Key environmental, social, health and safety impacts that were reviewed include: NCG’s system to assess and manage E&S issues during construction and operation phases of each of its businesses; land acquisition issues for development sites; labor and working conditions; community and staff occupational health and safety issues; life and fire safety design and provisions; management and minimization of air, water and solid pollutants during construction and operation; management and mitigation of bird collision risk at the wind farm, energy and water usage efficiency; and community engagement.
Newcom will manage E&S issues in accordance with applicable local laws and regulations and international standards, including IFC’s Performance Standards on Social and Environmental Sustainability, and IFC Environmental, Health and Safety Guidelines (General; Telecommunications; Airlines; Wind Energy; and Health Care Facilities). NCG has presented plans to address environmental and social (E&S) impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with host country laws and regulations, IFC Social and Environmental Performance Standards, and IFC Environmental, Health and Safety Guidelines (General; Telecommunications; Airlines; Wind Energy; and Health Care Facilities). Information about how these potential impacts will be addressed by the Group is summarized in the paragraphs that follow.
PS1: Social and Environmental Assessment and Management Systems:
Social and Environmental Assessment:
Newcom Clean Energy LLC assessed E&S risks associated with the SALKHIT UUL wind farm project mainly through commissioning a consultant (Black & Veatch) to conduct an environmental and social impact assessment (ESIA) which resulted in the ESIA report being issued in October 2008. The Chief Investigator of the Ministry of Environment of Mongolia subsequently evaluated the ESIA and provided approval for the project to proceed with a number of conditions to be met (e.g. continually advertise project details to rural residents and the public; restore soil and fauna conditions at the site after construction). Newcom Clean Energy LLC is in the process of addressing each of the required follow-up actions, and refining the construction phase environmental and social management plan (ESMP), which will be ready before start of construction.
The Company has recently placed a public tender for the general contractor, and the ESIA and E&S requirements have been included in tender documents and communicated to bidders, who will be required to insert E&S terms and conditions into legal agreements with sub-contractors and to monitor their performance. During construction, both the Company and its technical consultant will also have personnel regularly conducting site supervisions to ensure E&S compliance of contractors.
Newcom Property and Development Company (DevCo) is in the process of developing a portfolio of landholdings and real estate projects. Its E&S due diligence process focuses on looking at the legality of potential land acquisitions, and managing its workforce according to its human resource policy. DevCo has plans to develop an overall corporate sustainability brand and more specifically a brand for its real estate business based on sustainability. In this respect, the company intends to build a team of real estate professionals and will include an experienced sustainable building specialist. The company will develop policies and procedures encompassing sustainable building design, including sustainable procurement and waste, energy and water use; and management of contractors to ensure environmental compliance. Programs will be set up to monitor use of resources to maximize resource efficiency.
In terms of E&S risk management, Mobicom as a telecommunications provider focuses on management of its workforce and contractors through relevant company policies and procedures.
Eznis’ E&S management system focuses on safety aspects and it adopts a detailed safety assurance process in its aircraft acquisitions. The Company purchases aircrafts previously flown in Europe and the U.S. by major commercial airlines. All purchased aircrafts are approved by EASA (European Aviation Safety Agency), FAA (Federal Aviation Administration), and MCAA (Mongolian Civil Aviation Authority). Before entering into a letter of intent (LOI) to purchase an aircraft, Eznis requires the vendor to provide relevant third-party inspection, test and audit reports. Company engineers then inspect the proposed aircraft in detail. The LOI specifies required repairs and maintenances that the vendor needs to perform, which need to be satisfactorily completed before a purchase agreement is signed.
The planned Hangar construction design references NASA and the U.S. military hangar design standards, including design aspects relating to noise insulation and proper sanitary waste drainage. As part of the Newcom corporate E&S management system, the Company will apply E&S standards to contractors selected for construction of the hangar.
The Newcom JV hospital project is currently at an early planning stage and the JV entity has selected the technical design consultant VAMED (affiliated with the Hamburg University and the Austrian State Hospital) to develop a master design and planning document for the project. The JV has indicated that the hospital will be designed and developed to follow international operational and E&S standards, including fire safety standards, and this will include VAMED overseeing the E&S compliance of the master contractor and its sub-contractors through on-site supervision and through relevant terms built into contractual agreements. The JV is in the process of selecting an operator of the hospital. Once selected, the operator will be responsible for developing operational and E&S standards - e.g. waste emissions, biomedical wastes - and for monitoring day-to-day E&S performance including that of contractors and suppliers.
At the corporate level, NCG currently does not have a E&S management system. Responsibility for managing E&S issues mainly rests with each subsidiary company (e.g. At Newcom Clean Energy, the General Manager and E&S officer handle E&S related matters such as working with the ESIA consultant firm). To ensure a standardized and consistent approach across subsidiary companies, NCG will develop a corporate E&S management system (ESMS) appropriate to the level of impacts and risks typical of its business lines and is compliant with IFC PS1. The priority will be to ensure that there is a corporate level management framework that enables the Group to screen for potential E&S issues at the early stage of a potential investment, and manage consistently E&S aspects of each business as the Group grows, through a defined framework of policies and objectives and a management program to achieve these objectives.
As a first step, NCG will assign responsibility at the group level for developing and implementing the ESMS. It will then formalize the corporate managerial duties and documentation, including monitoring and reporting mechanisms for E&S performance in all operations and provide the necessary training and resources including CAPEX.
The ESMS will contain policies and procedures on aspects such as the following: the use of contractors; occupational health and safety including construction safety; life and fire safety (“L&FS”); emergency prevention and planning; management of hazardous materials and waste; resource conservation; biodiversity management; and community engagement and grievance redress mechanisms. Newcom will also include in the ESMS a land acquisition and resettlement protocol that ensures that all land acquisition activities are compliant with IFC PS5.
Training:
The Group has ongoing programs in staff training and talent development. NCG intends to continue training activities to ensure it can access and maintain a high level of staff expertise.
PS2: Labor and Working Conditions:
NCG currently has 1800 full-time direct employees, of which 1140 work at Mobicom, 260 at Eznis, 220 at Newcom Property, 8 at Clean Energy, 140 at its Security Company and 30 at the Newcom head office. The male to female ratio in head office is 60:40 and 50:50 in the subsidiaries. There are 50 students working on a part-time basis for Mobicom or as interns.
Working Conditions and Management of Workers Relationship:
The human resource (HR) practices of the Group and its companies abide by Mongolia’s National Labor Law requirements. Terms of employment and company human resources policies are communicated to all staff, and the remuneration package typically includes basic salary, a performance-based bonus, free transport to and from work, company-provided lunch during work days, access to low interest loans, pension scheme enrolment, and annual leave days which increase with number of years of service. Social security coverage is extended to all staff as per National Labor Law requirements, as is payment for overtime work performed.
The Group has recently appointed a corporate HR director who is in the process of harmonizing practices across all subsidiaries through the following initiatives: (i) developing a common compensation and benefit policy including salary scales; (ii) developing a policy on working conditions; (iii) establishing an applicant database; (iv) organizing training for workers; and (v) administering Newcom Leadership Institute training activities for managers and management trainees.
Staff turnover in the past year ranged from 5%-20% among Newcom subsidiary companies, with the higher percentages occurring at service-oriented job functions such as call center customer service agents. The key reason for staff leaving the company is to pursue education overseas. Grievance redress is regulated by national law. Currently, there are monthly staff meetings in each division and staff can talk to the CEO directly or submit anonymous comments through the intranet. Newcom is in the process of setting up a grievance handling committee, composed of management and worker representatives. There have been no instances of any labor incidents such as strikes in the past few years.
Every member of staff has an open-ended employment contract according to national labor laws. The Company does not prohibit collective agreements. At present no staff is affiliated with any trade union. IFC finds no evidence of restrictions on freedom of association.
Occupational Health and Safety (OHS):
NCG has policies on providing proper working conditions, such as lighting, equipment; on safe driving; and on fire safety which comply with local regulatory standards. The Group states that there have been no fatalities or major accidents in recent years. There was an incident in 2009 whereby an employee fell off the ladder during work and the Company has taken steps to reinforce safety training.
DevCo and Eznis hold training sessions for and take necessary actions to provide employees with safe, sanitary working conditions, and also co-operate with entities such as the Mongolian Employers Union, Emergency Medical Services, National Emergency Management Agency, non-governmental agencies and tenants to foster workplace safety.
During construction of the wind farm project, a construction workforce of up to 80 persons is expected. Newcom Clean Energy will implement safety procedures in accordance with national labor requirements such as providing workers with necessary personal protective equipment (e.g. dust masks, hearing protection), ensuring trained on-site first-aid providers, storing materials in designated areas, and training workers on safety practices. As part of the ESIA follow-up actions, a E&S management plan will be developed for the operational phase and implemented as part of the project’s E&S monitoring program (refer to PS6).
Mobicom commissions professional organizations to provide safety training to staff and contractor workers. Annual audits are conducted by the National Emergency Agency and recommendations including those related to safety are implemented by the Company. Mobicom regularly inspects occupational safety conditions at contractor work sites to ensure that they follow Mobicom procedures.
Eznis follows a process of recruiting qualified and experienced pilots, and of recruiting and training new pilots according to FAA (Federal Aviation Administration) guidelines. Candidates to become new pilots, once identified, undergo intensive training at professional institutes in Sweden and Ireland; go through a trail observation period by the Mongolian Civil Aviation Authority; undertake a series of language, aptitude, and hand-eye-coordination tests which they need to pass in order to proceed. Those who proceed are then mentored by experienced Eznis pilots and attend flight school courses for two years in Florida, U.S.A., after which they sign a formal employment contract with Eznis. All schools attended by Eznis new pilots are accredited to the EASA-147 standard.
The JV hospital project is currently at an early planning stage and the JV is in the process of selecting the operator. Once selected, the operator will develop OHS policies and procedures for the operation phase and ensure that all staff and contractors understand and follow them.
NCG will introduce a group policy and procedures on OHS risk management and training commensurate with the risks in each business line. This will include procedures for management of health and safety during construction, operation and maintenance activities, including stringent clauses in construction contracts and site supervision. During construction and maintenance activities, Newcom Group will oversee compliance of contractors with OHS regulations, including use of PPE by the contractors'' workers and working conditions.
PS3: Pollution Prevention and Abatement:
The ESIA for the wind farm includes an assessment of the following key areas of pollution-related impacts during construction and operation: i) Increased surface run-off and pollution of surface water; ii) Potential pollution from suspended solids, oil and chemical spills, and from sewage discharge during construction; iii) Noise pollution. Impacts related to items i) and ii) are regarded as low to very low, and a number of actions are listed in the ESIA’s environmental action plan to mitigate such impacts. The impact on sensitive receptors was assessed to be either negligible or minor adverse. No mitigation will be required.
At Mobicom and DevCo, there are procedures in place to handle and discharge used machine oils and oil bottles and licensed subcontractors are hired to handle liquid and solid wastes. Liquid waste is collected on a daily basis and solid waste is collected 3 times a week from company buildings. Mobicom is in the process of studying energy conservation options such as optimizing the use of its on-site heaters and diesel generators. It uses VRLA batteries instead of traditional lead-acid cell batteries which eliminate the emission of gases on overcharge, and reduces room ventilation requirements.
Eznis does not currently monitor aircraft air emissions. The “Final Report - Airline Expansion Plan Technical Assistance Project – Phase II” prepared by the technical consultant IOS Partners Inc. states that Eznis’ airline expansion plans may have emission-related impacts, but that “current industry initiatives designed to minimize environmental impacts can mitigate these
Impacts”. The report refers to industry initiatives such as “improvement in fuel efficiency and associated emissions reductions”, “improvements in aerodynamics and reductions in weight, including new technologies such as winglets, raked wing tips, and composite materials, which increase efficiency, reduce fuel burn, and decrease noise”, and “efficient air traffic management systems (which can) minimize emissions and noise impacts”. Eznis will develop procedures to minimize air emissions and optimize fuel consumption.
The operation of the JV hospital will be undertaken by a specialist professional hospital operator. This company, once selected will be responsible for developing an Infection Control Policy and Procedures Manual and a biomedical waste management system. Treatment of all toxic effluent and hazardous solid waste will be managed in accordance with IFC Environmental Health and Safety (EHS) General Guidelines and Environmental Health and Safety Guidelines for Health Care Facilities. Should the hospital include an on-site boiler, NCG will ensure that its air emission levels (for NOX, SO2, and Particulate Matters) comply with the limits specified in the IFC EHS General Guidelines for small combustion units.
Green house gas emissions are estimated at around 13,500 CO2 equivalent per year, attributable to the use of about 680,000 kWh of grid electricity, about 300 air conditioners (R410 and R22 refrigerants) and 3,750 tons of jet fuel used by Eznis airplanes. Currently there is no use of coal and boilers at Newcom facilities and operations.
All Newcom subsidiaries have practices for safe disposal of hazardous wastes and commission licensed contractors. The development of the corporate ESMS will ensure the procedures are up to date and monitoring is undertaken regularly.
PS4: Community Health, Safety and Security:
Infrastructure and Equipment Safety:
Eznis aircraft maintenance is undertaken by in-house engineers, with maintenance support from SAAB, General Electric and Lufthansa Technic. Eznis Airways is routinely audited by leading independent safety audit agencies. The Company is in the process of obtaining IATA Operational Safety Audit (IOSA) accreditation, which is the benchmark for global safety management for the airline industry. It is expected this will be attained in the third quarter of 2012. Eznis also complies with the Civil Aviation Authority of Mongolia’s Aviation Safety Regulations.
Life and Fire Safety:
DevCo keeps fuel and lubricants in designated containers and storage areas with proper warning signage and where functional fire-fighting equipment (e.g. extinguishers) is present. Smoking, welding and open fire is strictly prohibited near fuel storage areas. Company buildings are equipped with proper and functional fire-fighting equipment, means of egress, and warning signage. The Company does not allow vehicles carrying liquefied gas to be parked near open fire and public places. The outside temperature of gas tanks is monitored to ensure that it does not exceed 45 Celsius and they are kept at a minimum 1 meter distance from radiators and 5 meters from any furnaces. Gas stoves on company premises are elevated 2.2 meters from the ground and placed in rooms with proper ventilation systems. There are safety procedures governing the loading and unloading of gas tanks containing flammable and hazardous gases to ensure proper handling to minimize accidental leakage into the environment. Suppliers of liquefied gases use designated vehicles for transport.
The JV hospital is at an early stage of planning – one of the equity partners provided the land plot as pay-in capital to the JV and there is an existing building structure at the site. A European hospital design consultant firm (VAMED) has been selected to prepare the design plan for this project. NCG will commission a qualified fire safety engineer, acceptable to IFC, to prepare a life and fire safety “Master Plan” (effectively a fire safety specification), which when adopted will cause fire safety aspects of hospital building design and operation to be compliant with all local requirements and an international fire safety standard (e.g. U.S. NFPA). The Sponsor will also will commission a post-construction fire safety audit of the facilities by a qualified fire safety engineer to confirm that the works were completed in compliance with the master plan.
Emergency Preparedness and Response:
Eznis has developed emergency preparedness and response procedures with which all staff are required to familiarize themselves. Newcom Property has developed a “NaimanZovkhis Building’s Disaster Mitigation Plan” which has been reviewed by inspectors from relevant Government agencies such as the National Emergency Management Agency prior to approval by Newcom senior management. The plan includes the following content: i) Description of natural disasters and emergency response (in accordance with the Mongolian Law on Disaster Protection); ii) earthquakes, contagious diseases, fatalities and emergency response; iii) staff responsibilities under the NaimanZovkhis Building’s disaster mitigation plan; iv) natural disaster’s mitigation plan; v) the disaster mitigation committee members and its role and responsibilities in cases of disaster events; vi) the disaster mitigation committee’s resolution.
As part of the Group ESMS, emergency plans will respond to the needs of L&FS requirements and include training on emergency evacuation, use of fire equipment and other applicable aspects identified by experienced emergency planning specialists in the planning process. The Company will include in the ESMS a training plan to ensure that all employees are knowledgeable of existing emergency procedures and emergency contingency plans, including evacuation routes.
The Newcom Group and its companies employ 80 unarmed security guards. There have been no reported security incidents at Newcom company premises.
PS5: Land Acquisition and Involuntary Resettlement
The 30,000 hectare wind farm site is located near Salkhit Uul (“windy mountain”), about 70km south-southeast of Ulaanbaatar. The site, in a sparely populated Gobi area, is land owned by the state from which NCG acquired its land use rights for a 60-year concession period. The initial concession covered the entire 30,000 ha area and NCG subsequently determined that it did not need the entire area for wind turbines and power lines, hence the concession was modified down to the current 12,000 ha. While the area is state land, up to 40 rural families have been traditionally using the area to herd their horses and dairy cattle. Herders interviewed by IFC were in support of the project which was seen as a generator of local development and income earning opportunities such as construction work for young herders. Newcom Clean Energy also has plans to help the herders and the local Government to develop a local tourism program as the wind park may attract weekend tourists from UlaanBaatar. IFC notes that herders who derive their income mainly from selling milk products in the summer and meat and cashmere in the winter, have access to the local railway station and travel often to UlaanBaatar to sell their products. Hence they have good access to markets and are above subsistence levels, and the wind project is not expected to negatively impact their livelihoods as they will be able to continue using the area for their livestock herds.
From the above findings, IFC concludes that herders will continue to have access to grazing land and are therefore not economically displaced, and that land acquisition for the wind farm site is consistent with PS5 requirements.
Land acquisition for Newcom residential projects and the joint-venture hospital project involved state land and were willing-buyer-willing-seller transactions.
Land acquisition used to be individually conducted by various NCG subsidiary companies, but is now being centralized under DevCo, which is in the process of developing a portfolio of land assets, including landholdings in western and southern Mongolia and in UlaanBaatar. NCG does not currently have a group-wide set of land acquisition and resettlement policies and procedures, and is committed to developing these as part of its ESMS, to ensure that its current and future land acquisition activities are consistent with IFC PS5 requirements (refer to PS1).
PS6: Biodiversity Conservation and Sustainable Natural Resource Management:
While the other businesses of Newcom currently do not have a significant effect on biodiversity conservation and sustainable natural resource management, the proposed wind farm has the potential to impact birds.
Newcom commissioned Black and Veatch to undertake an Environmental and Social Impact Assessment (ESIA) of the wind farm, which included an avian survey undertaken in May and June 2008 (‘the bird survey’). Observations at the site included migrating raptors using the area for hunting and raising offspring. Five of the bird species observed are on the IUCN Red List: the Black Vulture is designated as Near-Threatened; the Great Bustard as Vulnerable; the Steppe Eagle and the Upland Buzzard as Least Concern. At the time of the bird survey, the Saker Falcon was designated in the IUCN Red List as Endangered but has subsequently been reclassified as Vulnerable as the population decline was less severe than first thought. It is also designated as Vulnerable in the draft Mongolian Bird Red List. Although not recorded in the bird survey, the Demoiselle Crane, designated as Least Concern, is likely to breed in the area. All six species are widespread in Mongolia, indicating that the wind farm land area does not meet the criteria for critical habitat as defined by PS6.
The bird survey considers that there is potential for three types of impact. Direct habitat loss to construction of service roads and the turbine foundations and indirect habitat loss through disturbance, both of which can be minimized by careful site management; and collision risk to at least some of the species.
As food sources are not limited in the area, birds are likely to avoid the turbines during feeding activity. The collision risk is therefore likely to be limited to birds nesting in the vicinity of the wind turbines, and in particular, young birds when initially leaving the nest. During the 2008 survey, eight nests were found in the wind farm area (two Saker Falcon nests, 2 Upland Buzzard nests and 4 Steppe Eagle nests). The Scottish Natural Heritage (SNH) collision assessment model is the most widely used and accepted model in the UK, and is accepted by leading bird organizations such as BirdLife and the RSPB. This model considers a significant impact to be one in which the mortality rate exceeds 1% of the normal mortality of the individual species’ population. Given the range and population size of the three nesting bird species (the population size of the only Vulnerable species, the falcon, was estimated to be 2000-5000 in Mongolia in 2010, IUCN 2010), existing data suggests that the impact on raptors is not likely to be significant.
As there is no other known development planned in the neighboring area, assessment of cumulative impacts is not applicable at this time.
The assessment considers that there will be no significant residual impact on the ornithological features following implementation of the mitigation measures. In order to minimize the impact of the turbines, the company will develop environmental management plans, satisfactory to IFC, for construction and operation of the wind farm, which will include key mitigation measures such as, but not be limited to:
• Encouraging key species to nest away from the turbines by providing alternative nesting sites to enable establishment of nests prior to construction.
• Minimizing the possibility of enhancing raptor food sources (small mammals) in the proximity to the turbines; and minimizing food resources by surveying for and removing all livestock and wildlife carcasses (vulture and other scavenging bird food source).
• Placing “bird diverters” on all overhead transmission lines to discourage perching and designing towers and lines so as to reduce the likelihood of electrocution.
The Company will also commission a bird specialist approved by IFC to supervise implementation of the mitigation measures, undertake bird monitoring prior to and during construction and for the first two years of operation and use the results to refine the mitigation plan. The bird specialist will ensure that the construction and operation of the wind farm is legally compliant for all species with protected status in Mongolia.
