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
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

With a total installed capacity of 76.5 MW, the four hydro power plants have been in operation since the 1960s. As such, no new E&S footprint will be created by this investment. KI’s purchase from the GoA is intended for the facilities to be used to provide baseload renewable power to its existing steel plant. Key potential impacts are limited to possible future retrenchment of employees, dam safety arrangements, and emergency preparedness in regards to downstream communities, all of which can be managed by readily available technology and procedures. Given the limited number of expected impacts, the project is categorized B according to IFC’s Environmental & Social Review Procedure.

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.

Policy: Kurum has to date operated a large steel mill in Albania. As such, the Company’s corporate E&S strategy and targets include improving production quality and undertaking technological investments to facilitate fulfillment of customer demands effectively while ensuring that all resources are used reasonably and efficiently to minimize consumption of raw materials, energy and water per unit of production. Kurum has an overarching commitment to meeting the E&S and security regulations in all of the countries where it operates. In addition, for the four HEPPs in question, Kurum has committed via the SPA to operate in accordance with IFC’s PSs, WBG EHS General Guidelines or equivalent Good International Industry Practices (GIIP).



Identification of Risks and Impacts. Project-related upgrading activities in the HEPPs will not require a national EIA as only minor, non-structural modifications will be realised. As mentioned in the project description, E&S due diligence on the HEPPs was undertaken in preparation for privatization tendering on behalf of GoA by an independent consultant based on IFC PSs and World Bank Group EHS Guidelines. This due diligence process involved desktop and field visit components and incorporated review of documents such as the World Bank Environmental Impact Assessments for Uleza and Shkopeti, links to which have been provided above. Following discussion with GoA and potential bidders, E&S recommendations arising from this due diligence were incorporated into the SPA as binding commitments. As a result, Kurum’s focus in its initial years of operation will be on managing identified risks and impacts in a manner consistent with its contractual obligations.



Management Programs. Presently, there is no existing E&S management program for operating HEPPs, though a series of guidelines and procedures are in place. KI will, as per its contractual obligations, develop an Environmental and Social Management System (ESMS) according to IFC PS1 within two years. This ESMS will establish management plans and procedures governing aspects such as waste management, pollution prevention, monitoring and water release; include establishment of appropriate E&S capacity; establish dam safety emergency preparedness and response programs; include a stakeholder engagement process incorporating a community grievance mechanism; and result in establishment of appropriate E&S monitoring programs. Kurum intends to make the ESMS an integrated one, as is its corporate practice elsewhere, and to certify it in future as conforming to ISO 9001 Quality Assurance, ISO 14001 Environmental and OHSAS 18001 Occupational Health and Safety management system standards.



Organizational Capacity and Competence. Having very recently won the HEPP privatization bid, Kurum currently has no specific team dedicated to managing E&S issues at the HEPPs. However, Kurum Holding has experienced staff with environment and OHS expertise and KI will appoint EHS experts e
xperienced in hydropower to implement and manage the ESMS described above. Existing EHS training programs will be expanded and upgraded to cover the range of issues described above.



Monitoring and Review. Kurum’s practice in all of the countries in which it operates is to monitor environmental parameters and report these to relevant authorities as required under host country regulations. Currently, no regular E&S monitoring practices are in place for the four HEPPs. As mentioned above, Kurum will develop an E&S monitoring program as part of its overall ESMS development, as stipulated in its contractual agreement with GoA. The results will be reported to Kurum’s upper management for review and action on a regular basis.



KI will commission an independent audit of its EHS performance within two years of the acquisition of the facilities. The audit will look at the HEPPs’ ESMS, management of labor and working conditions, health and safety performance, dam safety monitoring and improvement, disposition of sediments, and management of environmental flow. KI has committed to correcting any problems identified by the external audit within one year.

Working Conditions and Management of Worker Relationship: The current workforce at Bistrica 1 and 2 is 76 persons, not including security personnel who work for a private security firm. The current workforce at Uleza and Shkopeti is 142 persons, excluding third party security personnel. Both men and women are employed. Direct workers will be brought into KI as employees.



KI has both a Human Resources (HR) policy and a corporate social responsibility policy that include commitments to non-discrimination and a safe and healthy working environment. KI follows the Albanian Code of Labour (2003), which is in turn based on GoA ratification of all ILO core labor standards. Labor unions represent workers at all four HEPP sites and the company does not discriminate against workers who are members of a labor union. KI will develop and implement a worker Grievance Mechanism to operate in accordance with IFC PS 2 requirements.



Kurum does not plan any collective dismissals for at least a year after the purchase date of the plants. If/when collective dismissals become necessary for business reasons – as opposed to voluntary separation or dismissal for poor performance - Kurum will prepare a retrenchment plan based on consultations with the affected workers, the workers’ labor unions, and government officials. This retrenchment plan will be compiled in accordance with Albanian labor law and IFC PS 2, as stipulated in the SPA.



Occupational Health and Safety. KI is contractually obliged to improve existing OHS practices at the four HEPPs within a 2 year period, in accordance with WBG EHS Guidelines. Kurum’s existing occupational health and safety (OHS) management system is OHSAS 18001 certified and the company will extend this system to the four HEPP sites and implement training programs for staff. Kurum will also ensure that all staff members have adequate personal protective equipment - including ear protection to be used in areas of the plant where field appraisal found noise levels as high as 95 dBa – and improve OHS signage in all plants. Finally, Kurum will review fire safety and emergency evacuation arrangements at each of its HEPP facilities.

As the HEPPs are already operating and no construction activities will be implemented, no construction related emissions are anticipated. There are currently no waste management or pollution prevention and control plans for the HPPs. A comprehensive waste management plan outlining sources of pollutants, pollution control and mitigation measures as well as spill prevention and emergency response plan and monitoring activities will be established as part of the new ESMS for HEPPs. Major sources of waste in HEPPs include used transformer oils (that may contain PCBs), hazardous wastes from maintenance activities, scrap materials from replacement programs and domestic solid waste. These wastes will be managed in accordance with the waste management plan based on relevant Albanian Law and IFC’s PS 3.



In terms of wastewater management, only domestic wastewater generation is of concern in the HEPPs. Septic tank systems are utilized in Bistrica 1 and 2 and wastewater is discharged to Bistrica River at the tailrace channel. No wastewater management is implemented in Uleza and Shkopeti HEPPs: domestic wastewater is discharged directly to the Mat River. This is the norm for Albania, in which there are only a handful of operating sewage treatment plants countrywide. To comply with GIIP, Kurum will implement appropriate wastewater management measures in the Mat River Cascade within a two year period.



Residual greenhouse gas emissions associated with decaying vegetation in the three reservoirs are considered to be minimal due to the fact that inundation occurred several decades ago.



In Uleza HEPP reservoir, concerns over chromium (Cr) contamination have been raised due to the past extraction, over many years, of Cr in mines upstream of the reservoir. The results of water sample analyses conducted in 2012 showed that, although present in small concentrations, no serious Cr contamination is observed in Uleza water and sediments. It is also unclear whether measured concentrations are due to natural conditions or releases from former mines. Notwithstanding this, KI is contractually required to manage any future sediment dredging and/or disposal in accordance with IFC requirements, including conducting a detailed analysis for Cr contamination and treating excavated sediment as hazardous waste if so indicated by the analysis.

Community Health and Safety. Kurum International is contractually committed to implementing dam safety programs and an emergency preparedness and response system in line with GIIP. The 64 m Uleza and 52.2 m Shkopeti dams, both concrete structures, are the subject of a dam safety monitoring program financed by the Swiss development cooperation agency due to their size (dams greater than 15 m in height are considered ‘large dams’ requiring dam safety assessment under international dam safety requirements ascribed to by the WBG). Instrumentation has been upgraded in both dams to include geodetic targets, seepage water measurement, stand pipe piezometers, seismic sensors, and a new automatic data acquisition system. Based on the improved monitoring system a dam alarm system will be designed and implemented with the main aim to inform on-site staff and the downstream public who could be affected from the dam failure. There are some dam safety procedures and emergency response guidelines in place at these HEPPs, developed in the scope of the GoA’s upgrading work. Additional training of HEPP staff will be undertaken to increase the awareness and knowledge of these procedures and guidelines.



Bistrica 1 is a clay core dam with a concrete/rock face and a 9.6 ha reservoir. Bistrica 2 operates with tailrace water from Bistrica 1 which is not considered as a large dam (> 15 m in height) under international standards. These power plants have been recently renovated with equipment replacements and enhancements. Emergency preparedness and response capacities of these plants in terms of both dam safety and other emergency conditions are to be developed in the scope of Project implementation. A dam safety expert will review the structure, and the Company will install a dam monitoring system, piezometers to measure moisture downstream of the dam, and a geodetic survey system to measure any displacement or settlement. Kurum’s existing procedures will be enhanced to make them specific to the operations of HEPPs and to integrate them into the ESMS. The dam monitoring system will also allow data collection and, based on that monitoring system, an alarm system will be installed.



Kurum will develop separate emergency response plans for each cascade, based on the warning systems, which will involve local GoA and regional civil defence authorities.



Irrigation downstream of both cascades reuses the water that goes through the HEPP facilities. Both the HEPPs and the irrigation users have water use permits that set out the amount of water available to them. The Uleza HEPP will have an equipment upgrade that will increase its power generation by 20%, but will not increase the flow (m3/second) above what is currently permitted. Downstream users will not experience a change in the availability of water, although the timing of releases may change because of a switch from peaking power generation to baseload.



Security Personnel. All of the hydropower facilities are
protected by a third party security company. Some security personnel are armed. Kurum will review the current security contract to ensure the application of local law and good international practice with respect to the hiring, training, equipping and monitoring of security personnel. Kurum will also ensure that the security personnel follow rules of conduct that employ the principle of proportionality and limit the use of force to preventative and defensive purposes. Kurum will investigate any allegations of unlawful or abusive actions on the part of the personnel and will take action to prevent any recurrence.

The Uleza and Shkopeti hydropower facilities have been in operation since the late 1950s-early 1960s, and Bistrica 1 and 2 since the late 1960s and any historical biodiversity impacts resulting from their construction and operation are therefore deemed irreversible. As KI’s takeover of operation of the HEPPs involves no additional construction, continuation of existing power generation activities is not expected to have PS 6 impacts. As long as the current operational mode remains unchanged, KI is required under the SPA to monitor E&S indicators in line with GIIP.



As mentioned in the project description, KI may in future alter HEPP operational mode to a baseload system involving steady power generation and a more predictable flow pattern. In general, global experience has demonstrated that such a switch typically leads to advantages for downstream water users and surviving ecosystems. Before such a switch may be made, however, KI is contractually obligated to undertake an environmental flow assessment in accordance with GIIP. Should this assessment identify adverse impacts on downstream water users (primarily farmers making use of water for irrigation purposes) or ecosystems, Kurum is contractually committed to develop mitigation measures in accordance with Albanian regulations and IFC PS 6 requirements relating to impacts on priority ecosystem services. These measures are to be contained in an environmental flow management plan that reflects engagement with downstream water users and relevant authorities, as described further in the next section.



Although a portion of Bistrica 1 reservoir falls within an IUCN category 4 ‘Rare Natural Treasure’ area due to the presence of protected springs upstream, HEPP operation does not impact on the area at all as the HEPP is located downstream. Although reservoir management (as opposed to power station management) will remain under the responsibility of KESH and the Ministry of the Environment, KI is contractually committed to develop a watershed management plan to reduce soil erosion and increase sustainable forest use along reservoir slopes and in their upper catchments.

Pre-privatization stakeholder engagement appears to have been very limited. During the privatization process in 2012, GoA engaged with certain key stakeholders, including worker / union representatives and a group of people claiming compensation for lands lost during reservoir inundation several decades ago.

As per SPA commitments, KI will establish and maintain an ongoing stakeholder engagement process to develop a constructive relationship with key stakeholders, including affected communities and downstream users of irrigation water. This process will include identification of key stakeholders, risks and impacts and means of communication; appropriate disclosure of relevant information, ongoing consultation of the affected communities, and implementation of a community grievance mechanism. Particular focus will be on the two issues most likely to be of community concern: the flow regime and dam safety. For example, should KI opt to implement a change in HEPP operating regime that might impact downstream users, KI will first organize and participate in a stakeholder engagement process involving disclosure of its intentions and consultation on potential impacts and issues of concern to downstream water users and/or beneficiaries of ecosystem services.

As mentioned above, community concerns and queries will be managed via a grievance mechanism that will be developed and implemented by KI. A responsible person will be assigned for leading community relations; a grievance register will be initiated; and a clear, time-bound grievance procedure will be put in place. Reporting on the outcomes of the grievance mechanism will be part of the ongoing engagement with local communities. In addition, KI will post key performance indicators for all of its operations on its corporate website and update these on a regular basis.

Two villages are dependent on Uleza and Shkopeti HEPPs for their electricity. These villages do not have any other means to receive electricity. In this respect, KI must ensure that it can continue to provide electricity to these villages under an agreement with KESH, the national electricity distribution company.

Broad Community Support is not applicable for this project

Action Item	Target date
1. Kurum International (KI) will implement its Environmental and Social Management System (ESMS) at HEPPs in accordance with the IFC Performance Standard 1 requirements and incorporating reference to IFC Performance Standards 2-8 and relevant WBG EHS Guidelines. This shall include, inter alia, development of appropriate E&S management plans and procedures, development of suitable E&S capacity provision of relevant training and implementation of appropriate E&S monitoring programs. 2. KI will implement a stakeholder engagement process aimed at establishing and maintaining a relationship with key stakeholders, including the Affected Communities. The process shall include stakeholder analysis, external communications, disclosure of relevant information to, and consultation process with Affected Communities, and establishment of a grievance mechanism to receive and facilitate resolution of third party concerns and grievances.	31 Dec 2013
3. KI will improve current Occupational Health and Safety practices through provision and training on the use of personal protective equipment for all employees and review of existing fire fighting and emergency response systems at HEPPs and bringing them up to a standard capable of responding to the fire and other emergency risk for the hydropower facilities.	30 december 2013
4. KI will develop a worker grievance mechanism and maintain a record of grievances raised and how these have been dealt with.	In three months after taking over
5. KI will develop and implement a comprehensive waste management plan to deal with solid waste, hazardous waste and domestic sanitary waste in accordance with Good International Industry Practices.	31 December 2013
6. KI will undertake a dam safety risk assessment carried out by a dam safety expert. 7. KI will implement the recommendations of the dam safety expert, including implementing any measure necessary to improve the current dam monitoring system.	31 dec 2013 March 2015
8. If KI changes the operational mode of the hydropower facilities from historical patterns, the Company will carry out an environmental flow assessment to identify any adverse impacts on geomorphology or priority ecosystem services, and undertake a stakeholder engagement exercise involving disclosure and consultation with relevant communities and authorities.	60 days prior to such a change
9. If the Company’s operation includes activities on sediments, KI will develop a sediment management plan based on national and IFC requirements.	Plan ready 30 days prior to dredging or movement of sediments.
10. KI will commission an independent audit of its EHS performance. The audit will look at the HEPPs ESMS, management of labor and working conditions, OHS performance, dam safety monitoring and improvement, disposition of sediments, and management of environmental flow.	December 2015