Key risks and issues related to this investment include the Company’s capacity to: i) undertake adequate social and environmental assessment commensurate with the impacts of the Company’s projects during both construction and operations phases including the assessment of potential cumulative impacts; ii) manage the social, environmental, health and safety performance of its contractors in accordance with good international practice; iii) ensure fair, safe and healthy working conditions during construction and operations for direct employees as well as for the contract workers; iv) ensure proper handling of hazardous materials, and management of air emissions, wastewater, solid and hazardous waste during construction and operations; v) ensure appropriate management of the impacts of construction and operations on local ambient air quality, community health, safety and security and consult and engage with potentially project-affected communities; and vi) minimize adverse impacts of construction and operations on the natural flora and fauna, including the maintenance of adequate ecological flows in the rivers utilized for power generation in accordance with local requirements and IFC Performance Standards.
Environmental, social, health and safety issues that require ameliorative measures are included in the Environmental and Social Action Plan (ESAP) and will be addressed by the Company. E&S issues relating to the investment are summarized below along with specific information on how potential impacts and risks are addressed by the Company. Upon implementation of the featured mitigation measures described below and in the attached ESAP, the project will comply with environmental and social requirements, namely the laws and regulations of Indonesia, recognized good international industry practice, IFC’s Performance Standards on Social and Environmental Sustainability.
Performance Standard 1: Social and Environmental Assessment and Management Systems
Upon implementation of the below, MPI have demonstrated that the Company activities will meet IFC Performance Standards requirements.
A social and environmental assessment of PT Mitra Energy Batam (MEB) was conducted and approved in August 2004 by the Batam City AMDAL Commission, with similar assessment studies being undertaken for the PT Dalle Energy Batam (DEB) project in 2006. These assessments were conducted under the Indonesian UKL/ UPL system (Environmental management & monitoring). Following additional planned expansions at DEB, the combined asset capacity triggered the need for a full Environmental and Social Impact Assessment (ESIA), referred to as an AMDAL under the Indonesian regulatory system, completed and approved in February, 2011. The impacts and risks of the remaining three operating small simple cycle gas turbines of 7MW, gas engines of 12MW and 12MW located at South Sumatra were sufficiently identified such that these assets were installed and operate in a manner consistent with Indonesian regulatory requirements.
To develop the separate gas fired power plant on Batam Island (“UBE Project”), MPI will improve the integration of potential project E&S impacts into the Front End Engineering Design (FEED) stage of the project. Moving forward, the UBE Project will augment existing FEED studies with complimentary ESIAs to ensure the project development will be consistent with Indonesian regulatory requirements and IFC’s Performance Standards.
In planning and developing small hydro assets (<10MW/ asset) within Indonesia, MPI will develop corporate policies and procedures to ensure that E&S considerations are integrated into all phases of current and future project developments in a manner consistent with host Indonesian national requirements and IFCs Performance Standards.
These policies and procedures will form a part of a corporate wide Social and Environmental Management System that will require Environmental and Social Impact Assessments (ESIAs) are undertaken at an appropriate stage in the project development cycle, such as the Front End Engineering Design (FEED) phase or similar, or undertake an environmental audit that is consistent with IFC’s Performance Standards of all prospective projects and/ or acquisitions. This will result in the development of an Environmental and Social Management Plan (ESMP) for each new project setting out: i) measures to mitigate adverse direct and cumulative impacts, including impacts arising from associated facilities; ii) monitoring requirements for ensuring the mitigation measures are implemented effectively and in a timely manner; iii) organizational and financial resources for carrying out the measures; iv) an implementation schedule for these activities; and v) an appropriate incentive structure (including provisions for reward and penalties) to ensure plans are implemented. In the instance where MPI proceeds with the acquisition of an existing or greenfield development project(s), the ESMP would form the basis for the project target acquisition company’s Health, Safety, Environment and Social (HSE&S) management system.
Existing corporate level EHS&S policies and procedures are developed and implemented by MedcoEnergi’s, the parent company, Health, Safety, Environment and Quality (HSE&Q) management system. Existing policies cover health and safety in the work place, environmental protection and conservation, energy conservation and corporate governance. At the operational level, the Batam Operational Assets operate an integrated HSE&Q management system that is organized to comply with ISO 9001, ISO 14001, and OHSAS 18001. In addition, the Combined Cycle Gas Turbine (CCGT) aspects of these assets are in the process of being registered as a Clean Development Mechanism project under the UNFCCC framework. Similarly, MPI are under long term contract to provide operations and maintenance services for the Tanjung Jati B, a 1,320 MW power plant located in Central Java operated on behalf of Perusahaan Listrik Negara (PLN), the Indonesian Government electricity producer. These operations have developed an integrated HSE&Q management system, also organized to comply with ISO 9001, ISO 14001 and OHSAS 18001.
Because the Company would benefit from the development of corporate level policies and procedures specific to the MPI power generation business, as part of the current investment, MPI will develop its own HSE&Q policies and procedures that are consistent with IFC’s Performance Standards requirements. MPI will engage a qualified third party consultant to develop a corporate Social, Environmental, Health and Safety Management System (SEMS), which will be finalized within a timeframe agreed with IFC, to ensure that its individual projects are constructed and operated in a manner consistent with host country requirements, IFC’s Performance Standards and good international industry practice as detailed in IFC’s Environmental, Health and Safety Guidelines.
The MPI SEMS will consider the E&S management of future projects to be implemented and/ or acquired by the Company. MPI will engage qualified consultants to: i) screen projects for HSE&S risk; ii) review assessments for completeness and consistency with IFC’s Performance Standards and EHS Guidelines; iii) identify the need for supplemental studies; iv) undertake the supplemental studies, appropriate update of existing EIAs and/ or undertake ESIAs in accordance with IFC Performance Standards; v) undertake regular project audits during construction to assess status of implementation of the project specific ESMP and implementation of corrective actions identified in the previous audit; vi) undertake annual audits to assess effectiveness of the corporate SEMS and status of implementation of corrective actions identified in the previous annual SEMS audit; and vii) build the capacity within the Company for corporate-wide HSE&S management. MPI’s corporate HSE&S Manager and the HSE&S staff assigned to each project company will be responsible for ensuring that the ESMP and Corrective Action Plans are implemented by each respective project company throughout the construction and operations of the project.
With regard to MPI assets, including contracted and sub-contracted resources, under the MPI corporate level SEMS MPI will implement procedures for: i) ensuring that contractors deployed by each project company meet relevant provisions of MPI’s SEMS and ensure implementation of the ESMP as applicable to their respective activities; ii) HSE&S training of MPI employees and contract labor; iii) procedures for recording, investigating, reporting and undertaking corrective action in relation to HSE&S incidents including those involving contractor and sub-contractor labor; iv) periodic monitoring of HSE&S performance; v) management review of SEMS effectiveness and implementation of measures for system upgrade; and vi) annual reporting of HSE&S performance to MPI’s Board of Directors, regulators and investors.
Existing owned MPI operational assets utilize both simple cycle and CCGT technologies. MPI ensures that all existing equipment, plants and infrastructure meet good international industry practice. Emissions from these assets and procedures to handle, store and dispose hazardous and other waste are consistent with regulatory requirements are consistent with Indonesian regulatory requirements.
Specifically, the Batam Operational Assets integrated HSE&Q management system sets out a monitoring program that is consistent with host Indonesian regulatory requirements. The program includes air source point emissions, ambient air quality, noise and water monitoring. Similarly, the Tanjung Jati B power plant, operated by MPI on behalf of PLN, undertakes a comprehensive monitoring and reporting program that is consistent with both host Indonesian regulatory standards and multilateral financing institutions, namely the Japanese Bank for International Coorporation (JBIC). Both assets report to their relevant regional regulatory bodies as defined by the UKL/ UPL requirements. In addition, the TJBP operations provide monitoring reports through PLN to JBIC on a pre-agreed basis.
Ongoing monitoring at the Batam Operational Assets indicates that point source emissions are within Indonesian regulatory limits, although above IFC’s Performance Standards limits. MPI will develop an ambient air quality program to confirm any sensitive receptors within the project’s zone of influence are below acceptable ambient standards. However, should future monitoring results show that ambient concentrations are in excess of the applicable standards the Company will implement appropriate reductions in NOx emissions to achieve acceptable improvements within a timeframe agreed with IFC.
Site specific pollution prevention and mitigation measures associated with future projects will be identified during the project ESIA stage of the project development cycle. The Company will, as part of its SEMS, develop procedures to ensure that the environmental impacts associated with the construction and operation of its projects is managed in accordance with IFC’s Performance Standard 3 and applicable EHS Guideline provisions. Similarly, all future project structures will be designed in accordance with internationally accepted engineering standards for structural integrity that account for the various seismic conditions encountered in Indonesia.
Small hydro projects are often located in remote areas with the potential for associated limited scale land acquisition, and in rare cases resettlement and/ or interaction with Indigenous Peoples (IPs). MPI will as part of the SEMS develop formal procedures to ensure compliance of its project companies with the applicable host country requirements as well as IFC requirements for the management of land acquisition, resettlement, livelihood restoration of project-affected people and IPs. By example, whilst in the early stages of project planning the current preferred option for the UBE project is within an existing industrial area on Batam Island. Should resettlement be required as part of the project related development households and/ or businesses will be compensated at market rates. The Company SEMS will include procedures for development of project-specific resettlement action plans and livelihood restoration plans for projects involving physical or economic displacement, including those who have no recognizable legal right or claim to the land they occupy.
Biodiversity protection measures specific to each project location will be identified during the project environmental assessment and implemented by the project’s HSE&S team. The MPI SEMS will include procedures to assess, avoid and where avoidance is not possible mitigate material impact, if any, on threatened species of flora and fauna; ensure small hydro project design maintains adequate ecological flow within the water resource; assess impacts arising from supporting linear infrastructure including, but not necessarily limited to access roads, onshore and offshore gas pipelines and transmission power lines (including associated facilities); develop and implement construction demobilization and landscape restoration plan detailing a systematic restoration of the project area landscape following the completion of all civil works and the evacuation of construction sites, including muck disposal sites, material lay down areas and labor camps.
Within MPI’s Batam Operational Assets and the O&M contracted asset (TJBP), well defined organizational structures are in place that establish and maintain the integrated HSE&Q management systems. Both assets have appointed qualified HSE managers, who are supported with the necessary human and financial resources to deliver the asset SEMS.
To provide additional oversight at MPI corporate level to manage the medium-term asset and capacity growth strategy, be it via acquisition or development, MPI will appoint an appropriately qualified individual, supported by adequate financial and professional staff resources, who will have overall corporate responsibility for the development and implementation of the SEMS. Within a timeframe agreed with IFC, MPI will ensure that each of the subsidiary companies implementing future projects assigns a dedicated qualified HSE&S resources to manage site construction and operations. Similarly, EPC contractors retained to deliver the projects will deploy the necessary resources required by the Company SEMS.
MPI’s individual operations currently plan and implement training programs according to the national regulatory requirements. These include aspects such as the identification of workplace hazards; the use of personal protective equipment and collective protection equipment; and the roles and responsibilities of employers and employees. MPI also requires that employees and subcontractors have formal education and experience appropriate for the assigned functions and provides induction training covering aspects such as the technical competencies of the assigned work activity
Going forward, MPI will ensure that training policies and procedures are fully integrated into the corporate SEMS, ensuring current and future assets implement training programs consistent with the environmental, health, safety, and social risks of the business line activities. This may include, but not necessarily be limited to occupational health and safety risks such as excavation safety; confined space entry procedures; electrical safety; fall prevention and rescue; hazardous materials management; and general accident prevention training. Similarly, MPI will establish an internal communications program whose objective is to disseminate corporate policies and practices starting with a standardized induction program covering HSE&S aspects relevant to the individual job description.
PS2: Labor and Working Conditions
At present, MPI directly employs 460 personnel, of which 47 are office based staff in the MPI head office in Jakarta with the remaining assigned on a rotating basis to support field operations. An additional 222 are contract staff employed to support the Tanjung Jati B and Batam Operating Asset operations undertaking security, cleaning, ad hoc administration, heavy equipment operating, company car operating. In view of an expanding portfolio, the Company expects to increase the current staffing numbers in the near-term.
Oversight of all employment relationships is provided by the human resources function which is managed centrally from MPI’s headquarters in Jakarta. The employment of all office based staff in Jakarta is consistent with Indonesian Labor Laws (Law No. 13/2003). As required by law, Company policies are 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.. MPI upholds and recognizes workers’ rights to form and to join workers’ organizations of their choosing.
Oversight of employment relationships with subcontracted organizations and subcontracted labor is managed by the project, department or subsidiary company contracting the required services. Terms of engagement for subcontracted organizations or operations are as per Indonesian law.
The minimum employment age at MPI is 18 years. MPI ensures that child labor or forced labor is not employed directly or by subcontractors through verification of relevant documents. Although not explicitly stated, employment relationships recognize the principals of non-discrimination and equal opportunity. Employees have the right to freedom of association and have the opportunity to collectively represent to the management any issues or grievances that they may have. MPI will seek to formalize existing worker grievance mechanisms as part of the Company SEMS.
There have been no fatalities in MPI’s operational history with LTI rates well within industry norms. At the existing operational assets, incidents are investigated and any non-conformity with procedures recorded and, where necessary to prevent re-occurrence, new corrective actions are implemented.
Although MPI has been in compliance with applicable regulatory requirements, there is variance between the Company’s regulatory obligations when compared to IFC Performance Standard 2 and IFC EHS Guidelines on Occupational Health and Safety (OHS). As part of the agreed ESAP and SEMS development, MPI will review and develop an implementation plan to achieve internationally acceptable standards for OHS for its employees and sub-contractors. The Company will take corrective measures to enhance its training programs, and implement standard operating procedures that specifically seek to mitigate OHS risks during land clearing and related preparatory work, and construction. It is anticipated that the Company''s occupational health and safety performance will achieve consistency with applicable IFC policies and guidelines for the sector only after recommendations from the external consultant are implemented.
