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 IFC's 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

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria as is described in the following sections.

Key environmental and social issues of the Project include; (i) capacity to manage environmental, health and safety, human resources and social elements in differing locations; (ii) labor and working conditions of direct and third party employees; (iii) compliance with local permits and licenses, including construction and operational permits; (iv) management of safety and emergency response during compression and transportation of the CNG; and (v) safety and integrity of NEOgas systems at compression stations and within clients premises.

The Project is expected to have positive environmental outcomes in that the use of natural gas leads to the replacement of other fuels (gasoline, diesel, fuel oil, etc.) thereby reducing greenhouse gas emissions and reducing air pollution.

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.

NEOgas has presented plans to address the potential environmental and social impacts to ensure the Project will, upon implementation of the specific agreed mitigation measures, comply with policies and standards internal to the Company, applicable national laws and regulations, IFC’s Performance Standards on Social and Environmental Sustainability (dated January 2012) and the applicable World Bank Group (“WBG”) Environmental, Health and Safety (“EHS”) Guidelines. The information about how these potential impacts will be addressed by the project is summarized in the paragraphs that follow, and in the Project’s Environmental and Social; Action Plan (“ESAP”) which is disclosed with this document.



Environmental and Social Assessment and Management Systems: Potential adverse environmental, social, and health and safety impacts associated with NEOgas' operations include; (i) noise generation from the compression units; (ii) fugitive emissions (natural gas) during regular operation and maintenance; (iii) potential risks to community (including workers) from natural gas leaks, fires and/or explosions, as a result of potential accidents during compression, transportation or delivery at the client’s premises; and (iv) environmental and social impacts during construction of the compression stations (e.g., waste generation, noise and dust emitted from construction). Such risks have been identified by the Company and depending on local requirements, the risks and mitigation measures are documented in form of environmental impact assessments, environmental plans or emergency response plans.



For new projects, NEOgas is responsible for the design of the facilities and projects while construction of the actual compression stations is subcontracted by NEOgas to experienced companies with supervision undertaken by NEOgas internally. Civil construction required at the client’s premises is the responsibility of the client, however NEOgas provides guidance on the safety features and technical requirements of the installation. Licenses and permits are obtained by NEOgas based on local legal requirements. NEOgas usually requires a “national” authorization for the distribution of CNG at each country; such permits assess the capacity of the Company to supply gas, including safety requirements. Other permits required include construction permits, operational permits and a fire fighters license.



NEOgas is in the process of implementing and certifying a quality management system for the operations in Brazil. The Company has written procedures for operations and some basic health and safety procedures; up to now most procedures and policies are country specific and thus the Company will develop a more corporate approach towards E&S issues. IFC will require NEOgas to plan, develop and implement a corporate Environmental and Social Management System (“ESMS”) covering all the operations from design to decommissioning in the different countries of operations, aligned
with the requirements of IFC’s Performance Standards as defined in the attached ESAP.



Organizational Capacity and Competency: In response to the growth and expansion of its business and acknowledging the increase in risks and potential impacts, NEOgas recently hired a Quality, Environment, Health and Safety (QEHS) Manager; depending on the size of the operations, there are also QEHS coordinators at country level. Country managers oversee the local operations including Human Resources (HR), environmental and safety aspects. NEOgas has a design and engineering unit in charge of defining the technical aspects of the operations and ensuring compliance with local requirements regarding gas compression and distribution.



NEOgas has basic corporate HR directives, though the Company does not yet have a corporate level coordinating position; therefore, practices on both environmental and social elements may vary from country to country. As part of the ESMS implementation the Company will appoint a corporate level HR manager/coordinator with responsibility for all the operations. NEOgas will review the structure defining roles, responsibilities, and authority to ensure that E&S elements are well defined and communicated to the relevant personnel, and third parties.



At a country level NEOgas has Operations Managers responsible to ensure proper operation of the equipment and transportation vehicles. Transportation is sub-contracted to reputable third party firms specialized in transport of hazardous materials, which have all the necessary permits and authorizations to operate. NEOgas itself provides specific training to the drivers to deliver the CNG at the client’s premises. Training records are available and interviewed drivers had proper knowledge of the procedures in case of emergency, NEOgas will continue to train and reinforce the capacity and competence of the drivers, operators and maintenance personnel throughout the Company.



Monitoring and Review: NEOgas has a real-time monitoring system for all the operating parameters such as pressures, temperatures and location of vehicles. NEOgas monitors and reports injuries and accidents; however, NEOgas does not have yet a formal set of E&S indicators. As part of the ESMS the Company will define a monitoring plan for the relevant E&S elements including the necessary corrective and preventive measures.

Working Conditions and Management of Worker Relationship: Working conditions are dictated by local legislation and the Company’s focus has been to address and comply with local requirements. As mentioned previously, third party employees include drivers from specialized transportation companies and construction workers during the building of compression stations.



Compensation at all locations complies with local laws and the paid salary is above the national/local minimum salary. Working conditions including those related to hours of work, wages, overtime, compensation, and benefits are communicated in writing to all employees. Such conditions are defined in the contracts signed with the employees and where applicable on the collective agreements signed with local worker’s organizations in each country.



NEOgas has signed agreements with different working organizations in Brazil and Mexico. In other countries there has not been such request among employees. NEOgas management did confirm that they would not prevent workers from organizing if this were requested.



HR policies exist for some country-operations (e.g., Brazil) and include statement regarding non-discrimination, commitment to comply with local law and to protect worker’s rights. NEOgas will adopt and implement human resources policies and procedures defining the approach to managing workers consistent with the requirements of Performance Standard 2 and the local laws of the countries where the company operates; this action is defined in the ESAP.



Protecting the Workforce: Neither NEOgas nor its contractors use child or forced labor, nor is there any suggestion of such practices in NEOgas's supply chain which consists essentially of complex and efficient capital equipment and which is aligned with local laws in respective countries in which they operate.



Workers engaged by Third Parties: Sample contracts provided to IFC include basic requirements that NEOgas's contractors observe all labor laws of the countries where operations take place, such as payment of salaries, workers compensation and social security payments. As part of the HR documentation to be compiled, NEOgas will include the requirement for the provision of the Performance Standard 2 to be applied to subcontractors and specifically those associated with construction and transportation; the documentation will also define how this it to be achieved.



Occupational Health and Safety (OHS): The main OHS risks in NEOgas operations are those associated with potential explosions and fires, and vehicular accidents. Workers acknowledge the risks at the workplace and they were observed using appropriate Personal Protective Equipment. Training is provided to all employees on fire safety and OHS elements; safety elements are included in the operational procedures and some specific safety procedures such as for “hot works” are in place. NEOgas has defined OHS programs in compliance with local law. For example in
Brazil the Company has in place an occupational medical monitoring program (PCMSO) and internal committees for accident prevention (CIPA). Noise exposure is minimized as employees are not in the compression area, but in control rooms. As part of the ESMS NEOgas will define a corporate OHS program and will ensure compliance with corporate and local requirements at all operations; this will cover also requirements for third party companies such as transportation and construction companies.

Resource Efficiency: NEOgas’ activities and proposed investment plan will result in the direct replacement of more polluting fuels by natural gas; this is expected to result in a significant reduction in the GHG emission contributions from NEOgas clients, and is likely to result in improved air quality as well.



The environmental footprint derived from NEOgas activities is mainly derived from the use of electricity for compression and use of fuels for the transportation of the CNG. The Project’s direct GHG emissions have been estimated at 15,800 tons CO2-equivalent per year during 2012, mainly from fuel used for transportation of the CNG. GHG emissions are expected to grow to 18,000 tons CO2-equivalent per year. There will be a reduction of GHG emissions due to the replacement of other fuels (e.g,. fuel oil, diesel and gasoline).



Pollution Prevention: NEOgas activities generate very limited quantities of solid and/or hazardous waste, waste produced is mainly from oil filters and maintenance activities. Wastes are disposed through authorized vendors at each country. As required by law, in some locations a solid waste management plan is in place (e.g., Colombia); special wastes from vehicles (e.g. oil) is managed at specialized vendors in the repairing shops. Construction waste is managed by contractors in accordance with local laws. Water, other than for sanitary purposes, is not required in NEOgas activities, therefore no industrial effluents are generated, and stormwater is considered in the design of the compression stations and as needed proper drainage is provided.



Air emissions are generated from standby generators which operate for a few hours per month as backup; in addition, some fugitive emissions of CNG occur when venting of the equipment is required or when loading; such losses are considered to be minor and estimated to be less than 0.1% of total CNG distributed. Noise from compression units is abated by having enclosed areas for compression; in addition, compression units are usually located in remote areas with limited exposure to communities. Ambient noise monitoring has been performed at compression stations in the different countries of operation and at the client’s premises (near the delivery units) and levels are below local and IFC’s required levels. Based on the identification of environmental impacts and as part of the ESMS, NEOgas will continue to implement mitigation and monitoring programs for the environmental impacts according to best industry practices.

Compression and distribution of natural gas present inherent risks due to the potential for accidental gas leaks and subsequent explosions or fires. NEOgas considers safety elements during the design, construction and operation of the facilities and during transportation. The engineering team at NEOgas design facilities considering international standards, local codes and recommendations from recognized and experienced equipment suppliers. NEOgas adapts the safety requirements of the installations based on contractual conditions and local requirements; where local codes are absent the Company adopts codes used in other countries. The codes and legal requirements used by NEOgas include ISO 11119-3 (Gas cylinders of composite construction – Specification and Methods), NFPA 55 (Compressed Gases and Cryogenic Fluids Code), ASME B31.3 (Process Piping), NBR 7500 (Identification for Transportation, Handling, Movement and Storage of Materials), IEC 60079 (Explosive Atmospheres - General Requirements), ANSI/IASNGV 4.2-1999 (Hoses for Natural Gas Vehicles and Dispensing Systems), and ISO 9809-1 (Gas cylinders -- Refillable seamless steel gas cylinders -- Design, construction and testing -- Part 1); NPT 111.031 (Natural Gas. Compression station, container or storage modules and decompression station for compressed natural gas – Peruvian norm) and NTP 111.017 (Natural Gas. Periodic inspection and testing for cylinder type I for NGV - Peruvian norm), NBR 15600 (Compressed Natural Gas Storage and Decompressing Station - Design, Construction and Operation – Brazilian Standard); NBR 12236 – Criteria for the Construction and Operation of CNG - Brazilian Standard).



The use of these codes/standards is aligned with good industry practices. Safety elements in the compression units and the client facilities include gas leaks detectors; pressure relief valves; on-line monitoring system (telemetry); automatic stop mechanisms when there is a sudden pressure change; emergency stop buttons at different distances; minimum distances between equipment, community and surrounding facilities; and fire protection equipment, among others.



NEOgas has had a good safety record during the near 13 years of operations; however, during 2012 there was an accident in one compression station, which resulted in a fire. The fire was contained and a comprehensive investigation has been performed with corrective actions being currently implemented. To ensure there is a consistent approach to safety elements, as defined in the ESAP NEOgas will undertake a full safety assessment of their operations. NEOgas will perform a comprehensive safety assessment of the design and operation of the compression stations, facilities at client premises and the approach to transportation system of the CNG. The assessment will include; (i) a safety assessment by an external expert of at least one compression station, one client’s delivery facility and a transportation system (all together “a cluster”); an
d (ii) the identification of corrective actions as required and identified by the assessment; The external safety assessment will be performed by a safety expert with relevant and recognized experience in the CNG sector. The assessment will review the design, installation and operation of the safety systems and procedures, including that related to emergency response, as per defined in the attached ESAP. The assessment will also define issues to be assessed at other clusters and the approach thereto; this latter assessment will be undertaken internally by NEOgas and based on the findings thereof, a plan will be compiled for the identified corrective actions.



NEOgas has a solid program to test and certify all CNG cylinders every five years as per ISO 9809-1 standard. NEOgas’ technicians and maintenance service personnel performs periodic inspections and offers post-installation support; such elements provide reliability and enhance safety of CNG supply.



CNG transportation, as mentioned before, is performed by specialized third party companies All trucks have a monitoring system which facilitates response in case of emergency and the drivers undergo specific training. Drivers have information regarding the materials transported and emergency response procedures. NEOgas as part of the implementation of the corporate ESMS will implement a vehicle operator safety program consistent with the requirements of IFC’s General EHS Guidelines.



Emergency Preparedness and Response: Based on local requirements NEOgas commissions environmental impact assessments, environmental plans or emergency response plans. The Company has emergency preparedness and response plans and procedures that define the expected response in case of emergency; coordination with local authorities that has been pre-arranged as part of the permitting process. Drivers, compression station operators, and clients have the relevant contact details of the persons/entities that must be contacted in cases of emergencies; and the Company has performed some drills at specific locations. NEOgas has provided emergency preparedness training to the operators and the drivers; in addition, operational procedures are in place with step-by-step description of the loading and unloading operations. Procedures also include different types of potential malfunctioning and trouble-shooting thereof. NEOgas will implement any corrective actions identified by the safety assessment described before and emergency plans may require some adjustment to account for potential impacts on local communities during road transportation; the latter will be defined by the external and internal safety assessments.

NEOgas communicates to local communities in an ad-hoc manner. There have been a few requests from local communities on additional information regarding compression stations and the Company has addressed the concerns by coordinating meetings and providing responses to the communities. As per local requirements, the Company has not been requested to engage in public consultations or equivalent stakeholder engagement programs. NEOgas will define a mechanism for external communications and grievances in all countries where it operates to receive and register external communications from the public; in particular, to receive and facilitate resolution of Affected Communities’ concerns about NEOgas’ environmental and social performance. Communication with external communities will include procedures and response to potential emergencies and will aim to cover potentially affected communities along transport routes.

NEOgas do Brasil
Rua Erna Sirtoli Uez, 248, S.Leopoldo – Caxias do Sul – RS – Brasil – 95097-070

To contact the project company, or request additional information about the project please write to:
Name: Robson Domingues de Carvalho
E-mail: mailto:rcarvalho@neogas.com.br
Phone: + 55 54 3026 5644
Address: Rua Erna Sirtoli Uez , 248 , S.Leopoldo – Caxias do Sul – RS – Brazil – 95097-070

NEOGAS will make adequate public disclosure of this transaction in the Brazilian, Peruvian and Mexican business and trade press.

Broad Community Support is not applicable for this project

	Environmental and Social Action Plan (ESAP)
	Project Name:	NEOgas
	Project #: 32938 Date: 04/25/2013
#	Task Title/Description	Anticipated Completion Date
1	Plan, Develop and Implement an Integrated Environmental and Social Management System (ESMS) at the Corporate Level. NEOgas will institutionalize operational procedures, practices, management programs to address environmental, labor, occupational health and safety, and community-related risks and impacts. The ESMS should cover all NEOgas operations. The ESMS will include but not be limited to the establishment of an overarching E&S policy; identification of E&S impacts and risks and the corrective actions (through management programs); fire protection and control, including emergency preparedness and response; mechanism for community’s grievances and communications; management of occupational health and safety; and monitoring programs.	June 2014
2	Plan and Implement Community Grievance Mechanism. Implement and maintain a procedure for external communications (in all countries of operations) that includes methods to; (i) receive and register external communications from the public regarding NEOgas’ environmental and social performance; (ii) screen and assess the issues raised and determine how to address them; (iii) provide, track, and document responses, if any; and (iv) adjust the management program, as appropriate. The grievance mechanism shall cover communities in the vicinity of NEOgas operations and along transport routes	December 2013
3	Institutionalize Human Resources Policies and Procedures. NEOgas will develop and implement human resources policies and procedures defining the approach to managing workers consistent with the requirements of Performance Standard 2 and the local laws of the Countries where the company operates; this will also include the requirements for third party workers. The Company will appoint a corporate level HR manager/coordinator with responsibility for all the operations.	June 2014
4	Perform an External Safety Assessment of NEOgas Operations. NEOgas will perform a comprehensive safety assessment by an external expert satisfactory to IFC of at least one compression station, one client’s delivery facility and a transportation system (i.e., a cluster). The assessment will be performed by an expert with relevant and recognized experience in the compressed natural gas sector. The assessment will review the design, installation and operations of the cluster relative to recognized international safety standards and procedures relative to normal and emergency situations. The assessment will include but not be limited to the identification of risk scenarios (e.g. hazard operability study); assessment of presence and reliability of safety systems (detectors, valves, emergency equipment, etc), assessment of organizational capacity and competency to manage safety elements (both in design and operations); and assessment of emergency preparedness response capacity. A specific time-bound action plan with the corrective actions will be produced based on the findings. The assessment will also define the issues to be considered by the subsequent internal assessments to be undertaken by NEOgas and the approach to these assessments.	December 2013
	Implement the Corrective Measures Identified in the External Safety Assessment NEOgas will implement the corrective actions identified in external safety assessment according to the action plan defined.	June 2014
	Perform Safety Assessment for all the Operations Perform safety assessments for all the units/clusters, as per agreed schedule and implement corrective measures, based on priorities identified in the assessments.	As per scheduled agreed
5	Implement Vehicle Operator Safety Training Program. Develop and implement a vehicle operator safety program consistent with the requirements of IFC’s General EHS Guidelines. The objective of the program will be to ensure that; (i) procedures are comparable in all countries of operations; (ii) risk to the community has been assessed and managed; (ii) drivers are fully equipped with emergency kits, (iii) responsibilities are well defined; and (iv) drivers are able to respond to emergencies.	December 2013