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
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

This is a Category B project according to IFC’s Policy on Social and Environmental Sustainability because a limited number of specific environmental and social impacts that may result can be avoided or mitigated by adhering to generally recognized performance standards, Environmental, Health and Safety (EHS) guidelines or design criteria as is described in the following sections.
Because this is an investment in a corporate entity to support current operations and further expansion into water and wastewater utilities facilities, the key environmental, health, safety and social (EHSS) issues associated with this investment include: (i) assessment and management of environmental and social risks and impacts related to the operation of water and wastewater facilities;(ii) labor and working conditions;(iii) occupational health and safety; (iv) solid waste management; and (v) energy efficiency.
AEGEA’s core business activities in water and wastewater treatment provide essential environmental services with proven public health benefits. AEGEA is presently demonstrating the ability to effectively manage potential environmental and social risks from its business activities through the application of internationally accepted practices to protect soil, water and air resources. Based on the results of IFC’s review, Performance Standards 4, 5, 6, 7, and 8 are not applicable to AEGEA’s current business activities.

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.

Management System - As agreed under IFC’s previous investment, AEGEA will develop a sustainability policy and will further develop and implement a formal environmental, health, safety and social management program based on the principles outlined in the policy. AEGEA also agreed to adopt IFC’s Performance Standards as part of legal and other requirements that apply to future operations. AEGEA’s environmental, health, safety and social management program will reflect the adoption of these standards with specific procedures designed to cover each of environmental and social requirements.

E&S Assessment – AEGEA’s business model includes the development of greenfield projects as well as investments in existing assets. The development of greenfield projects is conducted at the state level under Brazilian federal environmental licensing rules which define a process requiring, in some cases, the preparation of detailed environmental and social impact assessments of the aspects and impacts, both negative and positive, in the project’s zone of influence. The stepwise environmental licensing process applicable to most industrial and infrastructure activities, including water and sanitation projects, entails the preparation of feasibility studies in order to obtain preliminary licenses. This is normally followed by more detailed environmental and social impact assessments required to obtain first, a construction license (based on the state regulator’s review of project impacts and mitigation measures), followed by an operating license that is issued after regulatory inspection of the fully constructed project, just before initiation of operations. Federal environmental licensing rules also allow state regulators to apply a streamlined licensing process for small and medium-sized sanitation projects defined as those servicing population centers of up to 30,000 and 250,000 inhabitants respectively which are representative of some of AEGEA’s typical sewer concession areas. The streamlined process allows project sponsors to prepare more simplified environmental and social impact assessments (ESIAs) focusing on potential impacts to socio-economic aspects and to the water quality of the receiving environment.

Surface and groundwater abstraction projects are also required to seek water concession licenses issued by the State or Municipal authorities. Licensing for the water supply systems of the Guariroba concession in Campo Grande, which includes surface and groundwater abstraction activities, was also subject to the results of pump studies to ascertain the productivity and sustainability of the water resource.

AEGEA’s operations are currently managed in a decentralized manner at the concession level focusing on applicable regulatory obligations. These programs focus on the operational aspects of the water and wastewater treatment concessions, including operation and maintenance of the water and wastewater treatment facilities,
technical and commercial water loss reduction programs in the water distribution systems, and the programmed expansion of water and wastewater service coverage in the area of concession. Environmental, social, and health and safety aspects are managed following applicable regulations and technical norms which are, over time, captured in operational manuals of the aforementioned activities.

In the current AEGEA operations, management of EHSS aspects is based on operational plans and procedures that cover such diverse aspects as treatment processes to achieve drinking water quality and wastewater treatment objectives; source water protection; water distribution system loss prevention; and occupational health and safety (i.e. training, health monitoring, etc.) as required by Brazilian law. As a result of IFC’s previous investment, the company is required to conduct an EHSS risks and impacts gap analysis following relevant World Bank Group EHS Guidelines and IFC Performance Standards.

Organizational Capacity and Competency – At the institutional model consolidated by AEGEA each business unit has two officers: the Executive Director focused on consumers’ needs and demands, including monitoring of Performance Indicators and definition and pursuit of goals; and the President (generally a former Executive Officer), focused on institutional relations and communication with stakeholders, including contact with regulatory agents and the granting authority. Both report to the COO (Chief of Operations).

Responsibility for the management of environmental, health and safety (EHS) aspects is assigned at the operational level, generally to an environmental coordinator who reports to the manager of operations of the concession. OHS matters are also managed by coordinators who report to human resource department of the respective concession. In some cases, environmental and OHS management is further delegated to OHS technicians or more typically through assignment of these responsibilities to operational personnel. Implementation of social responsibility activities (described in more detail below under “Community Engagement”) is supported also at the local level, typically through an external communications coordinator with the support of operational managers.

AEGEA has hired a qualified professional who is responsible for developing and overseeing the implementation of the aforementioned corporate EHSS policy and management program across all of its water and wastewater concession businesses.

Training – AEGEA’s individual operations 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; electrical safety; work in confined spaces; fall protection; and other aspects defined by the individual operations. As agreed under IFC’s previous investment, AEGEA will ensure that EHSS mat
ters are consistently integrated into training programs and that such programs incorporate minimum requirements for contractors/sub-contractors.

Monitoring and Reporting - AEGEA’s concessions are required to monitor a series of environmental, health and safety performance indicators in order comply with Brazilian regulations. Monitoring requirements include such aspects as raw and treated drinking water quality, treated wastewater quality, drinking water distribution, system losses, and waste generation. This information is compiled by the individual concessions. Water and sanitation operations in the current concessions are also independently monitored by the state environmental regulators who collect and analyze raw and treated drinking water and wastewater samples to verify compliance with environmental licensing requirements. The company monitors energy consumption and water losses in the water distributions systems. Also, the company tracks trends in infant mortality rates across concession areas to demonstrate how improvements in expansion of water and sewerage service are favorably linked to improvements in public health.

The information gathered by each concession is consolidated in a number of different management reports based on individual concessions’ monitoring programs and regulatory requirements. These management reports prepared by each department (for example human resources, external communications, operation etc.) are consolidated into internal summaries for presentation to operations and holding level management. Environmental monitoring data (drinking water and treated wastewater) is compiled into reports at the facility level for submittal to the respective state regulatory agencies in compliance with operating license requirements. Individual operations are required to report on drinking water quality and treated effluent testing results to municipal and state agencies.

Drinking water distribution companies in Brazil are also required to disclose the results of water quality testing to their customers normally including this information in the water bills and in the companies’ websites as shown below:

http://www.aguasguariroba.com.br/agua/sga

http://www.prolagos.com.br/atendimento/qualidadeagua.aspx

Brazilian regulations also require companies to report on occupational accidents and incidents resulting in lost time from work. Since 2011 the company prepares and publicly discloses an Annual Report regarding corporate monitoring results of its operations on the company’s external website against the selected environmental, health, safety and social performance indicators.

Human Resource Policy and Management and Terms of Employment – Currently, AEGEA’s operations in 26 municipalities in 5 states employee a total of 1,700 direct employees.

The company communicates employee rights and responsibilities through human resource policies, employment contracts, employee handbooks and collective agreements each developed at the local concession level. AEGEA also has a Code of Ethics which principally covers aspects of company policy regarding relations between employees and various parties in order to avoid conflicts of interest.

The terms of employment, such as wages and benefits, hours of work, overtime arrangements and overtime compensation, annual and sick leave, maternity, vacation or holiday are established by national labor regulations and applicable sector specific collective bargaining agreements. Although Brazilian workers are generally familiar with the national terms of employment, during the recruiting phase the company also informs candidates and newly hired workers about the specific terms of their job positions. Additional workers’ benefits include medical and odontology assistance, life insurance, meal and transportation vouchers, childcare aid and breakfast. All workers have to sign a formal contract with the terms of employment and retain a copy of that. Workers also have a worker’s labor book (Carteira de Trabalho), provided by the Brazilian Ministry of Labor, in which all information related to the terms of employment in the contract is registered, including hiring period, compensation, leave, promotions, salary increase and termination of contract.

Non-discrimination and Equal Opportunity - Strong support for equal opportunity and non-discrimination in employment is demonstrated through formal programs organized by AEGEA such as one targeting the employment of persons with disabilities, and diversity targets reflected in company metrics on gender, race, age, and level of education. In its operational units the company prioritizes to hire local professionals aiming to maximize local economic development impact. Currently, women represent 27% of employees and occupy 22% of management positions.

Worker’s Organizations – IFC found no evidence that AEGEA restricts freedom of association of its employees. In Brazil, workers normally affiliate with local or regional labor unions organized to cover their specific industry activities. Operational employees in the assets currently held in the State of Mato Grosso do Sul have the option to be affiliated to the Sindicato dos Trabalhadores nas Indústrias da Purificação e Distribuição de Água e em Serviços de Esgoto MS. The collective bargaining agreement between the company and the union is available at: http://www.sindaguams.org.br/-2013.html. Employees in the operations in the State of Rio de Janeiro have the option of being affiliated with the Sindicato dos Trabalhadores nas Indústrias da Purificação e Distribuição de Água e em Serviços de Esgoto de Niter
ói (stipdaenit.org.br/ ).

Both of these labor unions specifically focus on water and sanitation industries. The company and the union have signed a Collective Bargaining Agreements which covers key labor aspects such as: salaries; working hours; contracting and layoffs; labor stability; benefits, rights and responsibilities; occupational health and safety; workers organization and union relations; and contributions to the union.

Retrenchment – The company is projecting that the number of direct employees will continue to grow over the next few years primarily due to growth in the concession business. Some of the concession businesses will experience periods of growth and decline, primarily in the use of temporary contracted labor for projected construction activities. However, as part of its concession business, the company typically encounters the need to reduce the number of employees as the concession is transferred from government to private entities. In these situations, responsibility for the retrenchment process is retained by the municipal governments and is typically phased in over a period two years after AEGEA takes over a concession, time during which the public employees remain as part of the company while continuing to receive compensation from the government entity. In some cases, at the end of a pre-established time period, the municipalities exercise the option to provide early retirement or lay off some workers. In concessions in which AEGEA became responsible for retrenchment activities these are based on the principle of non-discrimination, reflecting consultation with employees, their organizations and, where appropriate, the government.

Grievance Mechanism – The company actively encourages employees and managers to openly discuss and resolve conflicts. Employees are currently able to lodge complaints internally through the Human Resources department and company management, although there are no written procedures or formal mechanisms, and externally through either the labor unions or the public Labor Rights system (Justica de Trabalho).

As agreed under IFC’s previous investment, AEGEA will create and implement a formal internal grievance process which allows grievances by individuals or groups (including anonymous complaints) to be presented verbally or in writing, without the risk of reprisals and according to other requirements consistent with IFC’s Performance Standard 2. The grievance procedure will be made available to all existing and new employees as part of its Human Resource Policy or other document.

Protecting the Work Force – The company complies with legal minimum age of work requirements by requesting valid documentation of age in the employee contracting process.

Occupational Health and Safety – To prevent workplace accidents and promote the health of its employees, AEGEA implements Brazilian Regulatory Norms (NR) applicable to its operations including those related to the identification and monitor
ing of exposures to noise, elevated temperature, chemical agents and physical hazards through a Workplace Environmental Risk Prevention Program or PPRA (Programa de Prevenção de Riscos Ambientais), use of personal protective equipment (PPE), emergency preparedness and response, and medical surveillance (PCMSO or Programa de Controle Médico de Saúde Ocupacional). The legally required safety committees (CIPA or Comissão Interna de Prevenção de Acidentes) with representatives from the workers and management are responsible for conducting preventive OHS inspections, reporting on health and safety issues encountered during work, investigating and analyzing occupational accidents, incidents, and health issues and helping ensure that the OHS training activities are completed. Some of the concessions use standardized OHS audit reports and standardized accident investigation forms.

Resource Conservation – Water use efficiency is a key aspect of the business strategy of the company, who is investing heavily in macro and micro-metering, nighttime leak detection, hydraulic simulation, fraud prevention, pressure management, and replacement of old trunk and distribution networks. The company also devotes significant financial and administrative resources in quality assurance and control of client water meters. The information gathered through the metering network is used, together with a targeted leak detection program, to identify technical and financial losses. The Loss Prevention Program of Águas Guariroba, for instance, has reached the rate of 26% in 2012 (against 56% in 2006), below the average rate of the sector. In the case of Prolagos, this program did not reached the target yet: in 2012 the rate was of 34% against 52% in 2008. The region served by Prolagos is an important center for national tourism and receives a floating population in high season that reaches 2 million people, what creates additional challenges for the company. Anyway, due to the improvement of the services, the municipalities requested the expansion of the system aiming to reach 100% of sanitation services in 2024.

AEGEA is developing some Research and Development (R&D) pilot projects, one aiming to replace drinking water by reused water acquired from the treatment processes of the major treatment plants for irrigation of a golf course and another one for the treatment of the leachate of a landfill to generate energy. The process of reuse water from washing the filters of the treatment plant generates an increase in the supply corresponding to a monthly savings of 30 million liters in Prolagos, and 65 million in Águas Guariroba. Besides avoiding the consumption of a huge volume from the water body, the system eliminates the impact of the discharge of wastewater into the sewer system.

Energy Efficiency – Energy efficiency is a significant part of the business strategy of the company, as it represents one third of the total costs, based on studies of efficiency and cost in pumping and treatment activities in both the water and wastewater business. Energy conservation strategies include increase in treated potable water storage capacity to reduce the need for pumping and treatment during peak electricity rate periods and installation of groundwater wells and water treatment plants in proximity to consumers to reduce the need for pumping over long distances, where feasible. Optimization of energy management is maximized through the use of optimization software together with a well-developed metering system. Águas Guariroba is a sector’s benchmark, for it shows private companies’ technical capacity of providing operating turnaround. Although the sewage coverage of this system has grown from 22% in 2000 to 65% in 2012, the energy consumption (kWh/month) has decreased from 454 in 2007 to 277 in 2012.

Water and effluent quality - The drinking water trea
tment plants and distribution systems AEGEA operates produce finished water that meets applicable host country standards. In certain systems there have been occasional exceedances of aesthetic parameters, such as iron (with the associated color and turbidity), due, in part, to corrosion of distribution piping. These minor violations are limited, and have no adverse impact on public health. company operations involved in drinking water treatment and distribution continually monitor source water quality and quantity according to applicable legal requirements. At-risk intake areas may be subject to source water protection programs in collaboration with local or regional regulatory agencies. Water operators are required to notify environmental regulatory agencies if a problem, such as the presence of hazardous constituents, is identified during source water quality monitoring activities. Water withdrawals take into account actual and projected capacity of the river systems used as water sources.

Effluent discharges from wastewater treatment plants operated by AEGEA generally meet the standards specified in permits issued by State and Federal environmental authorities in Brazil. Brazilian wastewater discharge standards are consistent with IFC’s PS3 requirements as the permits limit discharges of indicator parameters at levels that take into account receiving water use, as well as its assimilative capacity. As part of the internal review of new and existing plant operations, AEGEA identifies any instances of non-compliance with applicable wastewater discharge standards and prepares a time-bound corrective action plan to come into regulatory compliance.

AEGEA’s Campo Grande concession applies secondary anaerobic treatment followed by chlorination to its sanitary effluent while the Prolagos concession in the State of Rio de Janeiro applies activated sludge aerobic treatment followed by ultra-violet disinfection or chlorination, depending on the specific wastewater treatment plant. Prolagos developed its own technology in partnership with a specialized company for processing and disposal of sludge from water treatment process. In Águas Guariroba part of the treated sludge is used as fertilizer in plant’s nursery and the company is preparing a project with a research institution for application to agricultural purposes. Other wastes from sewage treatment are disposed in regulated landfills in accordance with current legislation.

Due to its touristic and ecological importance, the region where the Prolagos concession operates has two public entities which help steer the identification of priorities in investments in water and sanitation. A Water Basin Committee evaluates the needed investments and a Consortium of Municipalities helps executes the decisions of the Water Basin Committee. There is a small tax on water users which reverts to the consortium to help with costs of implementation which are mainly funded by state government (i.e. dredging of ri
vers) and private sector concessions (i.e. construction and operation of water and wastewater treatment plants). More information on the work of the Water Basin Committee is available at: http://www.lagossaojoao.org.br/.

Municipal wastewater systems with industrial users/discharges can pose performance problems for wastewater treatment plants where these dischargers aren’t properly managed. Although municipalities may regulate the quality and strength of industrial wastewaters discharged to their sewerage systems, the absence of effective monitoring and enforcement can cause treatment process upsets which may lead to breach of effluent discharge standards. Brazilian law defines industrial wastewater pre-treatment standards for industrial facilities discharging into municipal sewer systems.

Under the AEGEA’s management, strategic measures were adopted to achieve and, in many cases, anticipate the goals established in the contract to expand the coverage of water and sewage treatment. Besides the seasonality challenges, the cities covered by the system are facing a rapid growth, benefited from large government projects and business, requiring agility and constant investment in quality control of water provided and community services. The stability in water supply represented attractiveness for the local economy, impaired in previous years by chronic failures during peak season. Beyond the control of contamination of urban beaches, the performance of Prolagos contributed to reverse the environmental damage that threatened the Araruama Lagoon, the largest hypersaline lagoon of the world.

Solid Waste - The principal waste generated by AEGEA’s activities are wastewater and sludge from the water treatment plant. Consistent with Brazilian regulations, the company periodically tests wastewater and water treatment plant sludge to establish its correct waste classification and disposal method. According to the regulatory classification, after processing in centrifuges, sludge from operating facilities located in Campo Grande and the Cabo Frio region is currently disposed by third parties in properly permitted sanitary landfills. Sludge from water treatment facilities is typically disposed of in a drying basin and effluent from drying basin is discharged into wastewater network for subsequent treatment in the concessions wastewater treatment system.

Hazardous Materials Safety - Facilities using and storing hazardous chemicals, particularly gaseous chlorine at drinking water treatment plants, pose risks associated with accidental releases. AEGEA subsidiaries adequately handle these materials to minimize the impact of such a release. Appropriate emergency prevention and control plans are in place, and include provision of appropriate response equipment and materials, and a detailed set of procedures to be followed to minimize the harm of any potential accident. The Aguas de Guariroba concession produces its own chlorine at an on-site facility and is the
refore not required to transport it or to store it in large quantities. The plant is staffed with qualified professionals and equipped with safety systems to warn operators and to automatically shot down facilities in the event of an accidental release. The Prolagos operation purchases these materials only from licensed providers and follows the regulatory procedures for notification of local fire departments ahead of transport and delivery events.

In its water and sanitary sewerage concessions, the communities potentially affected by the company’s operations are also its customers. Through each new business, AEGEA becomes part of local community and engages in inhabitants-clients’ expectations and demands, for the creation of a relationship system with the community, which is considered an asset included in the strategic plan.
The Afluentes Program of Águas do Mirante unit, for instance, has the purpose of fostering the integration between neighborhood associations and the company, in order to establish an open communication channel with the community. Through the relationship with community associations, the company gets closer to the inhabitants, knows their needs and hears their suggestions and opinions on the services provided. For instance, in Campo Grande/MS, the concessionaire maintains a regular contact with about 320 community associations, to discuss the quality of services and inhabitants’ demands. From 2009 to 2012, a total of 5,430 requests from community associations were granted. The management system includes a KPI based on surveys conducted twice/year related to this program. The company also develops projects aimed at urban improvements, environmental education, cultural and sports activities and beneficent initiatives, in addition to maintaining the program of special tariff on services to low-income population. Some examples are:
• Jovem Aprendiz: for students between 14 and 24 years old, to help them to enter the job market.
• Saber Faz Bem: focused on integration of Prolagos with the local community, through classes, students’ visit to units and events.
• Águas Novas: stimulates treatment and proper disposal of waste and reuse of water to clean the Filter and Settlers located in ETA-Juturnaíba.
• Cine Prolagos: a big screen that broadcasts environmental-related movies free of charge for the population; 3,500 viewers.
• Sanear Morena: Campo Grande’s largest water and sewage program, providing sewage services to about 200,000 people.
• Sanear Morena 2: construction of 139 km of sewage network, 13,000 home connections and a new sewage treatment station.
• Programa Saúde Nota 10: developed by Águas do Mirante unit, the purpose is to raise awareness of students on the importance of water and sewage treatment for the environment and the public health.
• De Olho no Óleo: campaign developed in schools included in the Saúde Nota 10 program in Piracicaba, with a focus on the importance of collecting and recycling cooking oil already used.
In Campo Grande the Social Tariff of Sanitation Services Program reached about 5,000 households of low-income families were enrolled in the program in 2012 to receive treated water with a 50% discount rate. In Prolagos, 5% are entitled to social tariff; the number is still low due to the short time of implementation. In the newest concessions, the program is being implemented.The principal means of communication is through widely publicized call centers designed to attend costumer service related issues and, less frequently, reporting of emergencies. The call centers track the speed and effectiveness in the resolution of complaints with a target toward continuous improvement in client and community satisfaction. Subsidiary communication and marketing departments provide avenues of information disclosure and dialog with the rest of the general public. These departments also develop and implement social programs with organizations such as schools and other social institutions.
Prior to construction activities associated with expansion or modification of acquired concessions, AEGEA’s subsidiaries conduct community awareness campaigns to inform residents about the nature and extent of the works that may take place in their respective neighborhoods and, where necessary, consulting with residents and business owners who may be temporarily negatively affected by the construction works. The dissemination of information includes targeted letters to home and business owners prior to start of construction as well as radio and newspaper campaigns. These activities are considered adequate forms of public consultation in situations where projects are exempt from a more extensive environmental licensing process as described previously in this summary report.
Community grievances are managed according to the rules of public concessions laws which require private concession companies to have a formal, well publicized mechanism to receive complaints from customers and the public. In the case of the Sponsor’s current concessions this mechanism includes a first and second option to help resolve public grievances. Contact information is well publicized in customer’s monthly bills, company vehicles, and the following company web sites:
http://www.aguasguariroba.com.br/ouvidoria
http://www.prolagos.com.br/publico/atendimento/ouvidoria.php
To address one of the most sensitive issues in the sanitation service, the loss from fraud or default, AEGEA developed a joint program of operational and social teams during enforcement actions in neighborhoods, in partnership with local community leaders, previously consulted. As part of the program, the team keeps the Roaming Service, a mobile unit allows the team ability to negotiate the any clients’ pending issue. Started in Campo Grande, these procedures influenced the fall in the rate of loss in the city, which in two years fell from 28% to 26%, and are being extended to other operations. The improvement in the relationship between company and community in Campo Grande is being confirmed by the satisfaction survey: held in August 2011, it showed that 85% of users assess the performance of the concessionaire as excellent or good. The positive population''s perception of the care received by the concessionaire is confirmed by data recorded in Procon, the public body for consumers’ protection and defence: have been the third company in complaints when started the operation in 2007, Águas Guariroba appeared in 2012 at the 42nd position at the consumer records.
The company further prepares and distributes educational materials to the public it serves covering such aspects as the proper cleaning of household water storage tanks to prevent contamination of drinking water as well as information on issues of frequent concern such as taste and appearance of water drinking water; and proper use of the sewage system to avoid blockage from accumulation of improperly handled oily waste. The company’s corporate social responsibility program includes numerous activities in education (open doors programs for local schools), health (home water storage tank cleaning), environment (clean rivers and clean lakes campaigns; environmental education for school children; separation of storm water from sewage networks etc.), and recreation / human development (construction of recreational facilities and child care centers adjacent to company infrastructure). Information on these and other programs is available at the concessions’ websites:
http://www.aguasguariroba.com.br/
http://www.prolagos.com.br/

AEGEA Office:
Av. Brig. Faria Lima, 1.744 - 8º andar
01451-910 - São Paulo, SP
Brazil
Phone: +55 11 3818-8150
Fax: +55 11 3818-8166

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.