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

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability. The Company’s operations have limited environmental and social impacts, and these are site-specific, temporary and not significant. Impacts associated with an expansion of existing operations can be avoided or mitigated by adhering to recognized performance standards, operating procedures, guidelines and design criteria as described in the following sections.

Key issues related to this Project include: the prevention of fatalities and injuries to operations staff, contractors and the general public resulting from exposure to energized transmission lines; management of the disposal of PCB contaminated transformer oil; disposal of chemically treated wooden utility poles and improvement of waste management practices through the establishment and implementation of an environmental management system.

Information on how these issues are being addressed by the Company to comply with IFC’s Performance Standards and World Bank Group’s (WBG) Environmental Health and Safety (EHS) Guidelines is contained in the following paragraphs, which update the Environmental and Social Review summaries of IFC’s previous investments in Umeme (http://www.ifc.org/ifcext/spiwebsite1.nsf/ProjectDisplay/ESRS25788 and http://www.ifc.org/ifcext/spiwebsite1.nsf/ProjectDisplay/ESRS32795) .

IFC’s review indicates that the Company’s operations have impacts that must be managed in a manner consistent with the following Performance Standards:
- PS 1: Social and Environmental Assessment and Management Systems;
- PS 2: Labor and Working Conditions;
- PS 3: Resource Efficiency and Pollution Prevention;
- PS 4: Community Health, Safety and Security; and

The full scope of the Company’s network expansion is yet to be defined but the bulk of the existing distribution network is situated in urban or peri-urban areas traversing populated and otherwise disturbed areas. As such, there is no specific application of PS 5: Land Acquisition and Involuntary Resettlement, PS 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources or PS 8: Cultural Heritage. The procedures by which the Company will address any situation that requires application of these PSs is described in the narrative of PS 1 below. PS 7: Indigenous Peoples is not applicable as Indigenous Peoples meeting the criteria established by the World Bank Group have not been identified in Uganda to date.

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.

IFC’s assessment considered: the Company’s system for the management of its environmental, occupational health and safety, performance in the establishment and operation of its facilities; and compliance with national and local permitting requirements.



Policy – In October 2012, Umeme’s Board of Directors formally adopted an Environmental and Social Responsibility Policy, committing its management to minimizing the adverse impacts of its operations on the environment and the health and safety of its customers, stakeholders and employees. To achieve these commitments, the Company has revised its EHS management system to meet the requirements of IFC’s Performance Standards and Ugandan legislation.



Organization and Staffing – Umeme has an Environmental Safety and Governance (ESG) Committee at the corporate level. Environmental, Health and Safety (EHS) matters are managed by Umeme’s Safety Department. The department consists of a Chief Safety Officer, a Senior Safety Manager and a Safety Administrator who oversee nine staff including: six Regional safety advisers who support Umeme operations staff at the district level; a Contractor Safety Adviser dedicated to appraising, pre-qualifying and monitoring contractor safety compliance; a Safety Engineer who identifies and supervises implementation of emergency projects outside of the Company''s rolling capex plan; an Environmental Adviser dedicated to improving awareness of environmental issues among Umeme staff and promoting sound waste management practices in Umeme operations.



Identification of Risks and Impacts – The Company has a process to identify environmental and social risks associated with major network expansion. An Environmental Impact Assessment (EIA) is required by law for every new sub-station as well as for substantial refurbishments of existing sub-stations and development of new distribution lines. EIAs must be approved by the NEMA before development can be undertaken. Umeme engages NEMA-approved independent environmental consultancies for all its EIA requirements and an Environmental Advisor retained by the Safety Department coordinates and supervises the work of the consultancy. Typical issues associated with network expansion include containment of oils via appropriately sized bund walls and sumps to prevent surface and groundwater contamination, and the installation of fire barriers between transformers. The Company commissions environmental audits when sub-stations are being refurbished, in order to identify and address historical issues such as oil-contaminated soils. NEMA issues a compliance agreement once audits are submitted, together with a work plan outlining action items. Environmental mitigation measures defined in approved EIAs are supervised by the EIA

consultants during construction.



To date, the Company has not encountered issues related to adverse impacts on biodiversity largely because it has been rehabilitating an existing distribution networ
k. Umeme sources all utility poles predominantly from Forest Stewardship Council-certified suppliers. Any direct impacts resulting from future greenfield expansion requiring new transmission line rights-of-ways and substations will require EIA studies and appropriate management plans undertaken by independent consultancies as described above. The Company’s Environmental Advisor will screen all proposed future greenfield expansions and ensure that PS 6 requirements and objectives are met in the development of this infrastructure.



Umeme has a well established procedure for the acquisition of land. In the case of new sub-stations, land is purchased on a willing buyer/willing seller basis at 100 % of the market price. The process of acquisition is as follows: a) identification of the area where a substation is to be constructed; b) identification of the land around this area that is available (on sale); c) identification of the landowner(s) and verification of Certificates of Title in the Land Registry; d) valuation of the land by private valuers and negotiation with the landowner; e) signing of a purchase agreement and transfer of title deed once Umeme and the Landowner(s) agree on a purchase price; and f) payment of the landowner(s) and transfer of ownership to Umeme via the land registry.



In the case of new power line installation, Umeme pays compensation for way-leaves, i.e., the right to use another person’s land for construction purposes. The Company pays compensation for the crops that are destroyed during construction plus a certain percentage of the market price of the land as a disturbance allowance. This compensation is a legal requirement in Uganda, i.e., that in addition to the assessed compensation; a disturbance allowance is paid as compensation for an ‘involuntary sale’. The disturbance allowance is 30% of the assessed amount if the land is to be used within six months of notifying the landowner and 15% otherwise. The process of acquisition of way-leaves is as follows: a) survey of the proposed power line route; b) identification of the landowners along the proposed power line route; c) notification of the landowners of the plan to construct a power line through their land; d) seeking of landowners’ consent for the construction of a power line through their land; e) assessment of compensation; f) signing of  way-leave agreements; and g) payment of compensation by Umeme.



Land acquisition is generally an uncomplicated process, although there are occasional complaints or disputes over compensation amounts that are dealt with via a dispute resolution process. If these isolated cases cannot be dealt with via the valuers or through discussions between landowners and Umeme, aggrieved parties may take the matter to the courts. These procedures are consistent with IFC’s requirements related to land acquisition.



Monitoring and Reporting – The Safety Department establishes Key EHS Performance Indicators each fiscal year a
nd reports on the achievement of these indicators to the ESG Board committee on a quarterly basis, and to IFC via an Annual Environmental & Social Monitoring Report.



In addition, the Safety department conducts regular internal EHS audits covering a wide range of topics including: buildings; environment management; staff welfare; personnel protective equipment; public safety; internal communication and training; documentation and reporting; fire prevention and protection; supervision and monitoring; staff appointments; and plant and equipment maintenance and isolation procedures. Regular external audits are conducted by National Environmental Management Agency (NEMA) during the course of sub-station and new distribution line installation.

IFC’s review considered the Company’s operations with regard to fair, safe and healthy working conditions in its operations.

Umeme currently employs 1,374 staff in 25 districts, of which 12 are expatriate staff. Umeme is an equal opportunity employer and abides by all statutory requirements of the Ugandan labor law. Umeme’s Human Resources Department carries out annual market surveys to ensure the wage and benefits packages offered employees are competitive. The Company does not discriminate on the basis of HIV-AIDS status, color, tribe, sex, disability, religion or political opinion. The Company has a collective bargaining arrangement with the Uganda Electricity & Allied Workers Union, in accordance with the Labor Unions Act of 2006. Approximately one-third of Umeme employees are union members.



Umeme has a comprehensive Human Resources Manual, which is provided to all employees on joining. Terms of reference, remuneration, working hours, overtime rates, sick pay and termination notices are highlighted in each employee’s appointment letter. These terms are further explained during induction training. The manual contains conditions of service including the disciplinary code and severance pay arrangements in the event that retrenchment is necessary. The manual also contains a clearly defined employee grievance and complaint procedure that provides for a procedure whereby any employee can e-mail the directors to make their complaints known, after failing to get redress from within the company systems and procedures. All employees must be at least 18 years of age to quality for a job with Umeme.



Umeme places great emphasis on Occupational Health and Safety of its staff and contractors. Nine members of the safety Department have completed the International Certificate of Occupational Safety and Health administered by the UK National Examinations Board in Occupational Health and Safety (NEBOSH). The Safety Department has improved its screening of contractors and applying an OHS compliance system to its contractors and major suppliers, which provides an ongoing assessment of their OHS readiness and performance. This assessment has also been built into the procurement process, as a pre-qualification criterion.



The Safety Department ensures that Personal Protective Equipment (PPE) is provided to all employees, free of charge and replaced when damaged or has deteriorated through use or age. Standard specification for all PPE types is established by the Safety Department in consultation with the users. Electrical competence is the cornerstone of Umeme’s safety program, but the Company also organizes driver training, safety briefings and tool box talks on a wide range of subjects. The Department maintains a comprehensive database of Lost Time Accidents among employees and contractors that allows analysis of OHS trends and performance. This information forms part of monthly reports covering all aspects of the Company’s sa
fety management system. Umeme uses Occupational Safety & Health Agency (OSHA) statistics as a minimum benchmark, with annual Key Performance Indicators established for internal and external accidents above this minimum standard. Recordable incidents include fatalities, lost time incidents, restricted work incidents and medical treatment incidents. The OSHA standard for recordable incidents is 2.30; while Umeme’s current recordable incident rate is 1.30. The last workplace fatality occurred in September 2012.



The Company has identified EHS risk in its supply chain, related specifically to its suppliers of chemically treated utility poles and worker exposure to hazardous materials. Beginning in the 3rd Quarter of 2013, the Company’s Safety Department will undertake audits of its four main utility pole suppliers to ensure that appropriate EHS standards are applied in the preparation of the poles.

IFC’s review considered the Company’s management of resource use and waste disposal on the surrounding human and natural environment.



Oil spillage, waste handling and materials storage have been identified as key environmental aspects for Umeme to manage from a pollution control standpoint. Focal areas include Umeme’s 33 kV/11kV substations and main operations depots. Substations vary considerably in age and state of rehabilitation, ranging from brand new to decades old, and from original condition to rehabilitated condition. A number of substations have been refurbished since the 1990s using German, Japanese and Swiss bilateral funding and World Bank multilateral funding. Substations typically comprise of a fenced in area, manned by a security guard housed in a small on-site building and one or two power transformers.



Oil spillage from transformers is a common feature at substations, although volumes vary. A previous EIA for the rehabilitation of UEDCL components conducted in 2004 observed that most leaks were relatively minor in nature, though a handful were regarded to be sufficiently serious to endanger ground and surface water quality in the vicinity. Transformer oil, or insulating oil, consists of a highly refined mineral oil which is stable at high temperatures and has dielectric (electrical insulating) properties. It is used primarily as a coolant. The Company currently has more than 60 large power transformers, each containing significant volumes of transformer oil (averaging 4 tons), as well as more than 7000 smaller distribution transformers containing roughly 300 liters of transformer oil each. Umeme maintains a basic transformer oil treatment re-generation unit which allows for periodic heat treatment of this oil to remove impurities.



There are two main issues associated with transformer oil spillage, namely: contamination of soils; and groundwater and surface water and PCB contamination. With regard to oil spillages, the Engineering Department ensures that all new and refurbished sub-stations are fitted with bunded oil sumps located below the transformers which can handle a minimum of 110 % of the total oil capacity of the transformers. In addition, plugs on the majority of distribution transformers have been welded shut to avoid oil theft and a progressive program of fencing all ground mounted transformers country-wide is being implemented to prevent loss of oil due to theft and vandalism. The Safety Department also ensures that refilling and maintenance procedures are robust and prevent spillages.



Polychlorinated Biphenyl (PCB) contamination: A study entitled National Implementation Plan of the Stockholm Convention on Persistent Organic Pollutants for Uganda (UNEP and partners, 2008) found that 12 % of a sample of 159 transformers country-wide had PCB levels exceeding recommended levels. Likely sources of contamination were listed as: cross contamination with PCB contaminated oil during service and repa
ir of transformers and presence of pre-1985 transformers still in use. The relevance of PCB contamination is that the transformer oil is considered hazardous and unsafe to handle and dispose of without special decontamination precautions and procedures. The Ugandan context is one in which accidental spills and leaks are common and theft of transformer oil is widespread across the distribution network. Likewise, significant leakage of such oil could cause contamination of water systems and enter the food chain (although the likelihood of this occurring is regarded to be low).



As a result, Umeme has been implementing a management plan to collect and destroy suspected PCB-containing transformer oil through its program of rehabilitation or replacement of transformers in use. Designated Umeme employees are trained in PCB handling and provided with adequate Personal Protective Equipment (PPE). Contaminated oil is removed from transformers, contained and stored at Umeme’s Engineering Center at Lugogo and the oil supply is periodically removed to the Tembo Steel Mill for incineration in the mill’s blast furnaces, which is good international industry practice for disposal of PCB-contaminated oil. In the 2nd Quarter of 2013, The Safety Department oversaw the removal and incineration of 18,000 liters of oil suspected of being contaminated with PCBs from 219 transformers.



Aside from transformer oil, Umeme uses few hazardous materials. Small quantities of paint and thinners are kept in the Engineering Center, in a ventilated, locked area. No fuel is stored by Umeme; re-fuelling and maintenance of the fleet of 300 Umeme trucks and 200 Umeme motorcycles is outsourced to third party providers such as Shell and Total. No pesticides are used in way-leaves and no burning of vegetation in these way-leaves is undertaken.



Umeme generates two dominant solid waste streams, namely old transformers and treated utility poles. Typically, the transformers are stored at Umeme’s main depot before being sold to registered scrap metal dealers. Treated wood utility poles are now predominantly sourced from Uganda. These poles have been pressure treated with one of two sorts of heavy duty wood preservatives, which protect the wood from decay fungi and wood attacking insects such as termites and borers, as well as improving weather resistance. Chromated Copper Arsenate (CCA, also referred to by its main global trade name ‘Tanalith’) is a water-based compound with a greenish tint comprised of a mixture of copper, chromium and arsenic salts. Creosote is a black oily substance distilled from coal tar, comprised mainly of polycyclic aromatic hydrocarbons (PAHs) but also containing phenols and cresols. Although Umeme does not have its own wood treatment plants, the disposal of treated poles poses certain challenges.



There are tens of thousands of treated poles in the Umeme network that are rotten and being replaced. Although replacement is a normal process
in any distribution network, Umeme faces particular volume challenges due to factors such as the dilapidated state of the distribution network, Uganda’s hot, wet climate and historic procurement of inadequately treated poles. There is currently no effective strategy for the safe disposal of these old poles. Good industry practice involves one of three main options, namely: a) land filling in a sealed site; b) high temperature incineration; or c) controlled recycling for uses that exclude burning on open fires and close skin contact. The first two options are currently not feasible in Uganda. Umeme has made efforts to collect the poles and sell them to businesses; contractors were required to cut the poles into 2 m sections to preclude re-use in the network, and to return the sections to Umeme. In practice, the Company does not possess sufficient storage space to collect the poles and as a result they have been allowed to be collected and by contractors and the general public. This practice may pose health risks, as described below under PS 4: Community Health, Safety and Security. The Safety Department is strengthening its efforts to investigate and regularize treated pole disposal, through a monitoring and reporting program focusing on OPEX and CAPEX refurbishment works. It should be noted that this particular challenge is faced throughout the region and also in developed country markets where it has been managed in different ways by different agencies.



Umeme’s greenhouse gas emissions are relatively insignificant, and associated almost entirely with fuel consumption by the company’s fleet of motor vehicles. Total annual consumption for this fleet in 2012 was approximately 1,167,022 liters of diesel and 264,748 liters petrol. This amounts to emissions of ± 4,000 tons CO2 equivalent per annum.

IFC’s review considered the Company’s capacity with regard to the management of the impacts of the operation of its facilities on the health, safety and security of surrounding communities.



There were 47 public fatalities associated with Umeme’s network in 2012 and nearly all took place in low voltage (mostly residential) parts of the network. Only one of these fatalities was not associated with power theft and the misuse of electricity. “Legitimate” fatalities (as opposed to fatalities related to power theft, and domestic wiring faults and network interference) arise due to dilapidated network elements inherited from the previous operator, i.e., rotten poles, poor or incorrect conductor joints and historical joining of different size conductors. Since 2009, Umeme has succeeded in reducing legitimate fatalities from an average of 12.75 per year (2005-2008) to an average of three per year; the current moving annual total is Zero. Although regarded as a significant problem area by Umeme, benchmarking in East Africa has shown that Umeme’s public fatality frequency rate in relation to the size of its network is the lowest in the region. Although there are pockets of high-risk network, which Umeme targets for rehabilitation purposes, network dilapidation problems are both common and geographically dispersed, meaning that network-related risks to the community are not amenable to immediate trouble-shooting efforts and are likely to persist for several years until the bulk of the network has been overhauled. Current plans are that, by 2013, three quarters of the dilapidated network infrastructure that Umeme inherited will have been repaired or replaced.



Decentralization of safety management and increased oversight of contractor operations has had a positive impact on staff and contractor fatalities. However, fatalities related to the theft of electricity through conductor tapping, network interference and faulty domestic wiring have averaged 36 per year over the last four years. This, despite Umeme’s stepped up public awareness campaign, including: toll free call centers for reporting safety issues; school and community safety talks, radio programs and a confidential hot line for reporting meter tampering and illegal connections sanctioned by Umeme staff. Umeme attributes the persistence of this problem to the growing number of informal and unplanned settlements in and around Kampala, growing populations within those settlements, the increased accessibility to cheap consumer electronics and to the inability of local authorities to prevent encroachment on the transmission line rights of way. The Company is introducing technical solutions to complement its public awareness campaigns, e.g., bulk metering points to control connections and bundled conductors to prevent illegal connections via contact with un-insulated conductors.



Encroachment on transmission line way-leaves is another source of accidents and fatalities in the Umeme network.
Way-leaves for power distribution in Uganda do not belong to the utility company or state, as is the case in many other countries, although unimpeded access to these way-leaves may be sought for maintenance purposes. As a result, there is widespread encroachment of houses and businesses into these way-leaves, much of which cannot easily be successfully challenged in court. This encroachment raises the risk level associated with line breakage and can lead to electrocution if people are not mindful of activities conducted beneath power lines. Theft is also a risk for Umeme, involving everything from transformers to conductors (power lines), transformer oil, power – via illegal connections – and other saleable items. This has historically been a problem involving both external and internal stakeholders, and as a result Umeme is tackling the problem via a variety of means including: night patrols of transmission corridors by the Company’s security contractors; anonymous hot-lines for people to report vandalism and theft; and prosecution of thieves.



The Safety Department regularly engages other utility companies within the region to share lessons learned in the management of EHS. In the 2nd Quarter of 2013, Umeme hosted a three day EHS workshop in collaboration with the Power Institute of East and Southern Africa for its engineers, district managers and contractors. The workshop included representatives of utility companies from Malawi, Kenya and South Africa.



Umeme currently utilizes three private security providers. Following advice from the Uganda Police Force, guards are armed at senior staff residences and at locations where cash is handled. To date, there have been no armed robberies or incidents involving the use of guns by these guards. All guards have radios. The security companies are subjected to a degree of screening by the Uganda Police Force. The main security issue for Umeme is theft of equipment, disposables and power. Cable and power line theft has increased significantly since 2009, notwithstanding the replacement of copper conductors (power lines) with lower value aluminum conductors. In situations where illegal connections are being dismantled or power cut off after illegal use, the Uganda Police Force may be asked to accompany Umeme employees to ensure their safety and security.

Stakeholder engagement related to infrastructure development is conducted by independent EIA consultants, as part of the mandatory EIA process in Uganda. Every EIA involves discussions with local Government leaders, adjacent land owners, and the district engineer and district planner. Feedback from these parties is incorporated into the planning process as appropriate.

Umeme maintains a 24 hour call center to receive customer complaints, reports of electricity theft and any other issues affecting its network. The Company pledges to make any emergency situation safe within 20 minutes.

At the corporate level, Umeme’s public communication program utilizes a wide range of media such as targeted radio programs, safety stalls at trade shows, new posters, adverts in newspapers and the use of an SMS platform introduced for 2013. A key element of Umeme’s communication program is the education of members of the public, and especially children (through school-based safety programs), of the dangers associated with electricity and the tampering with transmission and distribution infrastructure and equipment. In 2012, the company conducted 3,973 school visits and 2,125 community visits with talks on electrical safety.

Hard copies of this Environmental & Social Review Summary (ESRS and the Summary of Investment Information (SII) may be examined at the following address:

Umeme Limited
2nd Floor, Rwenzori House, Plot No. 1 Lumumba Avenue
P.O. Box 23841 Kampala, Uganda

Contact Person:
Phil Ball
Chief Safety Officer
Tel: +256 (0) 312 360 733
E-mail: mailto:phil.ball@umeme.co.ug

Broad Community Support is not applicable for this project

Current client performance is aligned with applicable Performance Standards and EHS Guideline requirements. No ESAP is required.