PS1: Social and Environmental Assessment and Management Systems
When the Sponsor acquired the Company in 2009, the Company did not have any defined Health, Safety and Environmental (HSE) Management System. Although the Company has focused its resources to more core business performance improvements (e.g. metering and billing procedures), the Company is aware of the need to develop HSE management system in line with good international industry practice.
As part of the acquisition process, the Sponsor and the Company reviewed the two health, safety and audit reports – the first one conducted in 2008 through IFC Advisory Service project, and the second one in 2011 through lenders’ technical due diligence. The Sponsor is an experienced utility power company and is providing necessary technical support to the Company to help review the outcomes of the audit reports, to identify the priorities, and to implement the recommended actions. A series of actions will be implemented as part of the agreed Environmental and Social Action Plan (ESAP). These include establishment of formal HSE management system, development of HSE policy and procedures, development of HSE training programs for both employees and contractors, development of HSE monitoring program, and carrying out the environmental and social appraisal of the investment program components in accordance with IFC Performance Standards. Contracts of the contractors will include requirements of the IFC Performance Standards.
The Company has two safety officers in the headquarters who are supported by 10 persons working in the 10 zones of the distribution system. Their main task is the supervision of the security of meters within buildings and recording of accidents. On October 1, 2011, the Company established a Health and Technical Safety Unit. The unit’s responsibilities include day-to-day management of the HSE aspects of the Company’s operation and development of the Company’s strategies and policies related to environmental and safety aspects. The ESAP agreed between the Company and IFC includes actions to start establishing HSE management systems, including appointment of adequate number of environmental specialists (chemist, environmental engineer) and head of the Unit.
Going forward, through the established HSE management system, the Company will implement the HSE monitoring program.
The ESAP also includes various actions to improve the Company’s HSE and social performance to achieve compliance with IFC Performance Standards. Actions are specified in the areas of environmental management system, labor and working conditions, occupational health and safety performance, emergency preparedness and response plans, pollution prevention and abatement (handling of transformer oil, PCB screening system, ground water and soil contamination assessment), greenhouse gas emissions tracking, public safety performance. Detailed actions can be found in the ESAP attached to the ESRS.
PS2: Labor and Working Conditions
Working Conditions and Management of Worker Relationship: The Company appointed a new Human Resource (HR) Manager in 2010 and is working to improve the Company’s HR management system and performance. A new HR Policy including a HR Manual and a Code of Ethics was established in 2010. At this moment, there is no specific grievance mechanism established to address HR issues but grievances and complaints are handled through managers, HR group and trade unions. In order to improve communication between the Company’s management and employees, the Company started to publish internal newsletters in 2009.
Two trade unions actively represent workers of the Company: (i) Trade Union Federation of Industry in Albania (FSPISH) and (ii) Independent Trade Union of Power Sector of Albania (SPPESH). These two trade unions represent around 80% of all employees / workers of the Company. The collective agreement previously signed by the two trade unions expired in September 2009, and in November 2009, a revised collective agreement valid for another four years was signed. The revised collective agreement includes chapters on recruitment, working conditions, compensation, rights and duties, working conditions and protection of workers, disciplinary measures, and social and health insurance. Under the rights and duties chapter, Article 43 clearly states that the Employer commits to respect constitutional rights and to avoid any kind of discrimination by it, which relates to race, color, sex, social origin and political convictions, religious or ideological to employees.
The Company had about 6,000 employees in the end of 2009. A collective dismissal was agreed with the two trade unions with a maximum of up to 650 staff reduction until June 30, 2010. The staff has been informed of this agreement. The Company had a plan to reduce the staff to 5,520 employees by June 30, 2010, and to 5,220 employees by the end of 2010. The Company’s aim by the end of 2015 is to reduce the staff level to about 3,000 employees, which is a reduction of around 50% from when the Sponsor took over control of the Company. As of mid 2010, 6 former employees took their dismissal to the court. The Company is of the view that there is a general acceptance of the necessary dismissal measures amongst the Company staff and also outside the Company by the general public. The Company’s plan to reduce staff is based on principles of non-discrimination and is being consulted and agreed with the Company’s employees and trade unions and the Government of Albania, in principle in line with IFC Performance Standards.
As agreed in the ESAP, the Company’s actions include (i) development and implementation of the HR policy and procedures that will incorporate IFC Performance Standard 2 requirements for human resources, (ii) development and implementation of a redundancy plan to manage reduction of staff targeted by the end of 2012 in line with IFC Performance Standard 2, (iii) provision of proper protection equipment and facilities to workers and contractors, and (iv) development of a grievance mechanism for workers.
Occupational Health and Safety: The Company has health and safety training programs in place and keeps track of accidents. Accidents occurred within the Company are analyzed and its reports including causes and suggested preventive measures are shared among employees. In 2006 – 2009, the Company had 7 to 11 severe accidents and 1 to 4 fatal accidents per year. The Company recognizes the need to improve this performance. Technical due diligence reports prepared by SNC Lavalin and Fichtner observed that: (i) basic safety measures are not conducted in line with good international industry practice; (ii) open manholes exist, cables are lying in open ditches filled with water, no fire protection measures are taken where cables from outside enter the buildings, cables enter the control building just through holes in the wall, within the control buildings cables often lie on top of the floor; (iii) in case of a cable fire, there is no prevention possible to hinder the fire bleeding through into the building; (iii) there are no fire walls existing between transformers hindering a possible transformer fire to hit neighboring transformers; (iv) fences of the substations are often broken, small substations (10 or 6 kV) can be opened very easily or do not have locked doors; (v) working sites within buildings (e.g. transformer repair station) are polluted with oil causing poor working conditions. Through the establishment of the new Health and Safety Technical Unit, and the strengthened overall HSE management system, the Company will identify the priority areas to improve, allocate resources to the ongoing capital expenditure program as part of the Project, and implement the actions aiming to improve the health and safety performance and the safe working conditions and to achieve compliance with IFC Performance Standards.
PS3: Pollution Prevention and Abatement
Due to the lack of HSE management system in the past prior to the Sponsor’s acquisition, the current framework of managing pollution prevention is not in line with good international industry practice. The practice of collection, disposal and recycling of waste oils needs to be significantly improved. Some localized cases of soil contamination are observed through visual inspection. The ESAP agreed with IFC contains an action to review the current practice, including examination of groundwater and soil contamination, and to implement remedial actions. This is one of the top priorities also considered by the Company. The ESAP action No. 12 is to develop and implement a soil and groundwater monitoring program and register contaminated soil and groundwater.
SF6 (Sulfur Hexafluoride) is one of the six greenhouse gases regulated under the UN Framework Convention on Climate Change, and is used as a gas insulator. Currently, no complete SF6 substation has been installed in Albania but the use of SF6 insulated circuit breakers is expected to increase within the Company. In addition, about 1,200 of the 20 kV cabinets and 2 of the 35 kV cabinets are SF6 insulated. As part of the ESAP (action No. 14), the Company will establish a procedure to track use of SF6 within the Company and to minimize its emissions to the atmosphere.
Considering that panels made of asbestos for fire protection have not been found in substations, the risk of handling asbestos containing material as part of the rehabilitation works is considered to be low. Nevertheless, the ESAP has an action (No. 13) to review the Company’s usage of asbestos.
The Company does not have a system to screen PCB (Polychlorinated Biphenyls) containing transformers. As part of the ESAP, the Company will establish procedures to screen PCB contaminated equipment used within the Company, and to manage such equipment (storage, treatment, disposal) in line with good international industry practice. This is listed in the ESAP as action No. 11.
No emergency preparedness and response plans have been in place. The ESAP has an action (No. 15) to develop emergency prepared and response plans for major facilities of the Company.
The major direct emissions of greenhouse gases (GHG) by the Company is carbon dioxide (CO2) from combustion of gasoline used by the Company’s car fleet – about 400 vehicles of which three quarters are more than 10 years old. The Company will start tracking of gasoline consumption to estimate GHG emissions from its car fleet and evaluate measures to improve the overall energy utilization efficiency. The Company’s electricity distribution technical loss rate in 2009 was at 15.2%. After implementation of the capital investment project in 2009 – 2013, this loss rate is expected to decline to 11% saving electricity purchase requirement of about 340 GWh in 2014, which would be equivalent to about 242,400 ton of CO2 avoidance a year assuming that the this gap will be supplied by imported electricity from neighboring countries (e.g. Greece, Macedonia, Serbia – of which CO2 emission performance are 736 gCO2/kWh, 749 gCO2/kWh, 653 gCO2/kWh respectively in 2006-2008 according to the latest 2010 International Energy Agency statistics, or average of the three countries as 713 gCO2/kWh).
PS4: Community Health, Safety and Security
Over the last several years between 2006 and 2009, the Company recorded 6 – 11 severe accidents and 5 – 8 fatal accidents per year outside the Company associated with the Company’s asset. Most of these accidents occurred due to attempts to steal electricity. The Company is aware of the need to strengthen protection against people illegally trying to access the Company’s assets (e.g. fixing broken fences, strengthening fences, putting warning signs, putting locks at cabin doors, and safety awareness campaigns about the danger of connecting with medium and low voltage lines). Relevant actions are incorporated into the ESAP. The ESAP action No. 17 is to register security gaps for all facilities (e.g. open manholes, fire protection, fencing at substations) and activities (e.g. safety cones, warning signs at construction sites) and development and implement security investment plan. The ESAP action No. 18 is to develop and implement public safety awareness program.
