While all Performance Standards are applicable to this investment, IFCs 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. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
PS1 is applicable because the Project has potential environmental and social risks and impacts. PS2 is applicable because for the implementation of the Project, the Company will have both direct workers and contracted workers. PS3 is applicable because the Project has potential adverse impacts on human health and the environment, potential opportunities to improve resources efficiency including energy and water and to reduce project-related greenhouse gas emissions. PS4 is applicable because the Project has potential risks and impacts to the affected communities.

PS5 is not applicable because the Project will be developed within the Company’s land and no additional land acquisition will be involved. PS6 is not applicable because the Project is located in a mostly agricultural area mixed with several industrial facilities with no adverse impacts on biodiversity or ecosystem services. PS7 is not applicable because the Project will not affect any indigenous peoples. PS8 is not applicable because the Environmental Impact Assessment (EIA) report shows that there are no items of cultural heritage identified within the Project’s area of influence.

The Project to use recycled paper to produce corrugated paper and cardboard will contribute to the country’s overall recycling rate of wastepaper. The Project involves a 50MW captive lignite-based CHP plant. The CHP plant will have high energy utilization efficiency. The Company plans to adopt various best available techniques to minimize environmental impacts of the paper production including the CHP plant. Based on this, the Project has limited potential environmental adverse impacts and is a category B project in accordance with IFC Policy on Environmental and Social Sustainability.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives. effluent from the paper mill, to be mitigated by advanced wastewater treatment process and high water utilization efficiency;
air emissions from the CHP plant, to be mitigated by use of circulating fluidized bed boiler technology and air emission control measures (e.g. limestone injection plus flue gas desulfurization);
non-hazardous waste such as rejects from the paper mill, ash (if analysis results indicate non-hazardous) from the CHP plant, sludge from wastewater treatment plant (if analysis results indicate non-hazardous), to be mitigated by utilization at the cement factory, etc.;
environmental risks of traffic accidents involved with chemicals, to be mitigated by the emergency response plan; and
greenhouse gas emissions, to be mitigated by high paper mill process efficiency (adoption of state-of-the-art processing technology) and high energy utilization efficiency of the CHP plant.

Environmental and Social Assessment and Management System:
The Company is working to establish the integrated environmental, health and safety and quality management system in line with ISO 9001, ISO 14001 and OHSAS 18001 as the Project starts commercial operation. The Company has an environmental engineer and occupational health and safety specialist working towards this goal. Kipas Holding has an Environmental Policy at holding company level, and this is applied for the Company. The Policy includes statements on pollution prevention and abatement, working in compliance with the local and international standards, raising awareness among all employees that they are responsible for this policy and environmental laws while fulfilling their duties. It also states that Kipas Holding targets certification of ISO 14001 for fulfillment of this environment policy and has taken steps towards this goal including building wastewater treatment plants for textile business, promoting waste segregation and recycling / re-use activities, using internationally certified environment-friendly chemicals and raw materials in their production processes and producing the least waste with most efficient production by performing resource planning. Kipas Holding has established Quality Management Department to assist implementation of these activities. Kipas Holding will provide technical and managerial support to the Company to establish the Company’s management system.

Identification of Risks and Impacts:
The Company retained an independent environmental consulting firm (CINAR Muhendislik Musavirlik A.S.) to conduct an environmental impact assessment “KipasKagit (Paper) Manufacturing Plant and Power Plant (50MW) Integrated Project, October 2011 (“EIA” report), as required by the Turkish EIA regulation. The EIA report was reviewed by the Ministry of Environment and approved on December 1, 2011. In accordance with the Turkish EIA regulation, the Project will acquire one integrated environmental permit covering project permit (construction of new installation), water use and discharge permit, waste management operation permit, hazardous substance consent permit, noise permit and air quality permit. This integrated environmental permit will be completed during the first three months of operation.

The Company conducted an alternative assessment of fuel for the CHP plant as part of the EIA. The Company reviewed the option of using coal and natural gas and selected the coal option as a financially and technically viable option based on the following: (i) using a CFB boiler with adequate pollution control measures can reduce environmental impacts of using coal to the level comparable to that of using natural gas with regards to SO2, NOx and PM, (ii) coal option can produce ash which can be utilized as a raw material for the Kipas Holding’s cement operation, (iii) dependence on imported natural gas may have frequent interruption due to political reasons. For the selection of combustion system, the Company reviewed the Best Available Technique options (e.g. CFB boiler, CHP operation, limestone injection and flue gas desulfurization (FGD) for SO2 control), and selected these to best supply the needed heat and power for the paper mill operation.

Management Programs:
As part of the EIA, the Company prepared the detailed environmental mitigation measures plan (Table 6-1 of the EIA).

Key mitigation measures during the construction phase include:
-Air emissions: will meet the measures in the regulation, will take precautions to minimize dust emissions such as rehabilitating the existing roads ,covering the construction materials and keeping the moisture level on top of the materials at 10% and de-watering the roads when needed; and
-Wastewater: will be treated at the WWTP and the sludge will be treated in the sludge de-watering and filter system to the 65% moisture level and will be sent to the municipality for final disposal.

Key mitigation measures during the operational phase include:
-Wastewater: will be treated in the wastewater treatment plant as explained in the EIA. The sludge will be conditioned and treated in the sludge de-watering filter system to the 65% moisture level and will be sent to an accredited laboratory to determine whether it can be considered as hazardous waste. If the sludge is non-hazardous, options will be to send it to the municipality for final disposal, or incineration at Kipas’s cement factory. The company will also study the possibility of burning the sludge in the fluidized bed boiler.
-Air emissions: The emission levels will be in compliance with the maximum limits in the Industrial Air Pollution Regulation and Air Quality Regulation. The Company will do necessary adjustments to meet the new limits after Turkish Regulations adopt EU limit values. Major air pollution mitigation measures include lime stone injection at CFB boiler and additional flue gas desulfurization to reduce SO2 emissions, low NOx emission due to CFB boiler, dust removal (either electrostatic precipitator or fabric filter) system. Emissions will be within World Bank Group EHS Guideline values; and
-Chemicals: All chemicals used on site will be labeled and stored appropriately and the company will meet the requirements set forth in the relevant regulation.

Organizational Capacity and Competency:
The Company has about 60 staff to develop the Project. Because this is Kipas’s first paper plant, the Company has recruited capable officers with sector knowledge and experience including an environmental engineer and a health and safety specialist who are managing the EHS aspects of the Project.

Emergency Preparedness and Response:
As part of the EIA, an Emergency Response Plan has been prepared. The Plan addresses the responsibilities the emergency response coordinator and the emergency response team, and specific emergency response actions for each emergency situation (accident, earthquake, fire, storm, road accident and spill). The Company will update this Emergency Response Plan based on the final arrangement with contractors for the construction phase, and reflecting the final operational settings for the operational phase.

Monitoring and Review:
The Company plans to implement various monitoring programs to monitor environmental performance of the Project and the regulatory compliance status. Table 6-2 of the EIA describes the environmental, health and safety monitoring programs.

Key monitoring programs during the construction phase include:
-Air Emissions: Dust emission will be monitored every 6 months or whenever there is a complaint. The measurements will be performed by an accredited laboratory;
-Noise and Vibration: Noise will be monitored in the closest residential area every 3 months or whenever there is a complaint. Vibration will be monitored whenever there is a complaint; and
-Wastewater: Visual monitoring and laboratory measurements will be performed continuously and as required by the regulation.

Key monitoring programs during the operational phase include:
-Air Emissions: Air emissions will be monitored in the stacks and ambient air quality will be monitored around the closest residential area. The measurements will be performed by accredited companies and as required within the scope of the Environment Permit. The stack emissions will be continuously monitored;
-Noise and vibration will be monitored in the facility, closest residential area and sensitive areas around the facility. Measurements will be performed by accredited company whenever there is a complaint. The measurements for the facility (ambient noise) will be performed in one day and in the closest residential area, the measurements will be performed for 15 days continuously; and
- Effluent: The Ministry of Environment requires the Company to report effluent measurements twice a week from an accredited laboratory and to install an online monitoring system to continuously transfer data to the Ministry.

The Company’s environmental engineer and occupational health and safety expert will monitor the progress and effectiveness of the management program. As part of the integrated environmental, health and safety and quality management system, the Company will establish and implement internal auditing system to verify compliance status of the Project and progress towards the environmental goals of not only the Company but also the Kipas Group.

Working Conditions and Management of Worker Relationship:
The Company has currently 60 direct employees and also mobilized several contractors to construct the Project. The Company has a Human Resources Policy which states that the Company will meet the professional and developmental needs of the employees, adopt equal opportunity principles, provide job-specific and other training opportunities, establish career and performance management mechanisms, and motivate employees for mutual benefits.

The Company’s management makes it clear in its communication with employees that every employee is free to join a workers organization. Prior to the start of the Project’s operation, the Company plans to place complaint boxes in various locations within the Company’s premise and establish a system where workers can express complaints, if any, and those complaints will be reviewed by workers’ representatives, HR management, and worker health and safety representatives. The Company will not employ children – none of the employees is under the age of 18, nor any forced labor.

With regard to collection of the recovered wastepaper by third party contractors, the Company is aware of the potential risk of child labor and poor health and safety management. Third party contractors that will collect and deliver recovered wastepaper will all be licensed firms controlled by the Government of Turkey. The Company will regularly monitor the performance of those third party contractors to ensure that risks of child labor and poor health and safety management are minimized.

Occupational Health and Safety:
The Company has established its Health and Safety Handbook dated 2012. The Handbook contains Kipas Kagit’s Occupational Health and Safety Policy, description of the Occupational Health and Safety Committee including functions and procedures, and various health and safety instructions about safety signs, risk assessment, work accidents, safety equipment, chemicals, machinery, electrical handling, noise, thermal conditions, fire safety, safety education and first aid. The risk assessment studies will be performed by the certified OHS specialist of Kipas Kagit. The Company will provide appropriate training to workers on occupational health and safety issues. Personal protective equipment will be provided to relevant workers and periodic checks of use will be conducted in accordance with the local regulations.

The Company has selected to work with a reputable international fire safety consulting firm so that employee can receive high quality training on fire protection and safety, especially considering the risk of paper production process. The training will cover acceptable workplace conditions, fire risk assessment, appropriate warning signs, and protective equipment. The Company plans to establish a fire-related security unit that will be responsible for coordinating all necessary materials and knowledge.

Workers Engaged by Third Parties:
During the construction of the Project, the Company will work with several contractors. The Company is using commercially reasonable efforts to incorporate the Company’s requirements on working conditions and health and safety requirements in contractual agreements with such contractors.

Resource Efficiency –Utilization of wastepaper and other solid wastes:
Waste paper collection: The Company will use (i) recovered paper (RCP), (ii) old corrugated containers (OCC) and (iii) mixed waste paper, as raw material in the container board production. Recovered paper collection is organized through collection companies and its main sources are supermarkets and retail, printing converting and publication companies. Collection and sorting companies have to be licensed by the Ministry of Environment. The Company will purchase recovered paper either from those licensed companies or public recycling centers.

In 2010 Turkey consumed 4.7 million tons of paper and board, and collected 2.1 million tons of recovered paper (RCP) with the RCP collection rate of 44%. Average RCP collection rate in urban areas in Turkey is as high as 70 to 80%, equivalent to the average of Western European countries, and there exists significant potential to increase collection in the Eastern parts of the country. The Project is well positioned to exploit this opportunity through its location.

Furthermore, the solid waste (ash from the CHP plant) and the flue gas desulfurization by-products will be 100% utilized by Kipas’s cement factory, as summarized in under the Waste Management paragraph of this section. Sludge from wastewater treatment plant is planned to be used as fertilizer or transported to the cement factory for disposal.

Resource Efficiency – Energy efficiency and greenhouse gas emissions:
The Company plans to adopt the advanced paper mill technology with estimated electricity and heat consumption performance from 415 to 460 kWh/ton of paper produced and 6.27 GJ/ton of paper produced. These are at least comparable to the good international industry practice levels (e.g. IPPC Reference Document on Best Available Techniques in the Pulp & Paper Industry, Dec 2011, 700 – 800 kWh/ton of paper produced and 6 – 6.5 GJ/ton of paper produced.

The Company is planning to build its own Combined Heat and Power (CHP) plant to supply heat and electricity for the operation of the paper mill. Compared with the heat or electricity only plant, the captive CHP plant can achieve higher energy utilization efficiency and is considered as the most effective option to reduce the overall amount of CO2 released where the demands for heat and power are concurrent and where the heat demand, in terms of quantity and temperature can be met using heat from the CHP plant. The Company selected the coal-fired circulating fluidized bed (CFB) boiler CHP plant based on the alternative assessment conducted. The CHP plant is expected to have the overall energy utilization efficiency of around 70 % , much higher than the typical new coal-fired CFB boiler plant efficiency (around 40%). It should be noted that the above estimated efficiency is based on the assumption that 50MW CHP plant will be utilized to supply needed heat and power to the Project and the forthcoming potential expansion. The efficiency level will be slightly below 70 % until the future expansion is developed. Overall GHG emissions will be around 54% of the level that would have been associated with a coal-fired boiler providing process heat only, with electricity imports from the grid.

Furthermore, biogas with composition of about 70 to 80% methane will be recovered from the Project’s wastewater treatment plant (about 17,000 to 20,000 m3/day, with 6,500 to 7,500 kcal/m3 calorific value), and the Company plans to utilize the biogas (equivalent to about 5.3 MW input) as supplemental fuel to coal. This could reduce the coal consumption by about 2.2%.

Because of the high energy utilization efficiency of the captive CHP plant, the CO2 emissions from the CHP plant (without considering the biogas replacement effects) is estimated to be 681,000 ton CO2 equivalent per year, with CO2 emissions performance of about 472 gCO2/kWh (electricity and heat combined). This CO2 emissions performance of the CHP plant is much better than the current Turkish average levels of coal-fired CHP sector (1,032 gCO2/kWh from electricity and heat generation using coal, 2007 – 2009 average, CO2 Emissions from Fuel combustion (2011 Edition) by International Energy Agency), and also better than the average performance in Turkey considering all energy sources (484 gCO2/kWh, 2007 – 2009 average).

In addition to the coal consumption for the CHP plant, the Company estimates to use about 410,000 liters of diesel for forklifts (emitting about 1,126 ton CO2/year). In total, the Company’s GHG emissions (coal consumption for the CHP plant, and diesel consumption for the forklifts) are estimated to be about 682,000 ton CO2 equivalent per year. The Company will estimate GHG emissions annually.

Resource Efficiency – Water consumption:
Due to the advanced paper mill technology that the Company plans to adopt, the water consumption performance of the Project is estimated at about 7.1 m3/ton of paper produced, comparable to the good international industry practice levels of 7 m3/s or lower (IPPC Reference Document on Best Available Techniques in the Pulp and Paper Industry, December 2001.

Fresh water will be sourced from wells 1.8 kilometers from the project site (the other side of Osmaniye-Kahramanmaras road). In order to minimize water use, the Company selected to use the vacuum blower which will not use water during vacuum performing, rather than the liquid ring vacuum pump system (which is less expensive but uses more water). Water will be treated and some portion of the water is reused. The Company reviewed the option of achieving 100% recycling of water, but determined that it would not be feasible due to the inert COD content of the wastewater. It should be noted that the Company reserved a location at the basement of the wastewater treatment plant to add additional water treatment system (e.g. ultra-filtration membrane modules) for future needs. IFC will continue to work with the Company to review options to further improve water consumption efficiency. Closed cooling tower will be used to reduce water consumption for the CHP plant. Boiler feed water for the CHP plant will be made with reverse-osmosis from the well water.

Pollution Prevention – Air emissions from the CHP Plant:
The Project is designed to meet the Turkish air emissions standards which are as stringent as European Union standards (“Large Combustion Plant Directive”). Turkish standards are 200 mg/Nm3 (for SO2), 200 mg/Nm3 (for NOx as NO2) and 30 mg/Nm3 (for particulate matter) all adjusted at 6% excess oxygen level, more stringent than those of the applicable World Bank Group guideline limits which are 900 – 1,500 mg/Nm3 (for SO2), 510 mg/nm3 (for NOx as NO2) and 50 mg/Nm3 (for particulate matter). The CHP plant will use a mixture of local Turkish coal (of lignite quality) and imported Russian coal. The sulfur content of the local Turkish coal is 8.26 %, whereas the sulfur content of the imported Russian coal is 1.29%. The Company plans to use mixture ratio of local Turkish coal and imported Russian coal at about 70 to 30 or 80 to 20. To control sulfur dioxide emissions, the Company will use limestone injection, an effective control measures considered as Best Available Techniques for CFB boilers, and in addition, a secondary flue gas desulfurization to meet the Turkish emission standard. The CHP plant will have a dust removal system (either electrostatic precipitator or fabric filter) to meet the emission standard. The stack height is designed as 90 m to ensure sufficient dispersion of air pollutants and to minimize impacts on ground concentration in line with Turkish ambient air quality standards.

Pollution Prevention – Wastewater from Paper Mill:
The liquid effluent from the paper mill will be treated in the modern two stage (anaerobic and aerobic) biological process strengthened by tertiary treatment. The treated water will be used again in the process and the remaining effluent will be discharged into a small river called Imali, a tributary of the river Aksu. The river Imali is used for industrial effluents discharging channel in the area, and the Company estimates that the treated effluent from the Project will be cleaner than the quality of the existing river.

The wastewater treatment plant will have a treatment capacity of 13,560 m3/day, large enough to treat wastewater from both the paper mill (12,300 m3/day) and from the CHP plant (1,000 m3/day), or in total 13,300 m3/day). The Project’s effluent levels (COD 0.61 kg/t, BOD5 0.18 kg/t, TSS 0.31 kg/t, Total Nitrogen 0.031 kg/t, Total Phosphorous 0.006 kg/t) are estimated in the EIA as daily average under the worst scenario, and are expected to meet the World Bank Group effluent guidelines for pulp and paper facilities – recycled fiber without deinking (COD 1.5 kg/t, BOD5 0.15 kg/t, TSS 0.15 kg/t, and Total-N 0.05 kg/t, Total P 0.005 kg/t) which are presented as annual average values, and their compliance requires the daily average be not greater than 2.5 times the annual average values. The Company will treat the wastewater to meet the Turkish and World Bank Group EHS Guideline limits.

Pollution Prevention – Waste and Hazardous Materials Management:
The major solid wastes from the Project include bottom ash from the CFB boiler, fly ash from the dust removal system, and by-products from the Flue Gas Desulfurization process. All these will be utilized as cement raw material at Kipas’s existing cement factory (Kipas Cimento Sanayii, or KCS) located in Narli, Kahramanmaras, about 40 km from the Project site. They will be transported by special cement trucks. Other hazardous (e.g. used oil, used batteries) and non-hazardous wastes are collected, stored and disposed separately, in accordance with the local regulations. Hazardous chemicals will be stored in both the chemical storage area and warehouse storage area appropriately.

Community Health and Safety:
The closest residential area is about 500 m, and the nearest school and kinder garden are about 1.0 km from the Project site. The EIA concludes that with the proposed mitigation measures, the environmental impacts (e.g. air quality, noise) are minimized to comply with the relevant environmental standards. The Project will increase the number of trucks using the existing highway. Those trucks mostly transport non-hazardous materials (collected waste paper, paper products, ash from the CHP plant) but some trucks deliver limited amount of hazardous materials such as chemicals. The Company’s Emergency Response Plan includes preventive measures and response actions to minimize risks and impacts of the Project’s road transportation of hazardous materials.

Security Personnel:
The Project will involve contracted workers who will provide general security service to safeguard its property (e.g. security guards to protect the property). The security situation in the Project area is relatively good and no major risks to the workers or community villagers by the Company’s security arrangements are expected.

The Company participated in the public participation meeting held in Kilili town by the Ministry of Environment on June 23, 2011 The official minutes show that one question was asked about the selection of coal instead of natural gas for the CHP plant. Kipas explained why they chose coal with the summary of the alternative assessment conducted as described under PS1 section (achievable environmental performance of using coal with advanced technology that would be comparable to using natural gas, benefit of using coal that coal ash can be used as a raw material for Kipas’s cement production, and stability of coal supply against imported natural gas). Another villager thanked Kipas for investing in this Project which will provide job opportunities for the hosting village. The minutes show that there were no concerns presented by the people. In line with Kipas’s corporate sustainability program, the Company is planning to identify community development activities in an education sector to support. Kipas will continue to carry out ongoing community engagement activities to ensure that villagers’ concerns are addressed and to keep villagers informed of the updated status of the Project’s implementation.

The environmental impact assessment (EIA) listed below, prepared for the Project, is disclosed at the Ministry of Environment website:
Kipas Kagit Uretim Fabrikasi Ve Enerji Santrali (50MW) Entegre Projesi, CED Raporu, Ekim 2011
http://www.csb.gov.tr

The same copy is also available at Kipas Kagit office:
Address: Karacasu Karaziyaret Mahallesi faith Sultan
Mehmet Caddesi No 1/17
Merkez / Kahramanmaras
Tel; 344-236-3800

Further information can be obtained at:
Nuray Acikgoz
Chemical Engineer
KİPAŞ KAĞIT SAN. İŞL. A.Ş.
Telephone: +90 344 692 2520
Email: mailto:nacikgoz@kipaskagit.com

Haci SERBETCİAssistant CoordinatorKİPAŞ KAĞIT SAN. İŞL. A.Ş.Telephone: +905307824073Email: mailto:hserbetci@kipaskagit.com

This ESRS also has an attachment of the above EIA document:

Broad Community Support is not applicable for this project

Current client performance is aligned with applicable Performance Standards and EHS Guideline requirements. No ESAP is required.