29404 - Energy Dev II

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Environmental & Social Review Summary

Project Number

29404

Company Name

ENERGY DEVELOPMENT CORPORATION

Date ESRS Disclosed

May 19, 2010

Country

Philippines

Region

East Asia and the Pacific

Last Updated Date

Jun 19, 2026

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Dec 27, 2010
Signed : May 20, 2011
Invested : Sep 30, 2011

Sector

Geothernal - Renewable Energy Generation

Industry

Infrastructure

Department

Gbl Infrastructure & Natural Resources

Project Description

EDC is an integrated geothermal steam and electric power producer with its core activities in exploration, development, and production of geothermal energy in the Philippines. The company is headquartered in Metro Manila, Philippines, and its major projects are located on the islands of Luzon, Leyte, Mindanao, and Negros. The company is an existing IFC client in good standing, and is seeking a direct IFC investment of up to $75 million, and a potential mobilization of another $75 million from bilateral sources. The proceeds of the loans will be used to partially finance the company’s medium term capital expenditure plan.

Overview of IFC's Scope of Review

The scope of review of EDC''s compliance with IFC’s Performance Standards included assessment of EDC''s management capacity of its environmental, social, health and safety performance. The review relied on documents, annual monitoring reports on environmental and social performance and other reports made available by EDC and interviews conducted by IFC staff during their site visits. The IFC team also visited EDC facilities on the island of Negros (Northern Negros Geothermal Production Field, NNGPF). Other EDC facilities have also been visited by IFC staff in the last two years. IFC conducted interviews with key management personnel including EDC''s operational, human resources, environmental, social, health and safety managers and staff.

E & S Project Categorization and Applicable Standard

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management System;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement; and
- PS4: Community Health Safety and Security;

Consistent with the review for the previous IFC investment in 2008, and considering that no new assets have been added since, the nature of the corporate investment to partially support the company’s medium term capital expenditure program, 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 addressed adequately by EDC on an ongoing basis for the existing assets, as summarized in the description of EDC’s Social and Environmental Assessment and Management System further in this review. A continued condition of IFC’s repeat investment going forward will be that the Company shall consider all relevant social and environmental risks and impacts, including the issues identified in PS1 through PS8 while assessing any new business opportunities, acquisitions or service models.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because there are a limited number of specific environmental and social impacts that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. Key environmental, health and safety, human resources and social issues that were reviewed included the following: environmental and social management system; quality and sustainability of water resources; emissions to the environment – air, water and subsurface; solid, and hazardous waste and materials management; transportation; community and occupational health and safety; energy use and efficiency; community engagement; cultural heritage and land acquisition. Financing provided by IFC will help the Company to continue its transition to being a leading global large-scale clean renewable energy producer. The Company’s environmental and social assessment and management system is functioning well (to maintain and operate the existing facilities and to develop new projects in a manner consistent with IFC Performance Standards).

Environmental and Social Mitigation Measures

This is IFC''s third corporate investment in EDC; the key issues reviewed by IFC were 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 from previous investments related to the Company can be found on the IFC/World Bank website:
#25389 (October 30, 2006), and
#26529 (June 03, 2008).

IFC’s appraisal has confirmed that the Company continues to manage its environmental social, health and safety (ESHS) performance of existing operations effectively and addressing potential ESHS 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 any specific individual development projects, IFC will review and agree with the company on the overall monitoring and reporting framework of the company’s ESHS performance including those of individual new development projects, to confirm ongoing compliance with the IFC’s Performance Standards. Key areas reviewed are summarized below.

Social and Environmental Assessment and Management Systems:
The Company has an environmental and social management system (EMS), headed by a Vice President for Environment & External Relations, and supported by the Environmental Management Department, Community Partnerships Department, and Public Relations Department. The Company has a formal program and timetable for ISO 14001 adoption and certification of their management system, which anticipates a first site certification by end of 2011, and all principal assets certified by end of 2013. The existing management system provides adequate oversight of key functions such as assessment, planning, management and monitoring of the health, environment, safety and security. The company has formally adopted 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 while assessing any new business opportunities, acquisitions or service models.

EDC has an effective community engagement program that includes a grievance mechanism to receive and facilitate resolution of the affected communities’ concerns or grievances about its environmental and social performance. EDC has consistently engaged with relevant stakeholders in addressing any community grievances in a timely manner, the process and outcomes of which are documented and reported to senior management in the Company.

The Company ensures continued compliance with all relevant regulatory requirements, IFC Performance Standards and applicable IFC guidelines. The company has presented data explaining that the monitoring results are in compliance with the relevant environmental, social and occupational health and safety standards of the Philippines and consistent with IFC Performance Standards and applicable IFC guidelines. In its corporate annual reports, the company reports on their sustainability initiatives including environmental and watershed management activities and community enhancement programs. The company’s annual reports are publicly disclosed and have a detailed section on Corporate Social Responsibility summarizing the activities conducted each year.

Labor and Working Conditions:
EDC employs 2,583 people directly, while the number of sub-contracted employees can vary significantly depending on construction activities from dozens to hundreds at any given time. EDC has a Human Resources policy that complies with applicable regulatory requirements, and is consistent with IFC Performance Standard 2. The policy is applied consistently to all employees; the policy is also included in employment contracts, and addresses working conditions, terms of employment, and wages and benefits. This information is provided in the form of an employee handbook at the time of induction. EDC’s HR policies and procedures recognize employment relationships on the principles of non-discrimination and equal opportunity, freedom of association and grievance, which are documented adequately. Employees are aware of their right to freedom of association and have the opportunity to collectively represent to the management any issues or grievances that they may have. Employees at EDC have the right to be part of a trade union. All five (5) geothermal fields as well as its head office in Fort Bonifacio have at least one trade union. The trade unions are actively engaged in ensuring workers rights and negotiating labor agreements with the management. While meetings are routinely held between EDC management and elected representatives of the trade union, collective labor agreements are negotiated once every five years; the economic provisions, are periodically reviewed with the Unions, after three and subsequently after two years within the five year period of the collective bargaining agreement.

The minimum employment age at EDC is 18 years. EDC ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Working hours on site can vary by nature of activity and phase of project, with most labor intensive phases being at the construction phase during which there are continuous operations. Construction activity is largely subcontracted for which unskilled labor is procured from nearby villages. Terms of employment for sub-contractors are as per applicable labor laws and clearly included in sub-contracts. Management of influx of labor into local communities and the responsibility for accommodation is managed by the subcontractor. EDC provides direct oversight of wages, working or living conditions of subcontracted labor. EDC ensures that contractors pay wages on a monthly basis and are calculated with basis on the hours worked, inclusive of overtime. Internal audits are conducted periodically to monitor compliance with EDC requirements and applicable labor laws. Moving forward, EDC will review its human resources policy to ensure consistency with IFC Performance Standard 2, especially related to management of impacts from temporary labor influx into local communities and providing them with adequate living conditions.

Occupational health and safety of employees at EDC has a comprehensive Safety Plan which is managed by the Health and Safety departments. The key components of the Safety Plan are the establishment of safety policies, provisions for a trained workforce, and integration of risk management. The plan supports the six (6) elements of the EDC safety program: a) Policy, b) Training, c) Promotions and awareness, d) Investigation, e) Inspections and f) Evaluation. The plan for accident prevention and worker safety is consistent with local regulatory requirements. All employees in the company have to undergo a training program at induction and subsequently regarding worker health and safety relevant to their job activity. Facilities are audited yearly by regulatory agencies to monitor compliance with labor regulations. The Company has been in compliance with regulatory requirements and has recorded no significant lost time incidents or fatalities in over 7 million man-hours of operational history.

Pollution Prevention and Abatement Since geothermal energy generation entails the tapping of deep geothermal fluids which may naturally contain traces of heavy metals leached from the surrounding rocks, in addition to high TDS and sulfides, the discharge of these fluids (brine) has to be managed appropriately to minimize impact to the environment and preserve quality of surrounding water for productive use. The reject brine after energy recovery is reinjected back into geothermal aquifers. Drilling mud is disposed in lined ponds where sediments settle, and overflow water is discharged through the reinjection gallery. Blow down from cooling towers at the power plants are also disposed with the brine to the geothermal aquifers. 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. Sanitary wastewater at the sites is treated through on-site septic tanks that discharge directly to surface water.

Solid wastes produced at EDC facilities include hazardous, non-hazardous and recyclable wastes. Sediment from drilling mud settling ponds, sludge from cooling tower water treatment may contain heavy metals. Sludge containing heavy metals above regulatory levels are treated and disposed at specially designed disposal facilities where sludges are mixed with cement to immobilize the metals. The immobilized sludge is disposed on site in specially constructed concrete silos. Water quality is monitored downstream (monitoring wells) from these storage locations to ensure no leakage to groundwater.

Based on the total generation of 5,038,213 MWh from geothermal energy sources in 2009, the equivalent carbon dioxide (CO2) avoided by EDC is estimated to be about 2,963,980 tons of CO2 based on an Emission Factor of 0.5883 tons of CO2 equivalents/MWh. Water usage by EDC is mainly for use in cooling towers for power plant operations. Surface water is the primary source of water for these operations and is obtained from rivers under abstraction permits issued by local regulatory agencies.

Community Health Safety and Security
Engineering controls and staff training are provided to mitigate risks and issues associated with EDC''s operations. At EDC''s facilities, the use and storage of hazardous materials are subject to stringent safety standards. EDC has emergency prevention and control plans which specifies responsibilities, ensures appropriate response equipment and materials are in place, and detail a set of procedures to be followed to minimize the harm of any potential accident. For each of its facilities, EDC has 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 ERP also includes specific contingency plans for geothermal brine and blow down / condensate spills, fire, and natural disasters such as typhoons or earthquakes.

EDC uses security service providers for its industrial / internal security needs. The company provides regular in-house training supervised by trained internal on-site security officers. As a standard company requirement, all guards are oriented on the Code of Ethics and Code of Conduct which are consistent with international good practice for provision of security services. EDC’s security policy includes a grievance mechanism for affected communities. EDC does not contract any government forces to secure any of their projects. However, being vital energy installations, the protection of the general area where EDC projects are located is part of the regular duty of government forces. EDC will review its security policy against IFC Performance Standards 4 for Community Health Safety and Security, and update (if needed) to achieve documented consistency with applicable provisions of the IFC policy that covers management of risks associated with use of government security personnel.

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. There are no outstanding legal actions or complaints against the Company in relation to E&S performance of the Company.

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 (www.energy.com.ph).

The company regularly remits royalty payments to the national and local governments, which are required by law. For 2009, actual royalty payments to the DOE and Local Government Units (LGUs) amounted to PhP 759.9 million and PhP 266.90 million respectively, for a total of PhP 1.027 billion.

EDC is committed to promote social prosperity and environmental stewardship 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. EDC has an approved budget allocation for CSR to be equivalent to 1% if the Net Recurring Income Before Income Tax (NIBT) of the previous year. CSR projects focus on four fronts, namely livelihood, education, health and community environment. Details of these programs are contained in the CSR Report of 2005-2007, the company brochure on Community Partnerships, and in “Doing Good in Business Matters: CSR in the Philippines” by the Asian Institute of Management (AIM). EDC’s CSR program has also been embodied in its Corporate Policy Manual since 2007.

For more information, see the company’s website: http://www.energy.com.ph/, or contact:

Mr. Paul A. Aquino, Vice Chairman/CEO or
Richard B. Tantoco-- President/COO
PNOC-Energy Development Corporation
4th Floor, Bldg. 5 Energy Center
Merritt Road, Fort Bonifacio
Taguig, Metro Manila, Philippines

Environmental and Social Impact Assessment Reports or other documents relevant to environmental and social issues that are prepared for any new development projects are disclosed locally at each relevant community of the project affected areas. When appropriate, EDC conducts public consultations with various stakeholders prior to implementation. Environmental and social information about the company’s performance are also disclosed at EDC’s website: http://www.energy.com.ph/. A local language copy of the Environmental and Social Review Summary (ESRS) will be made available at the corporate offices and available for public review and comment on request.

**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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