While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFC's investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards.

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security

The project is to acquire, operate, maintain, and conduct electro-mechanical rehabilitation of, the existing cascade of three hydropower plants with total generating capacity of 404.2MW. Key environmental and social issues of the project are the environmental and social benefits of the company’s rehabilitation program, need to improve existing pollution control areas such as transformers oil spill containment measures or lack of oil/water separator, potential employee retrenchment related to privatization, dam safety review of the existing dams, downstream community water use, aquatic ecological habitat integrity, and health and safety management of the rehabilitation program. The investment activities will be within the existing environmental and social (E&S) footprint and will help improve the availability and efficiency of renewable power generation.

Potential environmental impacts are primarily associated with rehabilitation works, but since they are limited to electro and mechanical components of the existing assets, they are relatively small and limited, and can be minimized through adhering to ContourGlobal’s E&S policies and procedures. Dam safety of the existing plants was reviewed by independent experts (Norplan, Sargent & Lundy, Mead & Hunt), and the overall conclusion was that there are no obvious and immediate safety concerns. The rehabilitation project does not require any additional land acquisition, and therefore, Performance Standard 5 is not applicable. No indigenous peoples, biodiversity or cultural heritage impacts have been identified for the project to date, hence Performance Standards 6, 7 and 8 are not considered applicable. All considered, the project is categorized B because a limited number of specific E&S impacts may result, but they can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Key supplemental actions to bring the project into compliance with IFC E&S Performance Standards are described in the supplemental Environmental and Social Action Plan (ESAP) included in this ESRS. Through implementation of management programs summarized in this ESRS and ESAP, ContourGlobal is expected to implement the project in accordance with IFC’s Performance Standards objectives.

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.

E&S Management System:

ContourGlobal has a corporate global-level E&S management system including policies, operational procedures, management programs, organizational structure, emergency preparedness and response, and monitoring and review procedure. ContourGlobal’s corporate level E&S policies include: (i) Health and Safety; and (ii) Social Responsibility and Environmental Sustainability. ContourGlobal’s Health and Safety Policy commits to providing and maintaining a safe and health environmental for all employees and contractors, and aspires to the goal of zero-harm in all of the ContourGlobal’s activities. Contour Global’s Social Responsibilities and Environmental Sustainability Policy not only commits to complying with government laws and regulations, but also effectively adopt the IFC Performance Standards as a comprehensive set of principles to ensure that projects are developed in a socially responsible manner and reflect sound environmental management practices. The current operation of the Vorotan hydropower plants does not have any E&S management system. ContourGlobal plans to apply its corporate E&S management system in Vorotan hydropower plants and to establish an E&S management system (ESMS) at CountourGlobal Hydrocascade CJSC as soon as ContourGlobal acquires and starts to operate the facilities (ESAP Action No. 1).



Identification of Risks and Impacts:

The rehabilitation works to be performed under the project focus on electro and mechanical components of the existing assets and no major structural modifications are currently planned. In 2012-2013, ContourGlobal retained an independent expert (Norplan) to assist with the company’s technical, environmental and hydrological due diligence of the project. This due diligence included a review of the environmental assessment report of the Vorotan rehabilitation project back in 1999 and an additional health and safety audit visit conducted by ContourGlobal’s health and safety expert in early 2013. The due dilligence identified areas of concerns as described in the E&S categorization section above, and opportunities to improve. ContourGlobal plans to commission an additional baseline environmental study, including a soil and groundwater investigation, and more detailed investigation in the field of safety, before they finalize the initial E&S improvement programs to implement (ESAP Action No. 2).



Management Programs:

Based on the findings of the ContourGlobal’s technical and environmental due diligence so far conducted, and additional supplemental studies to be implemented after ContourGlobal acquires the assets, and also as part of the Contourglobal Hydrocascade CJSC ESMS to be established as described above, ContourGlobal will establish cascade HPPs level management plans and procedures governing aspects such as waste management, pollution prevention, monitoring water release. These will include establishment of appropriate E&S capacity, dam safety emergency prepar
edness and response programs, a stakeholder engagement process incorporating a community grievance mechanism, and appropriate E&S monitoring programs (ESAP Action No. 1).



Organizational Capacity and Competency:

Although the current cascade HPPs personnel consist of technically competent professions with knowledge about the equipment and its associated hazards, it does not include a specific team dedicated to managing E&S issues at the HPPs. ContourGlobal’s experienced environmental and occupational health and safety expertise will assist the new organization to establish an appropriate E&S team to manage E&S risks and impacts of the HPPs (ESAP Action No. 1).



Emergency Preparedness and Response:

Although the current rehabilitation program to be implemented as part of the project is focusing on electro and mechanical assets, ContourGlobal plans to conduct a civil works survey and form a remedial action plan to further improve dam safety aspects. As part of this task, ContourGlobal will review the existing arrangement of emergency preparedness and response plan and implement appropriate improvements (See more in PS4 section on this).



Monitoring and Review:

ContourGlobal’s practice in all of the countries where it operates is to monitor environmental parameters and report those to relevant authorities as required under host country regulations. Currently, no regular E&S monitoring practices are in place for the three HPPs. As part of the ESMS that will be established for the cascade HPPs, and based on its corporate ESMS system, ContourGlobal will develop an E&S monitoring program for the three HPPs (ESAP Action No. 1).

Working Conditions and Management of Worker Relationship:

ContourGlobal’s Human Resources policies and procedures are documented in the corporate Employee Handbook which is periodically updated to reflect current developments in practice. Reflecting good industry practice, topics covered by the Handbook include: terms of employment; immigration; reference and background check; the work environment (including health, safety and security); payroll; travel and expense reporting; holidays; vacation; sick leave; maternity and paternity leave; other leaves of absence; benefits (insurance, retirement, health); employee terminations; and special local requirements. Collective bargaining and labor unions are fully supported, including providing training to worker representatives, as applicable.



ContourGlobal will apply these corporate HR policies and procedures to the cascade HPPs in a manner consistent with Armenian labor laws.



The current Vorotan Cascade CSLJ company has 237 permanent employees. ContourGlobal’s strategy is to take over these employees as part of the deal. The planned electro-mechanical rehabilitation of the cascade HPPs will result in higher automation of the plants and ContourGlobal assesses that it will be possible to gradually optimize workforce as the electro-mechanical rehabilitation is implemented. In case a collective dismissal of workforce is planned as part of the optimization of workforce, ContourGlobal will prepare a retrenchment plan in accordance with IFC Performance Standard 2 and will discuss with workers / workers’ organization and relevant Government agencies before implementation (ESAP Action No. 3).



The Vorotan Cascade has a trade union and a collective agreement in place. If the staff of the newly formed company will be unionized as is currently the case, ContourGlobal’s management will ensure a strong, trusting relationship with the union representatives. The relationship with the union will be contracted in the collective agreement compliant to the country legal requirement (Laws on “Trade Union” / In force since 15.01.2001).



Grievance Mechanism:

There is no internal (employee) grievance mechanism in place at Vorotan Cascade. After the acquisition, ContourGlobal will consider provisions of the internal grievance mechanism in collective agreements or establish and implement another transparent and reliable process. All the workers will be informed about the grievance mechanism at the time they are hired (ESAP Action No. 4).



Protecting the Workforce:

ContourGlobal’s due diligence did not detect any child labor or forced labor used at the hydropower plants prior to ContourGlobal’s acquisition. ContourGlobal will not use any child labor or forced labor for the operation of the acquired hydropower plants.



Occupational Health and Safety:

All employees of the cascade HPPs have medical records and they have been passing medical exams each year. Vorotan HPPs have statistics on t
echnical problems, but do not maintain any health and safety statistics. After the acquisition, ContourGlobal plans to launch a detailed study of all the workplaces in the hydropower plants. Based on the results of the study, ContourGlobal will take measures to improve the occupational health and safety management. A detailed health and safety conditions improvement plan with due dates and responsible persons will be established and implemented (ESAP Action No. 5).

Resource Efficiency:

The electro-mechanical rehabilitation program is designed to improve the plant reliability and flexibility. As a result, the plant availability is expected to increase and electricity generation as well. Armenia’s grid average CO2 emission is about 106 gCO2/kWh (2011-2013 average). After completion of the electro-mechanical rehabilitation, electricity generation from the cascade HPPs is expected to increase, or at least to avoid further gradual reduction in generation by 100 GWh/year, that will be estimated to contributing to avoid CO2 emissions by 10,600 ton CO2/year.



Pollution Prevention:

After the acquisition, ContourGlobal will strictly follow the provisions of respective Rules and Regulations in force in Armenia. Following permits will need to be obtained: (i) Permit for allocation of a depot for storage of construction waste materials; (ii) Permit from the Road Authorities to use the road networks to transport waste materials by heavy trucks. The routes will be specified based on the actual road traffic and capacity of the road bridges; (iii) Permit for storage of contaminated soil and allocation of storage area. Depending on the nature of the contaminated materials ContourGlobal will build safe storage to comply with the environmental regulations; (iv) Permit to executive larger scale excavation works, as necessary. This permit will require separation of the top humus layer from the soil and separate storage areas.

Dam Safety:

ContourGlobal commissioned an independent expert (Norplan) to review the stability of the existing dams and risk of overtopping of embankment dams. Norplan’s stability analyses have been carried out to the highest international standards, including Eurocode, Norwegian regulations and recommendations set out by ICOLD. All four dams are classed as high consequence dams according to generally accepted industry practice.



Norplan’s conclusions about seismic dam stability by static and pseudo-static analyses, supplemented by time-domain dynamic analysis were:

- All the three dams (Spandaryan, Tolors and Tatev) are stable in the static load condition.

- All the three dams (Spandaryan, Tolors and Tatev) are stable in rapid draw down load condition.

- Stability of the Tolors dam under seismic loading is considered adequate.

- It is not to be expected that there will be a failure of either Spandaryan dam or Tatev dam under the same condition.



Norplan’s conclusions about the dam failure in an extreme flood event were:

- Tadev dam and spillways do not meet current international dam safety practice in regard of the catastrophic extreme flood event tested, even though they have been designed to be able to cope with a 1,000 year return interval event. However, a significant enlargement of the secondary spillway tunnel on the right bank (about USD 2 million cost) will enable the Tatev dam to be upgraded to full international flood safety requirements.

- The safety of Spandaryan dam can be upgraded to internationally accepted practice without needing new works to augment spillway capacity.

- For Tolors dam a 1,000 year return interval flood can be passed safely without danger of overtopping the core. No additional spillway capacity is required at Tolors dam.

- For Angeghakot reservoir, all extreme floods can be passed safely with the existing spillway, and no new works or procedures are required.



Sargent & Lundy and Mead & Hunt, another independent expert, reviewed Norplan’s analysis and concluded:

- The site visit and document review did not disclose any obvious and immediate safety concerns.

- Tolors Dam is the most critical embankment due to its high hazard ranking and the lack of data on materials and construction. It is recommended that site-specific drilling, sampling and testing programs be implemented for all three embankment dams to verify stability analysis inputs.

- Additional investigations are recommended to determine whether dam modifications are required for the dam to meet international stability requirements.

- The Spandaryan Dam can safely discharge the Q1,000 flood event if the Spandaryan HPP is operating at full capacity. The Spandaryan Dam requires a pre-flood drawdown of 15m to safely discharge the 2xQ1,000 “safety check flood” event if the Spandaryan HPP is not capable of operating at full capacity.

- The Angeghakot Dam can safely discharge both the Q1,000 and 2xQ1,000 “safety check f
lood” event.

- The Tolors Dam can safely discharge the Q1,000 flood event from a full reservoir at the start of the event when the Shamb HPP is not operating and there is a full transfer through the tunnel from Angeghakot. The Tolors Dam requires a pre-flood drawdown of 7 m to safely discharge the 2xQ1,000 “safety check flood” event when the Shamb HPP is not operating, assuming the Angeghakot – Tolors transfer tunnel is closed.

- The Tatev Dam can safely discharge the Q1,000 flood event. The Tatev Dam spillway capacity needs to be increased to safety pass the 2xQ1,000 “safety check flood” event.



ContourGlobal will first focus on electroc-mechanical rehabilitation of the Cascade HPPs, but at the same time, is reviewing the recommendations by Norplan and Sargent & Lundy / Mead & Hunt to identify areas of further studies and investment needs to improve dam safety with regard to dam stability and flood hydrology (ESAP Action No. 6).



Security Personnel:

There is a security system in place at the existing HPPs such as gate checking at entrances. The current company employes 3 unarmed staff dedicated to security under the supervision of the chief engineer. No major actions were identified to improve security arrangement to comply with IFC Performance Standard 4.

To date, there has been limited stakeholder engagement with regard to the acquisition and rehabilitation of the existing hydropower plants. Although the project to acquire, operate and maintain, and to rehabilitate electro and mechanical parts of the existing assets is expected to have limited adverse, and rather more positive E&S outcomes, ContourGlobal will develop and implement a stakeholder engagement plan to develop a constructive relationship with key stakeholders, including communities within the project’s area of influence, focusing on the flow regime and dam safety.

ContourGlobal identified various stakeholders including communities within the project’s area of influence (including Sisian, Goris, Gorhayk, Tsghuk, Sarnakunq, Angeghakot, Shaqe, Shaghat, Balak, Tolors, Ahotavan, Uyts, Shamb, Ltsen, Tate, Khot), and Syuniq Region Government / Marzpetaran. Other stakeholders identified include PSCR (public service state commission / the regulator / licensor), SCPEC (Antimonopoly Commission), Ministry of Energy (policy maker), Ministry of Natural Protection (policy maker), Water Resource Management Agency and Local Water Inspectors (licensor, inspector), State Revenue Committee (Tax / Customs), Agency for State Registry of Legal Entities (Companies registry), State Committee of Cadaster of Real Property (Land Registry), “Armenian Electric Network” cjsc (energy distributor / buyer), “Settlement Center” cjsc (settlement provider), “Electric Energy Systems Operator” cjsc (system coordinator), Shares Registry / Custodian of shares (private licensed company / bank at choice), “National Center for Technical Safety” state non-commercial organization (technical safety of the inspector), Ministry of the Emergency (emergency, fire safety regulator and inspector).

The stakeholder engagement plan will include stakeholder engagement strategy and programs that will effectively help ContourGlobal Cascade CJSC engage with the stakeholders listed above on an ongoing basis (ESAP Action No. 1).

After the acquisition of the cascade HPPs, ContourGlobal plans to establish a local E&S team dedicated to handling E&S issues, comprising 2 to 4 full time employees. In the meantime, environmental and social information associated with the project can be obtained by contacting:

Contour Global contact in Armenia:
Name of the officer: Mr Garry Levesley
Title of the officer: Director
Address: 9, G, Lusavorich Str., Yerevan 0015, Armenia
Telephone number: +359 28102330
Email: mailto:garry.levesley@contourglobal.com

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
1. The Company will establish an E&S management system covering the Company by applying the Sponsor's corporate E&S management system. Specific elements to be established will include: (i) Management plans and procedures governing aspects such as waste management, pollution prevention, monitoring water release; (ii) Appropriate E&S team; (iii) Dam safety emergency preparedness and response programs; (iv) Stakeholder engagement plan incorporating a community grievance mechanism; (v) E&S monitoring program.	12/31/2015
2. The Company will (i) commission an additional baseline environmental study, including a soil and groundwater investigation for the cascade, and more detailed investigation in the field of safety, and (ii) finalize the initial E&S improvement programs to implement.	10/31/2015
3. In case the Company decides to conduct a collective dismissal of workers as part of the optimization of workforce for the cascade, it will prepare a retrenchment plan in line with IFC Performance Standard 2. The Company is trying to avoid collective dismissal, but in case "non-voluntary separations" are to be implemented, the plan will be prepared.	02/29/2016
4. The Company will establish a grievance mechanism for employees of the cascade, either through provisions of the internal grievance mechanism in collective agreements or introducing another transparent and reliable process.	10/31/2015
5. The Company will establish a detailed health and safety conditions improvement plan with due dates and responsible persons for the cascade.	10/31/2015
6. The Company will review the recommendations on dam safety made by Norplan and Sargent & Lundy / Mead & Hunt and prioritize areas of further study and investment to improve dam safety.	12/31/2015