required erosion and dust control. AEM implemented regular watering of roads and sourced water from municipal and Ejido authorized sites, no impact on other users occurred as a result of water usage.

Construction of the Project began in January 2008 and the first turbine was connected in February 2009. As of November 2009, the Project had reached 61 percent of its installed, generating capacity, with all 167 turbines erected, and 102 in operation. The substation and external electrical works are complete. Key impacts related to construction activities (e.g. soil erosion, noise, dust generation, traffic disruption) were managed to international standard by Siemens and AE and AEM. 
Areas temporarily used or disturbed during construction will be reinstated and re-vegetated at the end of construction; impacts are however small as the permanent footprint of each tower is relatively small at an average of 650 m2. Total land footprint of the project (turbines, substation and roads) represents less than 1% of total community/Ejido land. There were no significant accidents, spills or issues related to drainage /erosion that arose during construction to date. Transport of towers, generators and other heavy equipment to the Project site is almost complete and has not required any upgrade of the existing road network. The total permanent footprint of the Project is estimated to be approximately 50 hectares.

Ongoing maintenance of the project will require periodic parts and fluid (hydraulic and lubricant oil) replacement. Eurus will dispose of and manage wastes in accordance with national requirements and as per AE Corporate standards. Solid waste will be disposed of in designated landfills and oils/fluids will be recycled and/or sold to licensed companies for disposal.

PS4: Community Health, Safety and Security
The main risk to communities relates to the construction rather than operational phase of the project. Key risks posed to the community relate to traffic movement, noise, visual impact, and shadow flicker. With regard to visual impacts it should be noted that the flat landscape and tree belts in the area cause turbines to disappear from sight at relatively short distances and the landscape already contains multiple operating wind farms which has already altered its character. No visual impact or noise concerns have been raised by community members within the sight lines of the turbines. Given that the nearest households are over 700 meters from turbines, noise and shadow flicker impacts are negligible. Traffic safety procedures are being implemented by the project and its contractors as part of the project’s environmental and HS procedures. Additionally, there is restriction of access to specific areas/equipment that could pose any risk or hazard (e.g., electric shock, heavy equipment etc.) to community members.

Neither Eurus nor its contractors will employ armed security; if security guards or services are required by Eurus, these guards will receive training consistent with PS4 to ensure any response to threats to the project/personnel is in proportion the threat. Contractor contracts will contain a requirement to comply with this requirement.


PS5 Land Acquisition and Involuntary Resettlement

The Ejido system is the predominant land tenure system in the project’s area and in many other regions of Mexico and it emerged in the last century as one of the main results of the Mexican Revolution. The Ejido system allows for large extensions of land to be communally owned by a community with parcels set aside for individual use (ejitadario) or communal use. Individual ejidatarios are free to lease their lands to other ejidatarios or third parties, but Ejido lands cannot be sold or mortgaged without prior approval from the Ejido’s general assembly.

The Ejido La Venta, where the project is located, covers an area of 6,091 hectares of which the project’s final footprint from permanent structures such as platforms, roads, etc, will affect approximately 50 hectares (equivalent to less than 1% of total Ejido land). No physical resettlement will take place and impacts on livelihoods are minimal given the project’s footprint and the fact that ejidatarios can continue their farming or cattle grazing activities.
Before beginning construction, the Company entered into good faith negotiations with the Ejido La Venta and individual ejidatarios over a period of 2 years (2006-2007), through which replacement compensation criteria and amounts for loss of income and assets were agreed upon, and resulted into 461 30-year Land Lease Agreements (“Contractos de Usufructo”) for parcels of individual and communal use covering a total area of 2,658 hectares which has been defined as the project area (“polígono”). Additionally, the Company signed 112 complementary agreements (“Convenios de Afectacion”) for those parcels within the polígono that will have a permanent structure on them (the remaining 349 parcels will not be affected with constructions). As per these agreements, all parcels located within the polígono are paid a fix annual reservation fee and those with permanents structures receive an additional compensation fee. Annual payments are subject to adjustments according to the annual inflation rate published every year by the National Central Bank (Banco de México). Upon termination of the lease agreement, the Company must return the original quality of the affected soil in the parcel and remove all equipment and structures. The Company provided support to register the titles in the regional cadastre of those ejidatarios who haven’t done so by the time negotiations began.

The Land Lease Agreement with the Ejido for parcels of communal use (289 hectares) was signed on October of 2007, after being approved by majority by the Ejido assembly, and in addition to the reservation and compensation fees, it also included a one-time donation to the Ejido. All annual payments related to parcels of communal use go directly to the Ejido and are to be invested in communal goods and assets.

The Company is in the process of buying 13 hectares for the substation from one of the ejidatarios to be able transfer the Substation to CFE per the Interconnection Agreement, which requires final approval from the Ejido’s Assembly in accordance with article 56 of the Agrarian Law and it must be registered in the regional cadastre.

The Company can not resort to expropriation if negotiations fails and participation in the Project on behalf of the ejidatarios is voluntary, however, given the type of population involved, the nature of the land lease contracts, and the sensitivity of the issue in similar developments in the area, the Company will follow the PS5 approach in this project. Based on the existing information and interviews with ejidatarios, it was confirmed that all negotiations were based on informed and good faith basis, and that compensations are well above market values.

It must be highlighted that Eurus’ approach is consistent with the recommendations of a study carried out in 2003 by Winrock International and financed by USAID on land leasing practices for wind power development in the Isthmus of Tehuantepec, that recommends fixed fee arrangements (in contrast to royalty arrangements) that benefit landowners by offering steady, predictable income and protection in years of low electricity generation or revenue, as well as a transparent calculation of payments.

The company has developed an Integrated Social Management Plan (ISMP) that includes a section describing the land lease negotiations process and criteria to date and defines the process to conduct any future negotiations in the future in compliance with PS5 objectives.

PS6: Biodiversity Conservation and Sustainable Natural Resource Management 
This Isthmus of Tehuantepec has an area of 6700 square km and is classified by BirdLife International, the major global avian NGO, as an Endemic Bird Area (EBA). The Project site, which occupies a total of 50 ha (including platforms and roads), an infinitesimal fraction of the EBA, comprises farmland and sparse tree lines along roads, fields and several small streams. The land has significantly been altered by centuries of cultivation and human habitation. Sorghum cultivation and pastures dedicated to livestock dominate. No threatened, vulnerable, or endangered terrestrial species have been recorded in the Project’s site or in its surroundings. As defined below, no significant impact on any resident or migratory bird species is anticipated as per independent ornithological studies completed.
While its terrestrial footprint does not directly impact or touch any protected area, based on existing migration patterns, the space above the wind farms during migration periods at times, based on meteorology, constitutes a natural habitat critical to the survival of migratory bird species. However none of the key bird species present in this corridor or any of the resident species are endangered per the IUCN Red List. The sections of the Isthmus, particularly coastal areas and the Sierra Tolistoque mountain range, which form part of the main bird migration corridor which connects the Atlantic and Pacific Coasts are not located above or directly adjacent to the project site. Some bird species endemic to the Isthmus, in particular the Cinnamon-tailed Sparrow (Aimophila Sumichrasti) listed in the Near Threatened (NT) category in the 2008 IUCN Red List, are known to nest in the remaining patches of low deciduous forest found in some areas of the Project’s site. This has been taken into account in the siting of towers, for which no clearing of tree/forest belts has occurred.

For several bird species, none of which are endangered, 100 % of their Regional population migrates through the Isthmus each year (spring and fall migrations). According to results of bird monitoring activities carried out in fall 2007 and spring 2008 the Project’s site is not located within a high bird traffic zone in either the fall or spring seasons but is adjacent to the most important migratory flyways in the region. During the survey, about 600,000 individual birds were recorded with only 8 % of these individuals actually flying over the Project site of which the vast majority were flying at 300m plus, well above rotor or project impact height. More than 99 % of the birds observed flying over the Project site correspond to the following four species, all of them in the Least Concern (LC) category of the UICN Redlist: Turkey Vulture (Cathartes Aura), Swainson’s Hawk (Buteo Swainsoni), Broad-winged Hawk (Buteo Platypterus) and Franklin’s Gull (Larus Pipixcan). Whilst these species are not endangered the significance of this issue relates to the importance of the area to migratory species and the volume of individuals of given species flying over the site.

With regard to the key species listed above, anticipated project level impacts are not deemed to be significant with regard to population viability for any given species. Given that there are no internationally established models (e.g., Scottish National Heritage Model) or thresholds for management of wind farms with regard to impact on incremental mortality of species, the project will, until a regionally specific model is developed, operate the wind farm to ensure incremental mortality (caused by its operations) does not exceed 1% of natural background mortality for any given species – i.e., the threshold as set by the Scottish National Heritage Model. Based on collision risk assessment completed for the Eurus project no mortality is expected to result which is in excess of 1% of natural background mortality for any species. This threshold has been used in other countries, especially in the UK and is widely accepted, though not mandated due to geographic and species variation and behavior, as a good benchmark.Eurus’s proposed project level monitoring will have several key components, as follows:- measurement of bird use of the area within the wind farm;- measurement of bird flight activity through the wind farm site (including flight height) through the year. This will be over a sufficiently wide area to cover the wind farm site and it’s expected area of influence;- detailed monitoring of bird flight activity during spring and fall migration period (as part of the turbine shut-down program);- monitoring of collision victims around the wind turbines;- use of data collected to update the collision risk model and test its output;- establish, where possible, links with other bird monitoring programs at other wind farms to facilitate data-sharing and a wider-scale analysis of effects; and- Independent ornithological review and input.

Given that IFC and IDB are considering another project in the area (see EDF La Ventosa), and the fact that multiple wind farms currently exist, avian impacts are, as part of this project, being assessed at the cumulative level by the IFC and IDB. Eurus is funding completion of a study by international ornithologists to assess the cumulative impact and cumulative collision risk of development of large scale wind power projects in the Juchitan area of the Isthmus of Tehuantepec. This study is currently underway, preliminary indications are that cumulative incremental mortality is not anticipated to be significant and will probably meet the 1% threshold. When completed its main results will be presented to various stakeholders, including SEMARNAT, wind power project developers and key birds NGOs. With respect to migratory birds the study will include and defines the following:- collision risk analysis;- proposed turbine shutdown systems; - detailed monitoring scheme (including radar installation); and- cumulative ornithological impact assessment (defined as all existing, permitted and wind development under construction within the projects area of influence).It should be noted that populations and impacts on bats are also being assessed and will be input into the CRA, however due to turbine heights this is not anticipated to be a significant issue. Cumulative assessment of bird impacts will be a first in this geographic area and it is hoped ongoing monitoring and collection of additional bird data is anticipated to eventually result in development of a standard collision risk model for avian impact assessment for the wind sector in the Isthmus. This will be a significant tool for assessing wind project impacts and have a demonstration effect for the industry and would ultimately support and enable Government policy. Cumulative Avian Assessment in the wind power industry is a new subject area that many countries are currently grappling with, including the developed ones such as the US and the UK. Lessons learned in those industries are being applied in the assessment and review of this project. BirdLife lists the Isthmus as having incomplete data – population estimates for certain species in this area have huge ranges (in some case from 500,000 to several million). It is hoped that over time, coordinating with ProNatura and BirdLife, the project can help close this gap and contribute to avian knowledge in the region.

PS7 Indigenous Peoples

The Project is located in a geographical area generally identified as Zapotec traditional territory. It must be noted that not all Ejidos in Mexico are indigenous and that the people of the Ejido La Venta are integrated into the broader society and economy, and just a few of them speak the indigenous language (Zapotec). Members of La Venta self identify as ejidatarios, campesinos or venteros, not as indigenous, but they do maintain some traditional traits and institutions. However, for all practical purposes PS7 and IDB’s relevant policy had been applied to this project.

Potential adverse impacts on community members are likely to be minimal to moderate since the permanent footprint on the land is relatively small and it won’t affect land productivity or irrigation, and current users will be able to continue their past agricultural activities such as farming or cattle grazing. Some ejidatarios will be benefiting directly from the project through payments of annual fees for their lands, jobs and improved roads, and the Ejido as a whole will be benefiting from annual payments of fees for communal lands and the social investment program being developed by the Company based on a needs assessment and consultations with the Ejido.

The company has conducted land lease negotiations on good faith basis and ensuring free, prior and informed consultation (FPIC) of the Ejido and the ejidatarios. The Company’s ISMP has been designed to incorporate the elements of an Indigenous Peoples Development Plan (IPDP) and documents the consultation and land negotiation process to date and define measures to establish and ongoing and culturally appropriated engagement with the community throughout the life of the project. The ISMP also describes the Company’s social development program.

The closest community to the project is the Ejido La Venta which has a population of approximately 1.789 people. The population is concentrated in an urban area that has direct access to a highway and public services (80% has access to electricity and 60 % to potable water). The Ejido’s main representative body is the Ejido Committee (“Comité Ejidal”), with most important communal decisions being made through the Ejido’s General Assembly. Mexican regulations do not require a formal consultation process as part of the environmental licensing process for these types of projects. However, since February of 2006 numerous engagement instances have occurred between the project, the Ejido Committee, individual ejidatarios, and Government agencies, with most instances being related to the land lease negotiation process which has been described under PS5 above. During most part of the construction stage the Company established a Public Information office in La Venta. On May 2009 the company held an informative meeting with the Ejido Committee to present the status of the project’s environmental and social performance, including status of legal permits, land negotiations and environmental management. On July 2009 the Company held an open meeting with the ejidatarios to discuss the findings of the needs assessment conducted by the Company in preparation of the project’s Social Development Program. As a condition of IFC’s investment, the Company will be required to conduct and document an additional round of consultations with the community to discuss the environmental management program for the project during operations. During the project design phase, each ejidatario that would have any permanent structure (i.e. platform, road, etc) on his or her property was contacted by the Company and a joint walkthrough the property was conducted to identify specific siting of the proposed structure and identify measures to avoid or mitigate potential impacts (i.e. disruption of natural flow of water or irrigation systems). The rapid development of wind projects in the Isthmus of Tehuantepec has been source of social tensions and claims by some NGOs in relation to impacts on lands and livelihoods by some projects. In its initial development stages Eurus was also affected by some tensions with few members of the Ejido and external groups, however the majority of the ejidatarios support the project as is evidenced in the agreements reached and the fact that tensions linked to the project have receded as construction ends. The Company has prepared an Integrated Social Management Plan (ISMP) based on IFC PSs and IDBs policies in order to document and manage all project-related social issues. The ISMP includes a clear community engagement policy and documents in detail all consultations and land negotiations to date and also define clear procedures to manage this issues going forward. It also includes sections describing the local hiring and procurement process, a detailed grievance redress mechanism and evaluation and monitoring arrangements and indicators. The ISMP and other relevant environmental documentation will be made available locally to the community and oral presentation in Zapotec will be offered upon requested. The ISMP also includes a section describing EURUS’ corporate social responsibility strategy and social investment program. This section was developed based on a socioeconomic study and needs assessment for La Venta conducted by the Company in February 2009 and targets four areas: environment (i.e. landfill, domestic windmill, etc); technical and job training; productive projects; and communal infrastructure. The implementation of this program will be coordinated with the Ejido Committee. Additionally, Eurus has engaged the Universidad del Itsmo (UNISTMO) to develop a regional study to analyze the social impacts of wind development in the Isthmus and provide recommendation aimed at improving consultation and land negotiation practices with the different Ejidos in the region in order to increase transparency and enhance benefits for the communities and the region as a whole. Eurus will also explore opportunities to contribute to the improvement of environmental and social industry practices as a member of the Mexican Energy Association (AME in Spanish). Lastly the client and their avian consultants have been consulting and seeking the input of key bird NGOs in Mexico in project impact assessment and design, this engagement will continue through the life of the project as needed.

Eurus Carretera Juchitán-Tehuantepec No. 3 Col. Centro, Altos del Hotel Santo Domingo Juchitán de Zaragoza, Oaxaca, C.P. 70000 Telephone: 019712810749 Eurus Community Liaison Office La Venta, Oaxaca Documents are also available at: www.acciona.com