IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s 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 implementation of these measures, the Project is expected to be designed and operated in accordance with 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 IFC’s requirements. The previously agreed ESAP has been completed to IFC’s satisfaction. No new material E&S risks and impacts have been identified and no new ESAP is required for this Project. Through implementation of established E&S controls, the Project is expected to be operated in accordance with Performance Standards objectives.
PS1. Assessment and Management of E&S risks and impacts.
E&S management system and capacity:
ContourGlobal (CG) has a robust corporate E&S management system including policies, screening and assessment procedures, management programs, operational procedures, organizational structure, emergency preparedness and response, and a monitoring and review procedures.
The Sponsor’s publicly available E&S Policy is closely aligned with IFC’s PS. CG is committed to comply with the international standards (based on IFC’s PS), protocols and industry-specific Good International Industry Practice (GIIP), in addition to compliance with all applicable environmental and social laws and regulations of the host countries in which portfolio projects are undertaken. Where there is a difference between national and WBG Guidelines and IFC’s PS, CG is committed to develop projects in accordance with the more restrictive of the two sets of regulations. These commitments include assessment of child and forced labor risks when doing business with third parties in line with PS2; management of transboundary E&S risks and impacts; management of involuntary resettlements (if unavoidable) in a manner consistent with IFC’s PS5; as well as avoidance or minimizing adverse impacts to biodiversity in a project’s area of influences in line with PS6.
The Sponsor is committed in its E&S Policy to provide sufficient management sponsorship and human and financial resources on an ongoing basis to achieve effective and continuous social and environmental performance of each of CG’s project.
At the project’s level, the Company has a comprehensive E&S policy in place and is committed to operate in accordance with IFC’s PSs, World Bank Guidelines (WBG), EHS Guidelines, or equivalent Good International Industry Practices (GIIP). The Company indicated that they intend to pursue certification under International Organization for Standardization (ISO) 14001 and 45001 by 2025. Having these certifications will continue foster and strengthen CG’s and the Company’s E&S goals.
Qualified Armenian E&S and OHS personnel have been hired and with the support of experienced CG’s global staff are localizing CG’s global policies and procedures in the context of the project, with focus on priority issues such as hazardous waste management, environmental pollution prevention and OHS performance.
The E&S Manager, based in the Vorotan area, also facilitates Company stakeholder engagement efforts (refer to Stakeholder Engagement section for further discussion).
Identification of risks and impacts & management programs:
As part of its corporate E&S Management System, ContourGlobal has established a process for the Social and Environmental Evaluation (“the Evaluation”) of each project they develop. This includes ESIAs for greenfield projects and ESDDs for existing brownfield projects. CG is committed in its E&S Policy to inform their risk assessment process by national and international norms and regulations promulgated by the World Bank Group or the United Nations. The scope of this process is consistent with GIIP and includes evaluation of all activities and facilities that are directly owned, operated or managed by CG (including by contractors) and that are a component of the project; associated facilities; cumulative impacts that result from the project and other existing or planned developments; the role of third parties in the project’s compliance with CG’s E&S Policy; and E&S risks in the primary supply chains. Once the Social and Environmental Evaluation is completed, it is CG’s policy to establish and manage a program of mitigation and performance improvement measures and actions that address the identified social and environmental risks and impacts (the “Management Program”). It is CG’s Policy to disclose information identified through the Evaluation where such disclosure might help affected communities understand the risks, impacts and opportunities of the project. If communities may be affected by risks or adverse impacts from the project, CG is committed to provide such communities with access to information on the purpose, nature and scale of the project, the duration of proposed project activities, and any risks to and potential impacts on such communities. For projects with adverse social or environmental impacts, disclosure will occur before the project construction commences, and on an ongoing basis.
At Vorotan’s level, the E&S risks identification process conducted by the Company for IFC’s equity investment is summarized in the previously disclosed ESRS (https://disclosures.ifc.org/project-detail/ESRS/33450/vorotan-hydros). In accordance with the ESAP associated with that investment, the Company commissioned a series of supplemental E&S studies. These covered OHS, environmental issues, dam safety and hazardous waste-related risks, liabilities, and mitigation plans. These supplemental studies were undertaken by a reputable third-party consultancy together with the Company and government representatives as an audit. The Company has successfully implemented all recommendations and mitigation plans derived from these studies.
The Company has the Management Program in place with short-term actions prioritized. Social issues are discussed in the Stakeholder Engagement section below.
Emergency Preparedness and Response:
Operating risk at HPP plants and reservoirs is typically low and no significant emergencies have been recorded over a period of many years. Should an emergency arise, the Emergency Preparedness and Response Procedure is in place. Further discussion of dam safety related preparedness is provided below in the PS 4 section.
Monitoring and Review:
CG’s corporate practice in all the countries where it operates is to monitor relevant E&S and OHS parameters and to report those both internally and to relevant authorities / lenders. The Company, with assistance from corporate CG personnel has defined its national, lender-based and corporate monitoring requirements and conducts field-based monitoring activities on a regular basis. Monitoring covers key aspects of Vorotan’s operations, including OHS performance, waste management, community and/or worker grievance redress and effectiveness of the planned Corporate Social Responsibility program.
Third parties: For the refurbishment works of Vorotan, the EPC contract Technical Specifications included the Project’s E&S requirements. The requirements indicated that, during installation works, the EPC contractors were fully responsible to ensure that their personnel, equipment, and works complied with all local and international applicable E&S requirements. It also stated that the EPC contractors must ensure compliance with CG’s own established E&S regulations and requirements. It is expected that any additional work performed by external contractors will adhere to the same principles.
In response to the Technical Specification requirements, the EPC contracts included a template for a monthly Environmental and Social Monitoring Report. The topics to be covered by the report include budget status, incidents and grievances, monthly update on audits and inspections, monthly implementation of the E&S plan, and updates on organization and resources, community relations, social investments, and training and results. The LTA’s review considers the report’s template to be acceptable and in line with industry standards.
Overall, IFC is of the opinion that CG’s Corporate ESMS has sufficient capacity to implement portfolio projects in a manner consistent with applicable IFC PS, and it has been satisfactorily cascaded and implemented in the SPV.
ContourGlobal is dedicated to using the funds equivalent to IFC's proceeds, which will be generated through Vorotan's refinancing, for their new pipeline of greenfield renewable projects in emerging markets. They are committed to selecting projects with minimal environmental and social impacts and ensuring that these projects meet the eligibility criteria defined by IFC. The Sponsor will adhere to its corporate E&S Policy to assess and implement projects in a manner consistent with IFC's PS, including PS2 requirements in its supply chain. In addition, for any new eligible solar project, CG will provide evidence to IFC that, on the basis of CG’s own due diligence and representations received from the Solar Suppliers, the solar power products used or to be used in such solar project were not produced using Forced Labor.
PS2. Labour and Working Conditions.
The Company currently employs around 120 full-time workers, and, in addition, the Company provides indirect employment to 75 state police employees under a security contract with GoA (refer to the PS 4 section below).
Company’s Human Resources (HR) policies are closely aligned with this Performance Standard and Armenian labor regulations. Certain adjustments were implemented in the past to better align Company’s HR rules with CG’s. For example, the Company changed its 24-hour shift cycle, which could lead to fatigue and OHS risks at the HPP sites, to a 12-hour shift cycle. In all cases, employees are not working more than 48 hours per week for shift work, in line with Armenian and ILO regulations and norms.
Employees are free to form a union should they wish but have not yet chosen to do so.
There is a worker grievance mechanism in place. All direct and contracted workers are informed about the grievance mechanism. Based on the LTA’s review no major grievances have been received during past years. No child or forced labor is used by the Company and the risks of such labor by the Company and/or its contractors is considered low in the country context.
The Company does not anticipate any collective dismissal of workers, and in contrast, temporary jobs will be created during the refurbishment works.
Occupational Health and Safety:
As envisaged under IFC’s previous investment, the Company commissioned detailed studies of workplace OHS risks and issues across the Vorotan complex and identified a series of gaps and potential risks. The Company has adopted a designated OHS Policy, purchased appropriate personal protective equipment, posted OHS-related signage around its facilities, prepared safety induction materials, provided OHS training and started various other initiatives to reduce OHS risks. As the result of this solid effort, safety statistics compiled during the last years show zero reportable incidents since September 11, 2020.
Quarterly monitoring reports from the Company indicate that all plant personnel, including security guards, have been inducted into the Company’s and CG’s safety training. In 2023, a total of 4,990 hours of training were given for employees and 3,187 training hours for contractors.
PS3: Resource Efficiency and Pollution Abatement
Resource Efficiency: Continued operation of the Vorotan hydro cascade will not lead to any meaningful change in greenhouse gas emissions, which are negligible as the reservoirs are located at high altitude, under generally cool and low-vegetation conditions and have been in existence for decades.
Possible climate change-related river flow fluctuations are currently found to be of low risk to project viability. It is expected that water flows will increase in the short term due to melting glaciers. However, in a long-term perspective, meteorological and hydrological water sources may undergo reduction due to climate change. To properly understand and address climate risks and associated potential social and environmental vulnerabilities of the project, the Company is planning to undertake a comprehensive Climate Risk Assessment of the Vorotan hydro cascade.
Pollution Prevention: Operational hydropower projects do not typically generate significant waste streams. Nevertheless, certain issues were identified during the supplemental compliance studies commissioned by the Company after their take-over. These included, for example, historical dumping of waste into the reservoirs or river, an accumulation of hazardous waste materials such as old batteries and used oils, oil leakages, lack of potable water and sewage treatment at HPPs and reservoir sites, and other housekeeping-type problems. The Company, with assistance from corporate CG personnel, has undertaken a major clean-up and waste disposal exercise in collaboration with the local municipality, began to implement hazardous waste segregation and storage protocols, and provided proper sanitary and potable water facilities for its staff members.
Since IFC’s last visit, the Company has been developing and implementing their own waste storage facilities, which were not currently available in Armenia, to include storage of waste oil and asbestos. During the September 2023 visit to the Vorotan facilities, IFC observed that waste was properly segregated. Oil containments were in place where necessary and no oil leaks were observed. Asbestos abatement has taken place as part of the refurbishment process. The Company has constructed a long-term asbestos containment area, which has been approved by the government.
Overall, based on IFC’s and the LTA’s review, the Company is found to be in material compliance with local environmental regulations and conditions specified in water use and discharge permits, including environmental flow and irrigation water release obligations.
PS4. Community Safety and Security.
Typical to hydro projects in mountain range, landslides, seismic activity, flooding, and sedimentation are key risks to the operation and maintenance of the HPPs. These risks have been addressed in the project design and the assets have shown resilience against those risks during their service life.
As part of Vorotan’s acquisition due diligence, CG commissioned independent experts to review all the facilities against internationally accepted standards. No immediate dam safety concerns had been identified, but some geotechnical work was recommended to further strengthen dams up to GIIP. The implementation of the project on 3 embankment dams’ monitoring systems installation has been completed in November 2023. By 2028-2030 the Company is expected to implement strengthening the embankment dams and spillways rehabilitation. In addition, the Early Warning (Alarm) System, as an important component of the community safety program, will be implemented by 2024.
The Company has signed a contract with the State Police of Armenia to provide security personnel for Vorotan’s primary assets: four reservoirs, three power plants and the administrative office in Goris. Per contract, a total of 75 security personnel have been assigned to these assets on a shift-work basis. The Company is required by the contract to pay the Police for this service and to provide security offices at its facilities to house security personnel.
Except for the Company’s office in Goris, its assets are generally located in remote locations away from human settlements. No security-related incidents were reported in the past decade, nor were risks to surrounding communities identified during appraisal. As such, the risk of friction between security personnel and local communities or workers is considered to be low.
