33853 - Asahan 1 Hydro Electric Power Plant

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Environmental & Social Review Summary

Project Number

33853

Company Name

BAJRADAYA SENTRANUSA, PT

Date ESRS Disclosed

Feb 10, 2014

Country

Indonesia

Region

East Asia and the Pacific

Last Updated Date

Dec 1, 2016

Environmental Category

B - Limited

Status

Active

Previous Events

Approved : Apr 30, 2014
Signed : May 28, 2014
Invested : Sep 29, 2014

Sector

Large Hydro - Renewable Energy Generation

Industry

Infrastructure

Department

Gbl Infrastructure & Natural Resources

Project Description

IFC is considering an A-loan of up to USD 75 million, as well as a possible B-loan and small equity participation to support BDSN’s operational 180 MW Asahan-1 hydropower plant (HPP) in North Sumatra, Indonesia. The plant has been fully operational since January 2011 and sells electricity to PLN pursuant to a long-term PPA expiring on Dec 31, 2040 on a take-or-pay basis of 1,175 GWh of electricity per year. Asahan-1 is developed by the Independent Power Producer (IPP) BDSN, which is owned by Fareast Green Energy and PJB, a subsidiary of PLN (the national power company), respectively. The HPP located 25 km downstream of Lake Toba on the Asahan River in North Sumatra, Indonesia, approximately 130 km southeast of the city of Medan. Land acquisition and construction of the plant was initiated in 1997, but was stalled a year later following Indonesia’s financial crisis. Construction restarted in 2006/7 and the HPP was finally commissioned in 2010, having been constructed and part-financed by China Haudian Engineering Corporation (CHEC), which also acted as the EPC contractor and subsequently managed by CHD Power Plant Operation Co. Ltd (CHDOC) as the O&M contractor until December 31, 2013, whereupon it was replaced by PJB Services.

Asahan-1 is a run-of-river scheme developed to utilize the hydraulic head between the Regulating Dam and Siguragura Dam of the pre-existing Asahan-2 project, a three dam cascade developed between 1975-1982 to support the PT Inalum smelter, located on the North Sumatra coastline near Medan.The Asahan-2 scheme, which IFC is not supporting, comprises a 39 m Regulating Dam, a 47 m, 286 MW Siguragura Dam and HPP and a 73 m, 317 MW Tangga Dam and HPP. The scheme relies on releases from Lake Toba, the largest volcanic lake in the world, as the Asahan River is the primary drainage of this lake to the Straits of Malacca. The Asahan Authority, comprised of a number of state entities, was established to ensure smooth operation of the Asahan-2 project, including the Inalum smelter (originally developed and majority owned by several prominent Japanese companies, now owned and operated by the Indonesian Government).

The Asahan-1 HPP comprises of a 6.5 km tunnel, 70 m surge shaft, 275 m penstock, powerhouse with two 90 MW Francis turbines, accommodation camp and switchyard (the latter handed over to PLN). The intake is located in the pre-existing Regulating Dam which drains water directly from Lake Toba, and the powerhouse is located at the top end of the pre-existing Siguragura Dam, into which the tailrace empties. The project is linked to the grid by an 8 km transmission line, though BDSN only owns and maintains the three transmission towers that link the transformer at the powerhouse with the switchyard.

Overview of IFC's Scope of Review

IFC’s environmental and social appraisal of this project included a site visit held in December 2013.During this visit, the IFC teamtoured the main project facilities (intake area, powerhouse, staff accommodation camp) and met with BDSN management both on site in North Sumatra and at the company office in Jakarta. Discussions were also held on site with the leaders of the two closest villages, namely Ambar Halim and Siruar, in order to better understand any legacy social concerns as well as any possible ongoing concerns of affected communities.

IFC also reviewed various background project reports including technical descriptions, the Clean Development Mechanism (CDM) final report for the project, an internal environmental and social (E&S) due diligence report compiled by ERM Indonesia in 2012, and existing drafts of BDSN E&S procedures. IFC’s appraisal considered BDSN’s environmental and social management system and gaps, if any, between this system and IFC requirements. Where necessary, corrective measures intended to close these gaps within a reasonable period of time are summarized in the paragraphs that follow and in the agreed Environmental and Social Action Plan (ESAP). Through implementation of management procedures and the attached ESAP, BDSN is expected to operate its facilities in accordance with IFC Performance Standards objectives.

E & S Project Categorization and Applicable Standard

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

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

This is a Category B project according to IFC’s Environmental & Social Review Procedure because proceeds will not be used to expand or alter the existing operation’s environmental and social footprint. Having been operational for several years, the run-of-river hydropower plant was constructed in a highly modified stretch of the Asahan River, the flow of which had been significantly altered for decades by the earlier construction of three large (Asahan-2) dams.

The Asahan-1 operation has no dam wall (relying instead on the existing Asahan-2 impoundment), a low daily traffic volume and security is not regarded as a sensitive issue in the local area, hence PS 4 is not considered applicable to the investment. Land acquisition for the project was completed more than a decade ago and no legacy issues were surfaced during IFCs interactions with community leaders. The proposed IFC project will result in no incremental economic or physical displacement, hence PS 5 is not considered applicable.

The proposed IFC investment will not result in any incremental impacts on biodiversity. As a result, PS 6 is not considered applicable. Whilst anecdotal evidence suggests that scheme construction may have led to a decrease in fast-flow fish species and fishing activity amongst local villagers – due to diversion of Asahan River flow through the power tunnel – this impact occurred several years agoand is regarded as a non-reversible legacy impact. According to research conducted downstream for a similar scheme, it is considered unlikely that affected fish species were of high conservation importance, and local fishing activities were reportedly restricted to occasional, part-time fishing only, for home consumption or occasional sale. Biodiversity in the Asahan was already significantly modified prior to Asahan-1 construction due to the construction and operation of the Asahan-2 scheme with its three large dams that prevent fish passage up and downstream.

Although local Batak people share some characteristics of Indigenous Peoples, PS 7 is not considered applicable to this project as no incremental or ongoing adverse social impacts on local communities have been identified as a result of this proposed investment. As the project is already constructed, no incremental cultural heritage impacts are anticipated, hence PS 8 is also not considered applicable.

Environmental and Social Mitigation Measures

BDSN currently has a draft Health, Safety & Environment (HSE) policy which is awaiting Board sign off and is not displayed on site. As per Environmental & Social Action Plan (ESAP) item 1 below, BDSN will update this draft to an HSEC policy (incorporating community matters), formalize it in Bahasa and English and keep copies posted on site and in its offices in Jakarta.

The project has been operational for over three years and no incremental impacts are anticipated as a result of the proposed investment. There was no Environmental Impact Assessment (EIA, referred to as an AMDAL in Indonesia) required for this project as construction began in the 1990s prior to the introduction of relevant regulations, and also as it was regarded as a government priority project. Following construction delays brought about by the economic crisis in the late 1990s, BDSN undertook an environmental audit of the project in 2010 as part of the Ministry of Environment’s licensing process. As part of this licensing process, BDSN also produced an environmental management scheme and an environmental monitoring scheme, locally referred to as a RKL and RPL, respectively, which are still in effect.

BDSN has established a number of EHS procedures to cover its operations, including: risk identification, evaluation and monitoring; hazardous materials management; emergency procedures (power house and camp); natural resources monitoring and communication. Actual operational HSEC risks posed by the operation are relatively minor, being restricted mainly to Occupational Health & Safety (OHS) controls in the powerhouse, management of low volumes of hazardous waste (i.e. used lubricants) from periodic maintenance procedures, emergency procedures, and staff camp sanitation and maintenance. These are currently overseen by BDSN’s site manager and certain, e.g. OHS for the powerhouse, are managed by the O&M contractor. Flow rates through the Asahan-1 HPP scheme are contractually governed by the Asahan-2 scheme and the Indonesian government and are required to remain almost constant year-round.

As mentioned above, BDSN has emergency procedures covering the powerhouse and camp areas. In addition, BDSN is a co-signatory to a Water Management and Operation Rule Agreement along with the Asahan Authority (a group of government agencies responsible for water management around and below Lake Toba) and Inalum, the Government-owned aluminum smelter which owns the Asahan-2 hydroelectric scheme. This agreement incorporates the operating rule for the cascade including required behaviour under emergency situations, e.g. high flows. To ensure the management of potential cumulative impacts, Inalum and BDSN engage in frequent communication and data exchange to coordinate water management efforts across the Asahan-1 and Asahan-2 cascade and have developed signaling patterns and response procedures to prepare for high flow scenarios.

BDSN is currently required to monitor and report on hazardou
s materials, sedimentation and water quality at the intake, with reports delivered to the regional government on a six monthly basis.

Stakeholder Engagement

There are two villages located near the project site, namely Ambar Halim and Siruar; as mentioned in the scope of review section above, IFC met briefly with leaders from both of these villages to discuss historic and current social impacts and opportunities. These and other villages in the Lake Toba area are dominated by peoples of Batak ethnicity, one of the larger ethnic groups on North Sumatra but regarded as an ethnic minority in Indonesia as a whole as many are of Christian faith. Local livelihoods are dominated by agriculture, mainly crops such as rice, coffee and ginger, supplemented in some cases by fishing in Lake Toba.

Security staff-community interactions at this operating brownfield site were not identified as a risk and community-project interactions are generally fairly limited outside of the employment arena and very limited traffic through one village located between the accommodation camp and the power house.

Historic community issues in relation to the construction phase included blasting impacts (cracking) on houses and graves and damage to some irrigation canals. Both were reportedly addressed by the Chinese construction contractor at BDSN’s request, though not to the complete satisfaction of affected households. Community members also noted impacts on certain fish species formerly fished for in the steep 8 km diverted reach, though no compensatory measures have been claimed or requested and it is understood that fishing was mainly for home consumption or occasional sale.

Village leaders noted that present-day relations with the project are positive and that they are generally able to speak to the BDSN project manager on an as-needed basis.No ongoing disputes were raised with respect to historical impacts. There is currently no formal community grievance mechanism and BDSN will develop, locally disclose and implement such a grievance mechanism as ESAP item 4. Community leaders indicated to IFC that they appreciate the jobs provided by the HPP as well as various CSR activities undertaken by BDSN to date. These have included installation of water pipes and taps, construction of a community hall, provision of garbage bins, installation of drainage channel and (forthcoming) classroom construction. Key concerns raised by local community leaders included a desire for additional job opportunities and further investment in local infrastructure (e.g. street lights).

BDSN has recently commissioned an ecologically-focused NGO to help it develop and implement a multi-year CSR effort aimed at reducing the level of trash and water hyacinth in the intake area, with outreach and input to/by local communities living near the edge of Lake Toba.The company retains ownership of a 13 ha site that was previously used as a contractor’s camp and is currently investigating possible uses of this site that could provide mutual benefits to BDSN and local communities, e.g. processing of water hyacinth removed from the regulating dam into fertilizer or other useful products.

Broad Community Support

Environmental & Social Action Plan

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

Action	Timeframe
1. BDSN will formalize a Health, Safety, Environment & Community (HSEC) policy in Bahasa and English and share this with workers, contractors and community leaders.	April 15, 2014
2. BDSN will develop and implement a worker grievance mechanism covering its own workers and those of the O&M contractor.Records will be kept of grievances raised and responses provided.	April 15,2014
3. BDSN will develop and implement an OHS monitoring program for its activities on North Sumatra and ensure that the O&M operator implements sound OHS procedures and keeps records of any incidents and related follow-up. OHS statistics will be reported to the Board and lenders on at least an annual basis.	15-Apr-14
4. BDSN will develop, locally disclose and implement a community grievance mechanism for its nearby local communities. This written mechanism will be simple and accessible, with clear instructions, responsibilities and timeframes for responses to be given. Records will be kept of grievances raised and responses provided.	April 15,2014

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Environmental & Social Review Summary

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Environmental and Social Mitigation Measures

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PS 2: Labor and Working Conditions

PS 3: Resource Efficiency and Pollution Prevention

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