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

The project is categorized as B in accordance to IFC’s Policy on Environmental and Social Sustainability because of the limited number of specific environmental and social (E&S) impacts and risks of the project, which can be avoided or mitigated by adhering to standard practices, such as those described in the World Bank Environmental, and Health and Safety Guidelines (EHS Guidelines) and the applicable performance standards (PS). The most critical environmental, social, and health and safety (ESHS) risks and impacts of the project include: (i) earth movements, vegetation cover removal, and soil erosion associated with excavation and the operation of construction equipment, (ii) occupational health and safety (OHS) risks to construction workers, and (iii) OHS risks to maintenance workers, (iv) potential safety risks associated with blade throw (to nearby communities), and (v) permanent landscape modifications
The project requires no physical displacement and limited economic displacement associated with gaining access to land through 25 year leases for the WTGs, and acquisition of one 5-hectare plot for the sub-station. Consultation and negotiations with land owners were amicable and land acquisition was achieved on a willing buyer-willing seller basis. In respect to impacts on biodiversity, the project is more than 12 km away from any national park, Important Bird Area (IBA) or protected area, and is not in the path of migratory bird flyways. No adverse impacts on sensitive flora or fauna (including important bird and bat species) are expected. Finally, there are no indigenous peoples or areas of high archeological value in the project area of influence. As a result, Performance Standards (PS) 5, 6, 7 and 8 are not considered applicable to this project.

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.

Following the award of four associated concessions for a total installed capacity of 337.5 MW of wind power, and per Government of Panama environmental regulations and the explicit request from the National Environmental Authority, the client prepared four separate ESIAs. Additional ESIAs were prepared for the El Coco electrical substation and another for the improvement and widening of existing and new local access roads. The ESIAs for the WTG’s were approved by Resolutions IA-352/353/354/355-10 in May 2010, (substation) April 2012, and (roads) September 2012. The licenses considered the installation of wind turbines in progressive phases, and are valid for a period of 40 years as long as the sponsors continues to provide periodic environmental compliance reports. The WPP’s were rated as Category III type projects based on their level of risk. This category of project requires the highest level of impact assessment, including formal public meetings. The El Coco Substation was categorized as a type II project (moderate risk), and the widening and improvement of access roads a Category I (low risk).

Since the government-required ESIA and licensing process was artificially separated into four separate sub-projects to match the concession process, the sponsors hired an international firm to review the Penonome WPP as a single development and ensure its compliance with the Equator Principles and IFC Performance Standards. The review resulted in the recommendation to prepare a Non-Technical Summary and Supplementary ESIA and resulting Environmental and Social Management Plans (ESMPs). This Supplementary ESIA considers all phases as a single development and thus includes the cumulative impacts associated with the whole Penonome WPP. The updated ESMPs will include, among others, a Transport Management Plan, a Stakeholder Engagement Plan, and a Grievance Redress Mechanism. In addition, even though PS 5 and 6 were not triggered in this Project, in alignment with GIIP the ESMP will also include a Land Use Report and Compensation Plan and a Bird and Bat Monitoring Plan. The updated supplementary ESIA and associated ESMPs are requirements for IFC’s investment.

Project siting followed a strategic mitigation hierarchy whereby four alternative project locations were assessed against sector specific E&S criteria, including: (i) wind resource availability and capacity, (ii) avoidance of areas of critical or sensitive biological diversity, like migratory bird flyways, (iii) urban centers and tourism destinations, (iv) constructability, and (v) proximity to access roads and the national grid system. The Penonome site rated as the most optimal against all of these. Restrictions placed on the project include not siting the WTG’s closer than 100 m from a body of water, 500 m from dwellings and 4 km from an airport.

Projects’ ESIAs identified the main ESHS risks and impacts of the project. Construction impacts and risks include: (i) limited land acquisition, ease
ment, and minimal land use changes, (ii) earth movements, vegetation cover removal, and soil erosion associated with excavation and the operation of construction equipment, (iii) risks to pedestrians and vehicles due to construction equipment traffic in nearby communities as well as nuisance caused by elevated noise and dust levels, and (iv) occupational health and safety (OHS) risks to construction workers. Operational impacts and risks may include: (v) potential collisions of birds and bats with blades and other equipment, (vi) increased noise from rotating wind turbines and blades, (vii) accidental spills and discharges (oils and lubricants) during maintenance activities, (viii) OHS risks to maintenance workers, and (ix) permanent landscape modifications. Other than the Penonome WPP, the IFC is not aware of any plans for future additional wind developments in the Project’s area of influence.

Impacts will be moderate in nature, temporary in duration and can be mitigated with established pollution prevention and control technologies and by applying good international industry environmental and social management practices (GIIP), such as those described in applicable World Bank Group EHS Guidelines.

As noted above, PS 5 - Land Acquisition and Involuntary Resettlement - is not applicable to the project. In total, there are 21 landowners associated with the Penonome WPP, affected either by the direct siting of the WTGs and/or the related access roads. Of these, 12 own land required for Phase II, including a rice cooperative which uses government-owned land, with whom a formal compensation agreement has been reached in amicable terms. All landowners have voluntarily entered into 25-year lease agreements with the developer. To construct and operate the substation, the sponsor purchased one 5-ha plot of land from a single landowner, on a willing-buyer-willing-seller basis. The project will not physically displace any people, and only limited economic displacement is expected from the loss of access to 0.55 ha of land needed for the installation of each tower footing, to be reinstated to enable prior land use (agriculture) upon decommissioning. On average, affected landholders will not lose access to more than 4% of their land holdings, generating marginal impacts on people livelihoods. In addition, the Project needs to acquire a property containing a dwelling located within approximately 100 meters of the nearest wind turbine. All affected landowners have been duly informed and consulted about the impacts and risks of the project. Compensation, in the form of annual lease payments, ranges between US$6,000 – 7,500 per WTG per year, and is considered adequate to cover any potential losses to livelihoods. Other entitlements include indemnification for impacts caused on the owners land, property, or belongings and community level support provided in the form of small infrastructure works and improvements (e.g. roads, private fencing, local schools, et
c.), livelihood opportunities (e.g. jobs), and investments in health and education.

In terms of PS 6 impacts on Biodiversity, baseline studies during the ESIA process determined the project is located in Modified Habitat where the area’s primary ecological function and species composition has greatly been altered and diminished over time due to human activity. The area is considerably homogenous, characterized by flat open and sparsely populated land composed of grasslands and rice fields, with small streams crossing the area. Assessments on flora and fauna have not detected any threatened habitats or species in the project area. One tree species (Cedrella odorata) is listed as vulnerable (VU) by the International Union for Conservation of Nature (IUCN). Impacts on flora and fauna are expected to be limited both during construction and operations. A series of bird and bat surveys, inspections and assessments were carried since 2009 covering the entire concession area, prior to and during construction and now during operations of Phase I of the project. Data from monitoring and surveillance activities collected twice a week confirms the absence of migratory birds in the area. Bird diversity in the area is considered high, but none of the species are categorized as threatened by the IUCN Red List. Bat diversity on the other hand was recorded to be low, composed mainly of few, local, widely distributed species. Collision and fatality studies in the areas around the 22 operating WTG’s have identified on average 2 -3 carcasses of common bats per month, and only the carcass of one common vulture (not threatened). The expectation is that there will be on average approximately two bird carcasses per WTG a year, with higher numbers possible at WTGs nearest to a municipal landfill which attracts large numbers of common vultures. As per the attached E&S Action Plan (ESAP), as an integral component of the Project’s ESMS, the client will present a Bird and Bat Monitoring Plan, to confirm the predicted bird/bat mortality during operations and/or introduce adaptive management practices should significant mortality of threatened species occur.

The project ESMP is commensurate with the risks and impacts of the project and includes a number of manuals, programs and plans to mitigate and manage E&S impacts and risks during construction and operations of the project. Among them are an Environmental Policy, an integrated Environmental, Health, Safety and Quality (EHSQ) Plan, and an Emergency Preparedness and Response Plan. These documents were used for Phase I activities but as a requirement to IFC’s financing will be updated to reflect the new governance and staffing structure of UEP Penonome II. Other programs/plans/manuals include (i) fauna rescue and relocation, (ii) reforestation, (iii) traffic and transport management, (iv) erosion, sedimentation control and drainage and water surface protection, (v) solid and hazardous waste management, (vi) general pollutio
n prevention (e.g. noise, air, soil and water), and as noted above, (vii) a bird and bat monitoring program. Further details on the plans are described below under PS 2 – 4 (sections). Social risks and impacts will be managed through a Stakeholder Engagement Plan and both an external (public) and internal (worker) Grievance Mechanism. These plans will be updated prior to IFC’s investment. Finally, a Decommissioning Plan will be developed during the first five years of operation of the project.

Clearing and removal of vegetation will be done gradually, with disturbed areas being reinstated back to their original condition when construction works have ceased. National reforestation guidelines require that 10 specimens of native tree species be planted for every tree cut down by the project. Maintenance of tree plantings will be carried out for a minimum of five years, in an area approved by the regional administration of Cocle. The reforestation plan will include support from local community members. Contractors will train and implement codes of conduct prohibiting workers from logging, hunting, and fishing in the project area. The Bird and Bat Monitoring Plan for phase II will include surveillance and carcass recovery to provide a reliable estimation of the number of collisions or fatalities near the WTG’s and will document bird species in the area. This is currently done for Phase I through visual inspections on a weekly basis in the areas around each WTG and through the recovery of injured specimens or carcasses.

As per the ESAP, an emergency preparedness and response plan covering project construction and operation will be developed and implemented in close coordination with project contractors and, if necessary, in consultation with potentially affected persons and local government authorities.

Monitoring and evaluation measures will be developed to assess the effectiveness of the management programs in minimizing and mitigating the inherent and potential risks of the project and will be flexible enough to respond to new risks or opportunities in a timely manner through the adoption of new appropriate mitigation measures. Monitoring and supervision will involve routine internal inspections and audits of activities to verify contractor compliance with all contractual obligations, regulatory, and applicable IFC PS requirements.

Organizational Structure: UEP Penonome II will combine the expertise and knowledge of IEH and UEP, both holding longstanding experience in the management of environmental, social, and occupational health and safety (ESHS) risks in the infrastructure and renewable energy sectors. Inter-Energy Holdings owns a 75% stake in the Penonome WPP with UEP owning the remaining 25%. A condition of financing of a previous IFC investment required IEH to develop a corporate environmental, social, and occupational health and safety management system (ESHSMS) compliant with IFC’s Performance Standards. This ESHSMS will be operatio
nal prior to IFC’s investment in the Project and will form the foundation from which all other policies, procedures, and standards of the project will be based.

The project will be managed at three levels: (i) corporate: an IEH Environmental Manager will oversee and ensure that the project is integrated and aligned with IEH’s corporate ESHSMS, compliant with IFC PS requirements (ii) project management: a team of project managers will work to ensure the timely and smooth implementation of the ESMP, the management and supervision of contractor compliance with ESHS requirements and continuous coordination and feedback with the ESHS local team; (iii) site level: through a dedicated project level Environmental Coordinator (EC) and Community Relations Coordinator (CRC). The EC will be responsible for overseeing (a) contractor compliance with ESHS requirements, and (b) ensuring that worker grievances are resolved in a timely manner, in accordance to the project Grievance Mechanism. The CRC will support the management of all communication and relationships with project stakeholders, including the implementation and compliance with all project social commitments as established in the stakeholder engagement plan, the land use report and compensation plan, and the grievance mechanism.

Up to 300 workers were involved on site at the peak of construction of Phase I, which involved construction of the sub-station as well as the installation of 55 MW of WTGs. Phase II will require a smaller workforce, peaking at approximately 70-80 workers. Approximately 15 will operate the project.

IEH manages labor and working conditions through a suite of policies and procedures aligned with IFC PS 2 requirements promoting the (i) fair treatment, non-discrimination, and equal opportunity of workers, including the right to collective bargaining and freedom of association, (ii) fair and acceptable terms and conditions of employment, in compliance with local labor laws and GIIP, (iii) safe and healthy working conditions, and (iv) preservation and protection of basic rights of workers, through the avoidance and prohibition of forced, bonded, or child labor.

The project will have - and pass on to its contractors - similar policies and procedures, customized to the needs and local context of the project and labor laws. Hiring and management of construction workers will be outsourced to the main EPC contractors. These will be required to give preference to the hiring of local workers. Approximately 80% of the workforce for Phase I was obtained from the local area and Phase II will have similar targets.

As per the attached ESAP, the Sponsors will develop and implement an OHS program covering the management and mitigation of all OHS risks associated with typical labor tasks of construction and operation of wind farms. The OHS program will adequately: (i) identify occupational risks associated to specific tasks such as working in heights, in confined spaces, handling of electric and heavy construction equipment, (ii) provide workers with standard training/qualifications/limitations and personal protection equipment (PPE) to perform each task, (iii) document total worked man-hours, accidents, and incidents and establish annual targets for accident frequency and severity rates, (iv) and maintain records of accident investigations and corrective mechanisms.

The Penonome WPP is a renewable energy project and is the first wind power project in Panama. The project responds to an urgent need to increase and diversify the energy capacity and matrix in Panama to new, clean and renewable sources of energy, reducing a dependence on fossil fuels and fuel exports from abroad. The project is expected to reduce the generation of CO2 emissions from energy generation and electricity use in Panama by 400,000 tons CO2-eq per year.

The project will require the use of specialized cranes and other heavy machinery during installation of the WTGs.

A noise study to determine baseline conditions and likely exposure levels on the nearest dwellings was carried out at three monitoring locations. Three sets of 24-hour noise measurements were taken simultaneously at each of the locations. Wind speed and direction data were also measured near meteorological stations. The study confirmed that ambient and background noise levels are below the levels established in the IFC EHS Guidelines for residential areas at nighttime (45 dB). In the event of incremental impacts, alternative noise mitigating options will include the use of sound dampening modifications to turbines, planting trees to create a barrier around the affected residence or providing insulated windows. Large and heavy equipment will be transported to the project site between 10 PM to 6 AM to minimize traffic disruption on the Pan-American Highway. Construction-related vehicles will be generally allowed to operate only between the hours of 7:00 am to 7:00 pm near the local communities to minimize nuisances caused to local communities. Monitoring of noise, exhaust emissions, and air quality (PM10, PM 2.5, and PM total) levels will be done on a quarterly basis.

A shadow flicker modeling study was commissioned to quantify and assess the significance of potential impacts. Results indicate that no receptor will be exposed to more than 23 hours of shadow flickering on an annual basis. This is considered well below the acceptable value of exposure to human health which stands at 30 hours per annum.

Erosion control, drainage, and surface water protection measures will be implemented during civil and road works, including slope re-vegetation and the installation of sediment traps at strategic locations to maintain good water drainage and avoid impacts on water sources during earth movement activities.

The main water requirement for Phase II will be for the temporary concrete mixing plant and will be supplied from a ground water well. The project will not generate significant volumes of waste water (portable latrines provided by third-party contractors will be available and maintained during construction periods, and the sewage generated at the electrical substation will be discharged through leach fields).

During construction an area will be designated for the temporary storage of wastes generated at the site. Solid and liquid wastes will be segregated and stored in
accordance with their classification and physical properties. Hazardous materials will be handled with care and disposed of by licensed parties.

The project will dispose of solid, liquid and hazardous wastes in authorized sites; avoid accumulation of wastes and use hard standing or geotextiles where materials could contaminate soil or waterways. UEP II will report to the Regional Environmental Authority on a biannual basis on compliance with the implementation of mitigation measures identified in the ESMP. Excess construction material will be composed of excess soil, sand and rocks. Excavated rock will be reused as much as possible in the construction and road leveling and terrain re-profiling. Top soil and vegetation cleared will be separated, stored and reutilized for erosion and sedimentation control or replaced on landowners’ properties as agreed between the contractor and the landowner. Waste will be classified as hazardous and non-hazardous and UEP II will maintain records of the final destination of all waste materials. Spill prevention measures of fuel and hazardous substances will be implemented, including a requirement to establish and maintain appropriate storage, record keeping, and spill containment structures aligned with GIIP as well as the emergency response procedures and required spill containment and clean-up equipment.

The project includes measures to ensure that contractors appropriately manage and mitigate impacts on community, health, safety and security. Project impacts have been assessed and are expected to be minor, associated with standard construction activities, primarily due to excessive speed and dust levels from the passage of vehicles, potential nuisances and disturbances caused on local communities from the ingress of non-local workers into the area, and the use of large and heavy machinery and equipment on private land, including OHS risks to local communities. There will be no construction camp –local workers will stay in existing accommodation in the community. Impacts will be managed and mitigated through the application GIIPs, as indicated in the ESMP.

The most significant construction risk will occur during the transport, travel, ingress and delivery of heavy machinery, equipment and WTG components to the project area. Tree Logistics Panama was awarded a contract to ship the WTG and its components on custom designed vessels from China to the Port of Panama, and subsequently to the project area. A transport and travel risk analysis was performed for Phase 1, and will be updated for Phase II, to identify the best logistical options for entering the area. It must be noted that during the construction of Phase 1, the logistic plan worked without any major inconvenience or accidents, and the WTG were safely, timely, and successfully transported to the project site. Prior to commencing construction activities, the project will inform the Ministry of Public Works of how materials and equipment will be transported into the project area, including, schedules, roads, bridges, number and specifications of vehicles and security measures.

Potential health effects from noise, blade glint and shadow flickering were assessed and deemed to be marginal during operations. As noted under PS3 noise levels in Phase II are expected to stay within GIIP permissible levels.

The project deploys a small number of contracted security guards to protect equipment, materials and facilities. During construction of Phase 1 the project had four guards on duty. Now that construction of Phase 1 is completed, this has been reduced to two guards. The construction contractor also has one guard to safeguard their materials and equipment. The guards are trained and not armed. The standard operating procedure in the event of a confrontation will be to alert the local authorities for assistance/investigation. There have been no such incidents to date. The project is now assessing security risks and requirements for any additional security provision for Phase II.

The Penonome WPP underwent an exhaustive process of participatory stakeholder engagement during the early stages of development of Phase I. During this time, it was thought that only one developer would be involved in the project, thus the sponsors at the time, Goldwind and UEP, carried out broad consultation with all communities living across the entire concession area. The objective of the engagement was to inform affected people of the overall project and its potential impacts and risks and allow for them to provide feedback and concerns. All statutory public consultations required to obtain the environmental licenses and permits of the Penonome WPP were carried out satisfactorily with the Government Authorities between 2010 and 2012. Negotiations to gain access to land were also largely completed for the entire concession area prior to commencement of construction of Phase I.
The project has two main groups of stakeholders. One group comprises the landowners and users who have a contractual relationship with the project through the leasing of land to the project or receipt of crop compensation payments. The other group is the wider community including beneficiaries of social projects. The project enjoys broad support from both sets of stakeholders. The project area is sparsely populated, allowing engagement to be fairly informal and easy to manage. As the first wind project in Panama, people have responded to it in a very positive light. The project is not viewed as visually intrusive; rather it has attracted attention from peoples who visit it as a tourist attraction suggesting there could be some opportunities to develop this as a local community based initiative. Landowners contact the project directly by phone as well as in formal and informal meetings. During Phase I few grievances with landowner were recorded relate to damaged fences, straying cattle and clearance of construction rubble. All these grievances were resolved satisfactorily. There also were few community complaints about speeding vehicles and dust, and these were also been addressed. The Project is considering steps such as installation of cattle grids that could further reduce risks.
As the project progresses into Phase II, the sponsors will implement an updated Stakeholder Engagement Plan (SEP) in alignment with IFC PS 1 (as captured in the ESAP), including the hiring of a local community relations coordinator (CRC) who will support the Project Manager in maintaining day to day relationships with local peoples, documenting, addressing and resolving grievances and concerns in an appropriate and timely manner, and supervising the implementation of community development commitments. Phase II stakeholder engagement will involve a number of consultative processes (e.g. un/structured, focus group sessions, private, informal) depending on the purpose of engagement. The CRC will be responsible for the implementation of the SEP and GM with local communities, and for coordinating all aspects of its implementation with relevant parties.
A robust reporting and monitoring system will be put in place to record issues, their outcomes and for identifying opportunities. Reporting will include at a minimum the date, place, people met, topic of discussion, commitments and outcomes. The SEP will consider the broad range of stakeholder needs, and through this process, will facilitate the implementation of CSR commitments with local communities as required in the license. Furthermore, contractors will be responsible for compensating or indemnifying any person whose land, physical assets, belongings or livelihoods are damaged or adversely affected as a result of any works associated with the project. Compensation or indemnification will include reinstating the impacted area back to its original or better conditions.
The Stakeholder Engagement Plan will incorporate a Grievance Redress Mechanism, which will be made available to all affected persons. The EC and CRC will be responsible for ensuring that local communities are aware of the Grievance Mechanism, how to access it and file a complaint. Communities will also be informed about the scope of any emergency preparedness and response plan element which may involve them, its procedures and what to do in the event of an emergency. In coordination with the EC and CRC, the EPC contractors will provide local communities with timely information on the status of project activities and potential risks and impacts specific to each stage of development. Contractors are expected to inform private landowners when they will be working on their lands and describe the nature and duration of activities and the associated risks. The project will update and submit to IFC the Land Use Report and Compensation Plan, summarizing the details of all improvements and compensation paid to affected landowners at the end of the construction period.

IEH Penonome Panama S.A.
c/o Stuarts Corporate Services Ltd.
PO BOX 2510, Grand Cayman, Cayman Islands,
KY1-1104

Attention: Michael I. Bax
Telephone: +1 (345) 814 7911
Facsimile: +1 (345) 949 3344
Email: mailto:michael@interenergy.com

Broad Community Support is not applicable for this project

Penonome Wind(34810) Supervision Disclosure Snapshot – Version 4
Description	Anticipated Completion Date	Status	Comments	Completion Date
Develop and implement an internal Grievance Mechanism to address concerns from workers (including contractor and sub-contractor employees)	05-Sep-2014	Completed	Completed	11/3/2014
Update the existing Phase 1 Bird and Bat Monitoring Plan to cover project, and implement in alignment with good international industry practice.	30-Jun-2015	Completed	Completed	1/31/2020
Update and implement the Penonome WPP Integrated Environmental, Health, Safety and Quality (EHSQ) Management Plan and Emergency Preparedness and Response Plan to make these plans specific to Phase 2 of the project.	05-Sep-2014	Completed	Completed	11/3/2014
Develop and implement an OHS program, in form and content acceptable to the IFC, that will cover the management and mitigation of all OHS risks associated with typical labor tasks of construction and operation of wind farms.	05-Sep-2014	Completed	Completed	11/3/2014
Develop and implement a Stakeholder Engagement Plan in alignment with IFC PS 1, including the hiring of a local community relations coordinator (CRC), updating of the Land Use Report and Compensation Plan and the Grievance Mechanism.	05-Sep-2014	Completed	Completed	11/3/2014