This is a Category A project according to IFC’s Policy on Environmental and Social Sustainability due to diverse and potentially significant adverse risks posed across multiple sites to, among others, hydrology/ecological flow, land use and ownership, biodiversity, dam safety and community/worker safety. All of IFC’s Performance Standards (PSs) are applicable to the project with the exception of PS 7: Indigenous Peoples (IPs), as no IPs have been identified in the project area.

Environmental and Social Policy

AGL has an Environmental & Social Sustainability Policy that sets out its commitments and responsibilities and prioritizes environmental and social issues including biodiversity conservation, climate change mitigation and adaptation, and energy and resource efficiency. These commitments include actively seeking to ensure its activities adhere to good international industry practices in environmental, social and human resource management, including IFC Performance Standards and World Bank Group Environmental, Health and Safety (EHS) Guidelines, and contributing to effective implementation of relevant principles and codes of practice related to environment, labor, corporate responsibility and access to information.

Identification of Risks and Impacts

The company engaged Mott MacDonald and a local firm, Gamma Scientific, to prepare Environmental and Social Impact Assessments (ESIAs) to meet International Finance Institution (IFI, including IFC, EBRD and ADB) requirements. The ESIA considered the environmental and social impacts of both the Shuakhevi and Koromkheti schemes described above, as well as those of the proposed Khertvisi scheme that is no longer being actively considered for development. ESIA documentation includes a series of stand-alone documents (listed above), namely a Stakeholder Engagement Plan, Non-Technical Summary, Land Acquisition and Livelihood Restoration Framework and Plan, and a Biodiversity Action Plan. A series of management plans have been prepared as part of the Construction Environmental Management Plan (CEMP). In parallel, a national EIA has been undertaken to comply with Georgian regulations. This EIA considered the environmental and social impacts of only the Shuakhevi HPP project. The national EIA has been approved by the Ministry of Environmental and Natural Resources, with approval conditions attached to the Resolution of the Environmental Review issued by the Ministry.

The area of influence of the impact assessments was considered to include direct and indirect impacts that may arise from the construction and operation of the Shuakhevi scheme - and the Koromkheti scheme, in view of potential cumulative impacts - including all tunnelling, dam and weir construction, transmission line construction, operation of HPP scheme and associated works. These included impacts from land take, air pollution, noise, water discharge, spoil disposal, social effects (such as those resulting from land acquisition, economic displacement and changes to traffic use patterns), effects on the landscape, buried archaeology and features of cultural heritage importance. Neither impact assessment covers the transmission lines required to link each scheme to the national grid. These lines are considered to be associated facilities as defined in PS1, which will be developed by the Georgian Government. Clean Energy Invest, one of the project sponsors, commissioned a transmission line routing study from Mott MacDonald between October 2012 and July 2013 to identify environmental, social and technical issues and propose route alignment provisions. The International Bank for Reconstruction and Development, (IBRD, or the World Bank) has been approached by the Government of Georgia to support the establishment of this transmission line and it is thus expected that the ESIA will be conducted to Georgian and World Bank standards. Following the agreement reached with the Government of Georgia, AGL is conducting the ESIA for the transmission line development. A satisfactory draft ESIA for the transmission line project will be submitted to IFC by November 2013 (ESAP Action No. 1).

Cumulative Impacts

Cumulative impact assessment was incorporated into the ESIA, covering the scheme, the proposed downstream Koromkheti scheme to be developed by AGL and a number of other existing and planned projects in the basin, namely ski resorts at Goderdzi Pass (Khulo Municipality), Gomarduli (Shuakhevi Municipality) and Goma Mountain (Shuakhevi and Keda Municipalities) and a cascade of three HPPs on the Chorokhi river, namely the Kirnati, Khkelvachauri 1 and Khkelvachauri 2 HPPs with a total capacity of 105.4 MW.

The main cumulative impacts identified in the ESIA include those on aquatic ecology (including impacts on the fish populations and spawning habitats) during operations, and traffic during the construction phase of the Shuakhevi scheme. Measures to mitigate potential cumulative impacts on aquatic ecology as well as other ecological receptors are included in the Biodiversity Action Plan (described further under the PS 6 section below), to the extent that no significant adverse residual impacts are anticipated. Cumulative impacts on traffic flows in the project area are unknown due to uncertainties on project timing and scope associated with the ski resorts; however, it is anticipated that impacts could be significant if the peak construction period of the project were to overlap with those of these resorts. Mitigation measures for this impact are being incorporated into the project traffic management plan, including consultation and collaboration with other developers, municipal authorities and other key stakeholders with respect to traffic management and highway road safety during peak construction periods.

Management Program

The impact assessment process led to the compilation of an Environmental and Social Management Plan (ESMP, 2012) for the project that lays out key mitigation measures associated with identified impacts. The ESMP requires development of a number of Construction Environmental Management Plans (CEMPs) governing various aspects of construction-phase mitigation. AGL has already developed and is implementing many of these CEMPs and will develop and implement others in conjunction with construction contractors over the course of the upcoming months and years of project construction. The CEMPs in place include: Cultural heritage ‘chance’ finds procedure, Ecological management plan, Labor Accommodation plan, Spill prevention and chemical storage plan, Air quality management plan, Noise management plan, Traffic management plan, Labor grievance plan, Waste management plan, Erosion and sediment control plan, Water resources and water quality plan, and Emergency preparedness and response plans.

The ESMP and its sub-plans form the basis of an AGL environmental, social, health & safety management system that is being developed in line with ISO 14001 and OHSAS 18001 requirements and will be used to manage project risks and impacts on an ongoing basis. Aside from the ESMP and CEMPs, AGL has developed a number of other stand-alone mitigation plans as part of their management program, namely the Land Acquisition and Livelihood Restoration Plan, Biodiversity Action Plan and Stakeholder Engagement Plan.

Organizational Capacity and Competency

AGL has an Environmental, Health & Safety (EHS) department that is responsible for managing environmental, social and health & safety risks and impacts during construction and operations in accordance with ESMP commitments. The team currently comprises six full time professional staff, including Georgians and internationals, and will be supplemented over time through the use of reputable EHS consultants and third party experts during ESMS development. Current in-house competencies include contractor EHS oversight for large hydropower projects, community liaison, land acquisition/compensation, a community wildlife officer and administration. Budget has been allocated for these roles. One of the key roles of the EHS unit will be to monitor and audit contractor EHS performance during construction. The ESMP contains AGL commitments to ensuring all contractors are encouraged to adhere to the principles of ISO 14001:2004 and OHSAS 18001:2007 or equivalent, if not already accredited.

As part of the tender process, contractors were evaluated on their EHS policy, procedures and management system. Contractors are required to develop a site/project specific CEMP and elaborate other parallel plans; implement the requirements of mitigation activities in the construction ESMP via the above plans; provide a construction site layout plan that identifies key activity area including laydown, accommodation and welfare blocks, parking etc. prior to commencement of works; produce detailed method statements relating to key activities; provide all training necessary to oversee and implement ESMP requirements; produce a comprehensive suite of EHS management and coordination procedures; and identify a full time person on site with dedicated EHS responsibilities to oversee works on site. Each main contractor is responsible for sub-contractors’ EHS performance, including adherence to the requirements of the ESMP.

Emergency Preparedness and Response

In case of an injury to project workers, trauma provision will be provided at the new hospitals in Shuakhevi or Khulo. AGL insures all workers for medical treatment and its contractors, through contract clauses, will be required to have medical insurance for all of their workers. In addition there will be first aid kits and facilities at the major construction sites and a nurse will be on standby at all times to provide first response care in medical emergencies, as well as to treat workers for minor injuries or medical problems. If needed, search and rescue will be provided by the Department of Emergency Management under the Ministry of Internal Affairs of Georgia. A project Emergency Preparedness and Response Plan is being updated in consultation with local community representatives and local authorities, especially in areas where community response and cooperation is required for effective execution of the Plan. There will be particular emphasis on landslide risks and road safety during the construction phase and on flushing and changing water levels, which will occur during the operational phase of the project. The final Emergency Preparedness and Response Plan will be disclosed to communities via the Municipalities and village heads.

Monitoring and Review

AGL will approve Contractors’ EHS Plans and procedures. As per the ESIA, each Contractor will be required to issue a monthly environmental report to AGL. AGL will undertake daily compliance monitoring of the contractors’ activities and report to the Georgian Ministry of Environment on a quarterly basis on selected issues listed in the EIA Approval Conditions. The Department of Environmental Supervision of the Georgian Ministry of Environment will monitor and enforce the implementation of the conditions imposed on AGL. Construction EHS monitoring requirements are defined in the Construction EMP and include aspects such as water quality, waste management, worker health and safety statistics, seismic/landslide risk, land acquisition data and grievances raised. AGL will develop a detailed audit/monitoring schedule, including environmental, health and safety, labor and social issues. Operations phase monitoring is laid out in the ESMP and associated documents such as the Biodiversity Action Plan and Stakeholder Engagement Plan and covers aspects such as occupational health and safety incidents, environmental flow, water quality, seismic risk, terrestrial and aquatic ecology (e.g. annual fish surveys, hydrological monitoring, faunal diversity and habitat reinstatement monitoring) and community grievances. Independent EHS monitoring will also be commissioned on a periodic basis to satisfy international lender requirements, as outlined in the ESMP.

The project will require a peak construction labor force of around 800 workers. Construction works will be underway 24 hours a day, seven days a week and are likely to consist of three shifts of eight hours or two shifts of ten hours. Where possible the majority of unskilled workers will be drawn from the villages closest to each of the construction sites, subject to availability of suitable candidates. Contractors who demonstrated a high commitment to local employment were given a more favorable weighting as part of the tender decision process. The project undertook a skills mapping exercise during the ESIA process to identify the range of locally available skills. AGL has established a vocational training center and has been training local persons in key construction skills such as welding, carpentry and electrical matters, targeting communities to be most affected by project infrastructure. During operations, the workforce is likely to comprise 60 full-time employees.

Human Resources Policies and Procedures

AGL is a relatively new company that has committed to developing a Human Resources (HR) policy and associated procedures governing labor and working conditions, which will be consistent with Georgian and IFC/EBRD/ADB requirements. All employees will be issued with individual contracts of employment detailing their conditions of service. Temporary and permanent accommodation will be provided by AGL and its contractors in a manner consistent with a Workers Accommodation Plan that covers key aspects of workers accommodation as captured in the IFC/EBRD guidance note (August 2009) on worker accommodation processes and standards.

Workers Organizations, Non-Discrimination & Equal Opportunity and Grievance Mechanism

As this is a greenfield project being undertaken by a relatively new SPV company there are currently no workers’ organizations in AGL. It is unlikely that such organizations will become active until the operations phase of the project, as construction will be undertaken by a fluctuating contractor-dominated workforce. AGL will allow workers to join workers’ organizations in future. AGL is committed to non-discrimination and equal opportunity and this will be reflected in the company’s HR policy and associated procedures. The company will not make use of child or forced labor and will ensure that its contractors do not either. AGL will develop and disseminate a worker grievance mechanism and ensure that contractors provide the same for their workers. AGL’s EHS manager will maintain a record of worker grievances including how grievances were closed out and in what timeframe. Grievance, incident, accident and occupational disease logs will be retained at head office for future analysis and monitoring by lenders or government inspection authorities. ‘Toolbox talks’ on labor regulations and the grievance mechanism will also be held at least twice a year during construction.

Occupational Health & Safety

AGL and its contractors are in the process of developing and implementing a Worker Health and Safety Plan covering site-specific job hazards, provision of preventive and protective measures for all hazards; information about safe working methods including the production of individual worksheets for discreet hazardous tasks; use of Personal Protective Equipment (PPE); management and storage of explosives and hazardous chemicals; and road safety measures such as speed limits on public roads. Contractors are contractually required to monitor and enforce safety plans and establish penalties for violations and rewards for good compliance records. Contractors will be required, through their contracts, to supply key personnel for the management of OHS risks who will include an EHS Manager with overall responsibility for ensuring the health and safety of the contractor’s workers, reporting to AGL’s EHS Manager; and a Foreman on each construction and tunneling site who is responsible for that site, reporting to the contractor’s EHS Manager.

A Permit to Work (PTW) system will be established to ensure that all potentially hazardous work is carried out safely. All workers on the project will be given basic health and safety training including use of ppropriate PPE. Training will also be given on how to conduct tasks with specific health and safety risks such as welding, use and storage of explosives and hazardous chemicals, working with live equipment, tunneling, electromagnetic field safety measures, working at height, working on or near water, crossing water courses and the use of boats and life-jackets, road safety and general driver training, use of seatbelts, vehicle checking and dealing with adverse weather conditions on roads such as snow and ice, etc. The contractors’ EHS Managers will maintain a log documenting all health and safety training given to each worker and when refresher courses are due. These logs will be monitored by AGL’s EHS Manager on a regular basis. AGL’s EHS Manager will maintain a central record of occupational incidents, accidents and diseases and follow these up on all sites to ensure that corrective measures are taken and that recurrence is prevented. Each site will have a Foreman employed by the contractor who will be qualified in OHS and first aid and who will be responsible for management of all health and safety issues on their site. The Foremen will carry out daily site walkovers to identify hazards and take action based on their findings. They will report incidents and accidents to AGL’s EHS Manager. AGL’s EHS Manager will be mandated to carry out monitoring of sites and workers’ accommodation and hold site meetings with Foremen to discuss health and safety improvements, compliance with PPE requirements and other OHS issues as they arise. Based on the final arrangement with the selected construction contractors, AGL will update and submit to IFC an Occupational Health and Safety Plan to manage construction phase OHS performance (ESAP Action No. 2).

Workers Engaged by Third Parties

As captured in the ESMP, clauses are being inserted in contractors’ agreements to ensure compliance with the following AGL requirements: having a suitable HR policy and procedures, issuing individual worker contracts stipulating conditions of service, developing workers accommodation plans/procedures, and establishing a grievance mechanism (the principles for which are spelled out in the ESMP), code of conduct, worker health and safety plan and emergency preparedness and response plan. Contractors and sub-contractors will be made aware of their role in ensuring the project meets international standards related to labor and working conditions. In particular, overtime arrangements and the timely payment of wages will be addressed. Contractors will also be expected to provide all construction workers with a summary of their employment service and training activities at the end of each contract as a means to finding continued employment. This will be done through the provision of briefings to subcontractors and enforced through contractual clauses and regular monitoring (internally by AGL and externally by independent monitors) of contractors’ activities and performance.

Greenhouse Gases

Greenhouse gas emissions from the project will be negligible during operations as trees will be removed from the reservoirs during construction so as to avoid methane production from rotting vegetation and power used for ancillary purposes will be taken from the hydropower project itself. Standby generators will be installed but are expected to be used infrequently. The project was registered with UNFCCC as a Clean Development Mechanism (CDM) project on 1 November 2012, becoming the first new build hydro to obtain registration with UNFCCC in Georgia to date. A detailed Project Design Document (PDD) dated August 31, 2012 was prepared for CDM for the combined Shuakhevi Scheme and Koromkheti Scheme. For the Shuakhevi Scheme project to be financed under this investment, using the assumptions of annual electricity generation of 463.7 GWh and the Combined Margin emissions factor of 0.49308 tCO2/MWh, the PDD estimates CO2 emission reduction of the Project as 228,641 tCO2/year.

Wastes

The ESIA provides a breakdown of all the likely construction- and operations-phase waste streams expected to be generated by the project, as well as hazardous materials required, and how the project proposes to deal with these during key project phases. The most significant waste stream by volume during construction will be spoil (waste rock) generated via excavation of tunnels, dam foundations, adits and other civil works. The estimated total volume of spoil to be generated through construction of the Shuakhevi scheme is 2.4 million m3. To the extent possible, spoil material will be used for concrete production and as road aggregate, with the balance being disposed of in carefully sited and designed spoil dumps. Spoil dump sites were identified by AGL via a tailored analysis that focused on minimizing impact on agricultural areas, protecting against erosion and landslip processes, minimizing the potential for downstream flooding and minimizing impacts on landscape features and existing infrastructure.

A site waste management plan will be developed by each of the contractors and overseen by AGL, as captured in the ESMP. Particular attention will be paid to the use of settling ponds and sediment traps at tunnel and adit openings during construction, to reduce the sediment load of tunneling waste water and water make. Opportunities for future recycling of various waste streams are currently being identified by the project. During construction, drinking and general use water will be abstracted from local strings and wells, which are abundant throughout the project area or, where this is not sufficient, supplied by container. Sewage will be dealt with by a combination of modular treatment plants (construction) and septic tanks (operations); the latter will be serviced by the local municipalities, under contract to the company.

Pollution Prevention

Air, dust and noise emissions will be limited to the construction phase and mitigated using standardized mitigation measures laid out in the ESMP. Dust emissions from site roads will be controlled by the use of water bowsers during dry periods. Some water will be required during tunneling operations, and there may be water make due to groundwater intersections in tunneling operations. Sedimentation ponds will be established to allow sediment to settle out before tunneling water is released. Periodic water quality monitoring will be conducted upand down-stream of in-stream construction sites during the construction phase. Mobile toilets will be provided during construction, whilst septic tanks will be established for the operational phase.

Community Health & Safety

Adjara region as a whole is sensitive to natural hazards including mudflows, erosion and landslides. The project area has historically experienced many landslides, such as the Tsablana landslide in the Skhalta River valley, which killed 19 families. As a result, landslide risk has been a key concern of many local inhabitants. AGL commissioned detailed slope stability / landslide hazard studies during project design, and avoidance of landslides was one of the key considerations driving final design locations of key infrastructure. Associated risks and mitigation measures, in particular those relating to avoiding landslides during tunnel construction, are captured in the ESIA and ESMP and will be monitored on a site-specific basis during construction. Some of the generic engineering options envisaged for mitigating landslide risk during construction and operation include excavation of the landslip mass back to stable in-situ ground; buttressing structures at the toe of landslips; installing drainage measures to control and monitor the groundwater regime; using piling and soil anchoring, implementing toe protection structures where undercutting by a river is identified as a risk, positioning dams, reservoirs and tunnel portals away from landslide areas rated as major or critical risk, following good engineering design and construction practice for temporary and permanent excavation works, ensuring designs are appropriate to local seismic conditions, using low energy explosives for blasting in areas of low overburden and limiting the amount of tree felling wherever possible.

During the operational phase some reservoir levels will fluctuate. This will have a negative effect on the side slope stability by changing the pore water pressure regime. The dam structures and reservoirs have been cautiously located away from areas at risk of a high magnitude landslide event; as a result, the fluctuating reservoir levels may cause only shallow localized slips into the reservoir where the impact will be negligible. Landslides could cause a dam-break event - either by overtopping or loss of structural integrity - with potential for severe impacts on the local population downstream and those inhabiting the landslide risk area itself. Such an event may also occur independently of any of the proposed work. However, as the design has carefully considered and investigated landslide hazard risks to avoid construction taking place in high risk areas, potential for construction to activate landslides is minimal. A dam-break analysis has been carried out and the results are summarized in an appendix to the ESIA.

The construction phase increase in local traffic volumes poses a road safety risk to community members who regularly use roads that the project will need, especially in busy town centers and near schools. This could be a particular problem for vehicles travelling behind large trucks as there are few safe passing places. The increased number of heavy vehicles using the road may also cause deterioration in the road surface. There will be a road safety element in the Worker Health and Safety Plan including maximum speed limits for site and access routes. Contractors will be required through contract clauses to monitor and enforce safety plans, report accidents involving community members to AGL’s EHS Manager, and establish penalties for violations such as incidences of dangerous driving reported via the community grievance mechanism. AGL will be responsible for regular maintenance of site and access roads to reduce erosion, pot-holing and degradation of drainage channels in order to maintain access and road safety. Main roads such as the state highway will be repaired if significantly damaged by heavy trucks in order that local people retain a useful and valuable asset when the project is complete.

Flooding of areas will occur during the filling of reservoirs which will result in a risk to local people and their livestock. During the diversion of water for dam construction and the filling of reservoirs, care will be taken by the contractor to ensure that the areas to be flooded are clear of community members and their livestock and other assets. Announcements that flooding will be occurring will be made one week in advance in local village and community centers and via local radio, and village heads will be informed so that word can be spread amongst communities. The AGL Project Manager and support staff will oversee the flooding process in all cases. A warning system will be used during operation when overflow or sediment flushing occurs which will include advance notification to communities via village heads and local radio where possible. Where advance warning is not possible and in every case where significant additional water and / or sediment is to be released through (or around) the dam, a siren system will be used to give people the chance to clear the riverbed of themselves and their livestock prior to the flash flood occurring.

Emergency Preparedness and Response

An Emergency Preparedness and Response Plan for the project will be developed in consultation with local community representatives, especially in areas where community response and cooperation is required for effective execution of the Plan. There will be particular emphasis in the discussions with communities placed on road safety during the construction phase and on flushing and changing water levels which will occur during the operational phase of the project. The final Emergency Preparedness and Response Plan will be disclosed to communities via the Municipalities and village heads.

Community health and safety education campaigns will be undertaken commencing in the construction phase and ongoing into the first year of operation of each scheme, covering the following key issues: flooding during construction; fluctuating water levels associated with overflow and sediment flushing; road safety awareness; risks such as transportation and potential spillage of hazardous materials including chemicals and explosives; HIV/AIDS awareness; site safety awareness and access restrictions. Community education programs will take place in schools and community centers such as village halls and municipality buildings. Fencing will be installed around all construction sites and areas where there is a risk to community health and safety such as excavations. There will be warning signage in Georgian and English (for tourists) in areas which may flood when sediment is flushed or when there is a requirement to release heavy rainfall through the dam. There will also be signage and fencing around all live electrical equipment.

Security Personnel

Access to construction sites, tunnels, workers’ accommodation and the powerhouses during operation will be controlled by fences, gates and security guards. Each site will have entry and exit logs and vehicle access restrictions so that security teams know who and how many people are on site at discrete times in case of fire and so that they can restrict access to project staff only. The project will carry out appropriate checks to ensure that security companies and personnel do not have a history of past abuse. Security personnel will be trained in the appropriate use of force and in applicable Georgian laws. AGL will provide training to security personnel using the guiding principle that force shall not be used except in defense and in proportion with the nature and extent of the threat. The project will not make use of government security personnel.

Protection and Conservation of Biodiversity

An ecological impact assessment was conducted as part of the ESIA, comprising desktop reviews, field surveys, interviews with local people and several workshops/meetings with NGOs and agencies involved in conservation in Adjara and nationally. Field surveys covered fish, zoo-benthos, flora, birds, mammals, reptiles and amphibians and were variously conducted during 2011, 2012 and 2013. River meso-habitat surveys were also conducted as part of the ecological flow assessment process.

No protected areas will be impacted by the project. The most ecologically sensitive part of the overall cascade of hydro-electric schemes assessed in the ESIA process is the lower (most westerly) Khertvisi scheme, which was identified as posing direct adverse impacts to migratory black sea salmon breeding areas. As mentioned in the project description, AGL is no longer considering development of this scheme, and related impacts are therefore not described in this section. A Biodiversity Action Plan (disclosed with this review summary) has been developed for the project, in consultation with NGOs, lenders, government agencies, expert consultants and others, to ensure that the mitigation measures for biodiversity related impacts associated with the project, as captured in the ESIA and ESMP, are fully implemented. A September 2012 workshop on the Biodiversity Action Plan was followed up in September 2013 by a second multi-stakeholder workshop on plan design and

implementation. The Biodiversity Action Plan included a critical habitat assessment and concluded that whilst the broader project area, namely the Adjaristsqali river basin, qualifies as critical habitat according to PS 6 due to the presence of a number of high conservation value reptile, bird and plant species, the project is unlikely to have any residual adverse impact on these species.

The area of influence of the Shuakhevi scheme includes ten main habitat types, the most sensitive of which are oak forests lining the gorges of affected river valleys; however, as these forests do not fall within the project footprint, direct impacts are not envisaged. The main habitat type to be impacted is riverside grassland and terraces with patches of riverine forest and scrub dominated by alder trees. There will also be a moderate impact on deciduous spruce forest. Three plant species included in the IUCN Red List of Endangered Species occur within the area of influence but all are of low to medium conservation value. AGL will prepare a habitat removal and reinstatement plan that establishes minimum requirements for reinstatement of natural forests impacted by the project, as part of the construction ESMP. This plan will incorporate measures such as pre-construction surveys of affected species, recording of all felled species and numbers thereof and the use of indigenous species in revegetation programs. The ESIA summarizes a number of other mitigation measures designed to safeguard plants during the construction phase of the project.

There is likely to be a minor negative impact of moderate significance on the common rosefinch (Carpodacus erythrinus) and boreal owl (Aegolius funereus) if present in the breeding season around the reservoir inundation areas. Other terrestrial fauna with high conservation value identified within the area of influence include four bat species and otters. Adverse impacts on bats caused by loss of forest roosting sites are considered to be partially compensated by the creation of open water habitats that will provide favorable foraging habitat for bats. Otters are however likely to be significantly impacted via reduced river flows and the physical barriers to movement created by the dams, as well as loss of terrestrial habitat and change in food availability. Hunting and fish by project workers during construction and operation will be prohibited and a number of measures will be taken to minimize impacts on wildlife; e.g., inspection of any large crevices or caves for bats and other species prior to tunneling, checking for otter breeding sites prior to works in riverine habitats in May and June and identification of any nests belonging to birds of prey of conservation significance prior to forest clearing, with subsequent notification of the relevant authorities and associated mitigation measures.

Impacts on fish and aquatic habitats are anticipated to be most significant as a result of weir and dam wall construction and attendant changes in flow regimes on the affected rivers during operations. The small weir on the Chirukhistsquali river is expected to have the least impact as fish surveys indicate that no spawning habitat will be affected and as no protected migratory fish species are present other than the brown trout, which spawns at higher altitudes and does not migrate out to sea. This weir will have a fish pass built into it to allow for upstream and downstream passage of fish of various species. The 36 m dam to be constructed on the Adjaristsqali river will create a permanent obstruction to up/downstream fish movement (too high for an effective fish pass) and will create a reservoir habitat for 800 m replacing the fast flowing natural stream environment. This dam will not result in any loss of spawning habitat. No protected migratory fish species have been identified as being present in this reach of river, which is high up in the overall Adjaristsqali catchment. The 21 m high dam to be constructed on the Skalta river will permanently block fish movement up/downstream (too high for an effective fish pass) and will result in loss of spawning habitat in the reservoir basin and immediately downstream of the dam wall.

Mitigation measures for biodiversity impacts are proposed in the ESIA and ESMP and consolidated in the Biodiversity Action Plan for the project. These include, among others, appointment of a Community Wildlife Officer for the lifetime of the project, installation of bird and bat boxes and roosting sites, creation of new recreational fishing sites around the reservoirs, stocking of reservoirs with native fish species and planting of mixed species forest habitats to compensate for habitat lost to project development. The Biodiversity Action Plan contains a set of four detailed action plans focusing on a) Forest Habitats and Notable Plant Species; b) Rivers and Associated Species; c) Protected and Threatened Terrestrial Mammal and Reptile Species and d) Protected and Threatened Bird Species. It also lays out a detailed biodiversity monitoring and evaluation program for the project. To date AGL has established service agreements with three regional conservation-oriented NGOs, as a result of ongoing consultation on the ecological impacts of the project. These include agreements with Association ‘Psovi’ covering monitoring of birds, mammals, insects, reptiles and amphibians; with Association for Nature Protection and Sustainable Development (MTA-BARI) covering establishment of protected areas within the project boundaries and associated mitigation measures; and with Association Flora & Fauna covering fish monitoring.

Environmental flows

The ESIA concludes that the Shuakhevi scheme will significantly reduce the flows downstream of the barriers in the affected rivers which could adversely impact future fish populations and aquatic ecology. However it also notes that, due to the run-of-river nature of the scheme, which will spill over in high flow periods, and as there are many important tributaries downstream of the dams walls/weir, impacts on flow pattern will be markedly reduced a short distance downstream of these barriers and will not affect the entire ‘dewatered’ (bypassed) river reaches.

A base environmental flow case of 10% of annual mean flow was assumed to assess project impacts at catchment scale. This was based on the historical use in Georgia and other countries of setting environmental flows at 10% of the annual average, often as part of a two stage system of environmental flow assessment. The figure of 10% of mean annual flow represents the minimum instantaneous flow recommended to sustain short-term survival habitat for most aquatic biota, according to reputable studies. A second stage of environmental flow assessment has been designed and implementation is underway, the purpose of which is to identify sensitive river reaches and determine reach-specific flow requirements and mitigation, based on ongoing data collection, impact assessment and adaptive management. Mitigation measures available include habitat enhancement, alteration of flow regime, and or combination of these measures as well as potential for offsetting where relevant, collectively termed adaptive management. Phase 1 and the first stage of Phase 2 (meso-habitat mapping) were completed during the ESIA, whilst phase 2 work will continue through the construction and early operations phase of the project.

Phase 2 will incorporate consultation and engagement with local stakeholders as well as conservation groups interested in improving and understanding applications for defining environmental flow regimes and identifying key priorities for conservation and resource use. Adaptive management is a structured, iterative process that aims to reduce uncertainty over time through monitoring. Adaptive management of environmental flows means that a monitoring program will be put in place to evaluate impacts on ecological communities and establish whether the minimum environmental flows are effective in practice. If impacts are found to be more significant than anticipated, additional mitigation measures, including potential for revised flow regime, may be required. The results of the Phase 2 assessment and monitoring will allow the scheme to define an adaptive management process. To support this, a monitoring program will be initiated once the scheme is in operation. Ecological indicators will be monitored to assess the ecological status of the Adjara Rivers and determine ecosystem responses to reduced flows. These responses will be based upon ecosystem indicators representative of the health of the river ecosystem, namely fish and macroinvertebrate communities.

Management of Ecosystem services

The ESIA included a review of ecosystem services impacts related to the project and highlighted two that have the potential to be significantly impacted, namely fisheries and existing drinking water/irrigation/agricultural use of river water. The greater project area contains a significant number of fish farms rearing rainbow trout; however, the Shuakhevi scheme (the project covered by this review) will not directly impact any of these and only one such farm is located in a tributary to one of the three affected rivers. In relation to the risk of lost water resources as a result of tunneling, potential impact on springs used by communities could be a major adverse impact, but as most springs and users located on old landslip areas have been avoided by the tunnel alignment, this is considered to be a relatively low risk. Where impacts are foreseen they can be minimized by localized tunnel grouting or lining. Where loss of drinking water occurs a temporary water supply will be established so that households are not without drinking water in the short term. In order to rectify loss of drinking water resources in the long term, a permanent alternative water supply will be installed by the project. Water is diverted throughout the Adjaristsqali river and its tributaries for irrigation purposes, usually by means of low-tech intakes (e.g. aligned river boulders) with no hydraulic control structures. However these are typically located on upper tributaries, as the main river lies well below villages’ arable lands, hence will not be affected by the project.

Cultural heritage impacts were assessed during the ESIA via both desktop review and field walkover surveys. The project has been designed in such a way as to avoid inundation of any notable cultural heritage features. Two recorded historical remains were identified close to the Shuakhevi scheme development area, namely the Middle Ages fortresses of Selim Khmshiashvili and Diakonidzeebi Village. Neither of these remains fall within 200 m of any planned construction works and thus no direct adverse impact is expected on either. Although there are no recorded cultural heritage assets relating to buried features and deposits in the study area have been identified, this may be because the area has not been extensively studied to date and it is considered likely that such deposits exist. The most likely areas for survival of such features and deposits would be the flatter, low-lying areas of modern settlement, areas where project construction facilities and contractor colonies will be located, as well as at tunnel adit sites which will be excavated. The client has developed ‘chance finds’ procedures in accordance with Georgian regulations and IFC requirements to deal with this eventuality.

Stakeholder Analysis and Engagement Planning

AGL’s stakeholder engagement process is captured in the attached Stakeholder Engagement Plan. The engagement process began during the scoping phase of the ESIA and has continued until the present day. It was based on an early stakeholder mapping/identification process and has been iterative in nature.

Disclosure of Information

AGL has disclosed relevant project information throughout the ESIA process and will continue to do so during project implementation. This information has been presented in Georgian and English and in non-technical format wherever possible to enable stakeholder input. For example, the Stakeholder Engagement Plan was first disclosed on 28 July 2011 and the ESIA Scoping report was disclosed on 26 August 2011. Subsequently, AGL has publically disclosed (at public places, by post, by hand or on its website) a series of project documents including, among others, the draft and final ESIA reports, the Biodiversity Action Plan, a guide to land acquisition and compensation and the updated Stakeholder Engagement Plan. In future, AGL will disclose key monitoring results to the public, in particular affected communities.

Informed Consultation and Participation

ESIA (public) scoping meetings began on July 19 and 20, 2011, with four meetings in key municipalities and six village meetings. Further meetings have been held in 2012 and 2013 to discuss ESIA findings and associated mitigation measures. AGL has also held/hosted a series of smaller, focused meetings and workshops with key informants and groups that began in September 2011 and have continued to date. For example, dedicated meetings with NGOs focused on environmental and social matters were held in 2011, 2012 and 2013 to present the project, development team, proposed studies and impacts, mitigation measures, etc., and to capture NGO feedback and input. Focus group meetings and discussions have been held with vulnerable groups, municipal leaders, affected landowners and women’s groups throughout the process. A stakeholder workshop on the Biodiversity Action Plan (BAP) was held on 14 September 2012, aiming to identify and/or verify key conservation objectives, baseline information gathered and associated mitigation measures. This workshop, along with the NGO meetings held, led directly to the involvement of several conservation-focused NGOs in project monitoring, as described above in the PS6 section. Another stakeholder workshop on the Biodiversity Action Plan was held on 10 September 2013 to update the stakeholders of the biodiversity mitigation measures and monitoring programs, and to seek suggestions from them.

Key Issues

Key concerns raised during public consultation in affected communities were related to potential project impacts on local climate; land acquisition and compensation; landslide risks; water levels in the river; employment opportunities and whether the communities were to benefit from low electricity prices. Regarding concerns as to whether the project would have an effect on the local climate by increasing humidity, as no large reservoirs are part of the scheme design the effect on local climate is considered to be minimal. There was also a general concern on the possibility of erosion and the likelihood of landslide activation and whether the AGL would take responsibility for any repercussions these effects may cause. The project development team has stated that great care was taken during project design to assess the potential land slide risk areas, and the scheme has been developed and modified to limit risks on any sensitive areas. As a result, only low risk sites were chosen to position the dams/weirs, reducing the likelihood of landslides to a minimum. If an event resulting from the scheme does occur, AGL will take responsibility. The project was perceived by some stakeholders to have a negative effect on water levels particularly in the Adjaristsqali River, potentially affecting communities’ water supply and sewage systems. Although the project will affect overall existing water levels, the greatest impacts will be close to the dam sites (i.e. far from settlements) and a minimum ecological flow will continue to be released at each dam, in addition to additional inflows from side streams and tributaries along the Adjaristsqali, reducing the risk of impacts to water supply systems.

Questions in relation to land acquisition and compensation measures were raised consistently. Each municipality was informed of AGL’s intention to treat all land owners and users equally and offer compensation to all whether or not they had legal entitlement to the land. Land prices were to be determined based on market valuation undertaken on each land plot by a local real estate valuation company. Further details were provided in a leaflet distributed during the meeting, which contained the contact details of AGL’s Community Grievance Officer. AGL undertook additional consultations with affected households, as described in the PS5 section above. All municipalities raised the question of whether they would benefit from either free or low electricity prices. They were informed that electricity prices are set by the authorities at national level and that AGL has no power over this matter. Employment opportunities and re-training of the local population was brought up during most consultations. AGL conducted professional skills surveys in affected municipalities and operates a vocational training center in the Khulo municipality in collaboration with Kobuleti public college, with the aim of maximizing local hiring during the construction and operational phases of the project and assisting those most impacted by the project to gain additional benefits.

AGL appointed a Community Liaison Officer early in the process to provide a day-to-day interface with affected communities and other key stakeholders. Other project team members have been involved in consultations, as have the ESIA consultants. Each main contractor will be required to have a person responsible for community liaison and grievance redress. AGL has disclosed key ESIA documentation and updates on its website as well as at strategic locations in the project area and in Batumi. Local and national newspapers and radio channels have been used to advertise public meetings at least two weeks before each has occurred.

Grievance Mechanism

AGL developed and disseminated a formal project grievance mechanism early in project development. This mechanism is described in the ESIA and Stakeholder Engagement Plan and has been presented to affected communities and other stakeholders. The Community Liaison Officer’s contact details have been disclosed to affected stakeholders in meetings and via disclosed materials and the project website. This officer will manage the grievance mechanism (e.g. logging grievances received using the standard template and/or verbally, coordinating responses, etc.) and will also be responsible for coordinating ongoing stakeholder engagement efforts summarized in the Stakeholder Engagement Plan.

Adjaristsqali Georgia LLC (AGL)

Jeff Terry, Director Health, Safety & Environment

Georgian Mobile: +995 577 50 54 65

Email: jeff.terry@agl.com.ge

http://www.agl.com.ge