51515 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Date ISDS Prepared/Updated: November 3,2009 I. BASIC INFORMATION A. Basic Project Data Country: South Africa 1 Project ill: PI16410 I Additional Project ill (if any): Proiect Name: Eskom Power Investment Support Project Task Team Leader: Reynold DuncanlPankaj Gupta Estimated Appraisal Date: 11412010 1 Estimated Board Date: 03/04/2010 Managing Unit: AFTEG I Lending Instrument: SIL Sector: Energy Theme: Infrastructure services for private sector development (40%); Climate change (20%); Regulation and competition policy (20%); Education for the knowledge economy (20%) IBRD Amount (US$m.): 3,750.00 IDA Amount (US$m.): GEF Amount (US$m.): Other financing amounts by source: Borrower: 8,890.00 Foreign Multilateral Institutions: 2,675.00 Other Lenders inc I. Bilaterals and Commercial Financing 1,630.00 16,945.00 Environmental Category: A Simplified Processing Simple.[ ] Repeater [] Is this a transferred project Yes [] No [X] B. Project Objectives: The Project Development Objective (PDO) is to enable Eskom South Africa to enhance its power supply and energy security in an efficient and sustainable manner so as to support both economic growth objectives and South Africa's long term carbon mitigation strategy. C. Project Description: 1. The project comprises three components which will be implemented by Eskom: (a) Component I includes Medupi coal-fired power station (4,800 MW based on super- critical technology) and is estimated to cost US$ 15.4 Billion, of which IBRD will provide financing of about US$ 3 Billion. This loan will be provided for supply, erection, and civil construction contracts for the Medupi power plant and associated facilities. (b) Component II includes investments in renewable energy (wind and concentrated solar power) with an estimated cost of US$ 1 billion; of which IBRD will provide financing of about US$ 260 million. (c) Component III includes low-carbon energy efficiency components comprising road to rail coal transportation and power plant efficiency improvements with an estimated cost of US$ 545 million; of which, IBRD will provide financing of US$ 490 million. This component will include a technical assistance program (about US$ 20 million) for improving supply-side efficiencies. 2. The project comprises of about US$ 1.575 Billion of Low Carbon Renewable and Energy Efficiency investments, of which IBRD will finance US$ 730 million. E. Borrower's Institutional Capacity for Safeguard Policies: Based on due diligence conducted to date it can be concluded that Eskom has developed a superior ability to conduct EA, through independent consultants (as required by the EIA regulations); to prepare and implement EMPs, to pro-actively engage the affected public and NGOs in informed consultation through transparent public disclosure of projects and alternatives siting and mitigation strategies. An Executive Management subcommittee on Sustainability and Safety guides Eskom's strategy on sustainability and environmental and occupational health and safety. At the technical level, the Subcommittee is supported by the Environmental Liaison Committee which includes all environmental managers and representatives from the generation, transmission, distribution audit, legal and research units. Overall, there are approximately 120 environmental professionals working at Eskom out of a total of35,500 employees. The Department of Environment Affairs (DoEA), recently merged into the new Ministry of Water and Environmental Affairs, is the lead agency for all issues involving environmental management, including EA, drafting of legislation and issuance of regulations affecting the environment and monitoring environmental impacts, emissions and effluents from point sources, including electrical generation and transmission facilities. DoEA is organized into six integrated departmental programs each led by a separate organizational unit, or branch, and supported by various public entities and statutory bodies: The Environmental Quality and Protection (EQQP) unit is mandated to protect and improving the quality and safety of the environment, including air, water and soils. Within EQP the Chief Directorate of Environmental Impact Management is responsible for all aspects of EIA and is divided into separate Directorates for Environmental Impact Assessment, Environmental Impact Processing and Environmental Impact Management The Bank team has been in the process of preparing a Safeguards Diagnostic Review (SDR) to determine whether the EISP project may be appropriate for Piloting the Use of Borrower Systems to Address Environmental and Social Safeguards Issues in Bank-Supported Projects (OP 4.00). The Bank's SDR assesses the equivalence and acceptability of the Borrower's safeguards systems as per OP 4.00, and is subject to disclosure as a draft during project preparation for stakeholder comments and consultation and as a final report prior to Bank Appraisal. South Africa was selected as a pilot country because it has an established legal and regulatory system and a favorable reputation for effective implementation of its systems governing environmental assessment, protection of natural habitats and protected areas, and physical cultural resources. This has already been demonstrated by the SDR completed by the Bank for the proposed Global Environment Facility (GEF) project in support of the Development, Empowerment, and Conservation of the iSimangaliso Wetland Park and Surrounding Region (iSimangaliso), which examined South Africa's legal framework for the same four safeguards that are triggered by the components proposed for the EISP. The EISP was selected as a pilot project because the borrower, Eskom Holdings Ltd., has demonstrated a substantial corporate commitment to fulfilling and going "beyond compliance" with legal and regulatory requirements and embracing a sustainability policy on both a corporate and project level. Eskom subscribes to the United Nations Global Compact, has obtained or is in the process of obtaining ISO 14000 certification for the Environmental Management System (EMS) of each of its operational units, and seeks to align its projects and its practices with the requirements of the Equator Principles (i.e., the International Finance Corporation Performance Standards) and with the Global Reporting Initiative (GRI). Accordingly, there is reason to expect that Eskom's systems are likely to demonstrate strong equivalence with the World Bank safeguards as set forth in OP 4.00 Table AI, and that Eskom's investment projects making up the EISP would be implemented in an acceptable manner. F. Environmental and Social Safeguards Specialists on the Team: Mr Harvey D. Van Veldhuizen (OPCQC) Mr Frederick Edmund Brusberg (ECSS4) Mr Harvey Himberg (Environmental Consultant, OPCQC) Mr. Thomas Walton (Environmental Consultant, AFTEG) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safee;uard' Policies Trie;e;ered (please explain why) Yes No TBD Environmental Assessment (OP/BP 4.01) x The Environmental Impact Reports (EIRs) prepared by Eskom for the key project components have been disclosed on Eskom's website (www.eskom.co.za/eia) as per Eskom's standard practice. The Bank team has reviewed these EIRs as well as the construction stage and early draft operational stage Environmental and Social Management Plans for the Medupi Coal Fired Power Plant as part of the Safeguards Diagnostic Review being prepared under OP 4.00 .. Although an EIR has not yet been prepared by Eskom for the concentrated solar power plant (CSP), because the project has been on hold due to funding constraints, the Environmental Scoping Study has been prepared and disclosed on Eskom's website since 2006, and also has been subject to Bank review with respect to equivalence and acceptability. With respect to the Medupi power plant, the main environmental concern relates to the certainty and timing of Eskom's proposal to install Flue Gas Desulfurization (FGD) equipment, given the high capital cost and the question of when sufficient supplemental water will be available to support water-intensive FGD technology. Eskom's staged approach to FGD is consistent with its environmental permit, issued by DoEA in September 2006, and with proposed South African regulations which would categorize Medupi as an "existing" rather than a "new" facility for emissions compliance purposes. Medupi is categorized as an existing facility because the EIR was prepared and approved, and procurement and construction was' initiated, prior to the issuance of South African emission standards for thermal power plants. Without FGD, emissions from Medupi would exceed international good practice as recommended in the World Bank Group (WBG) December 2008 Environmental, Health and Safety (EHS) Guideline for new Thermal Power Plants, but the approach to assessing the need for and installing of FGD is consistent with the approach recommended for existing power plants in the December 2008 guideline. The team is recommending that Eskom install FGD at Medupi as soon as it is technically feasible to do so. Eskom's Board is expected to make a final decision on this issue shortly. The EIA process established by South African regulations and the EIRs prepared by Eskom for their proposed investments demonstrate robustness in public consultation and disclosure with key stakeholders. Natural Habitats (OP/BP 4.04) X The EIA process in South Africa requires assessment of project impacts' on natural habitat, not just critical, sensitive, or protected areas. Eskom, through its partnerships with South African conservation organizations, has supported conservation offsets for projects that convert natural habitat, even though South African legislation does not appear to require such practice. The Medupi project is located in relatively flat terrain in the Bushveld, a landscape dominated by thick growth of woody shrubs and low trees. The project area is occupied by large game farms and scattered hunting lodges. Mammalian wildlife populations are managed by the game farms. The Medupi project is located on land occupied by two game farms that were purchased by Eskom for the project's Safe2uard Policies Tri22ered (pleaSe explain why) I Yes I No I TBD development, and does not produce a significant adverse loss of sensitive or critical natural habitat. The coal transport railway project is being built in the Highveld, a landscape dominated by grasslands and agriculture (grain production and cattle-raising) in gently rolling terrain. The rail line will occupy approximately 370 ha of agricultural land, predominantly heavily grazed pasture land and grain fields. The EIR for the wind farm site on the Western Cape also included studies of habitats and wildlife use by qualified specialists. The site is remote from any significant bird nesting areas or known migratory pathways for birds or bats. Forests (OPIBP 4.36) I IX I Pest Management (OP 4.09) I IX I Physical Cultural Resources (OPIBP 4.11) IX I I Of the main project components the Physical Cultural Resources safeguard is triggered only by the the wind farm. Site survey work required under the EIA process determined the location of pre-historic sites in one area of the proposed wind farm site. These have been assessed by qualified specialists and the project layout will be required to avoid impacts on these specific sites. Eskom has the developed institutional capacity and effective procedures to implement South African legal requirements to include physical cultural resources and heritage issues in the EIA process, and also includes standard procedures for "chance finds" in construction contracts. This capacity and procedures have been successfully implemented at other Eskom project such as the Kusile Power Plant, where historic homesteads identified during the EIA process have been preserved and protected and human remains identified during both the EIA process and as "chance finds" during site clearance have been exhumed and moved in accordance with national standards. Indigenous Peoples (OPIBP 4.10) I IX I Involuntary Resettlement (OPIBP 4.12) IX I I South African legal requirements for resettlement and compensation are broadly consistent with the Objectives and Operational Principles of 4.00 Table AI, especially in the context of transparency in consultations with directly affected people, fairness of compensation, the widely-known availability of appeal mechanisms, and, particularly for the poor, a requirement for significant improvement in living quarters and opportunities for betterment in livelihood (economic rehabilitation). South African law goes beyond market value compensation, to include all costs needed for the affected landowner to re-establish an economic livelihood, including losses incurred during the transition period. South African law also guarantees that all people living on an acquired property, such as tenants, employees, or even squatters, are entitled to resettlement and assistance to improve their economic well-being. Eskom is the direct implementing agent for the resettlement process and takes full responsibility for land acquisition and resettlement. Government is drawn into the .process as an observer and key player to ensure that the legal requirements are being met. For this purpose, the national Department of Land Affairs provides a field officer who participates in all negotiations. In addition, provincial and local authorities participate directly in the resettlement process through representation on consultation fora. A review of Eskom' s practices indicates that they fully meet the requirements of South African legislation. Involuntary resettlement at Medupi (which is under construction) has been of very small scale. Eskom purchased from willing sellers two large game farms for the Medupi site; the directly affected parties were the two sellers, one of which was a corporation. The other farm owner lived in town and owns another farm; one full time worker had lived on the farm purchased for the project site for about one year before the purchase, and was relocated by the landowner to another of his properties. This resettlement Safeguard Policies Triggered (please explain why) Yes No TBD program has been audited by Eskom, and reviewed by the World Bank, and found to be satisfactory. Based on the findings of the EIR, resettlement or displacement of livelihoods is not expected at the wind farm site. Acquisition of land for the rail line right-of-way for the coal transport project will require negotiations and compensation with approximately 44 landowners. The process for developing a resettlement action plan, as needed, is already defined in Eskom's resettlement policy document, which is being applied to the entire project. Resettlement or impact on livelihoods caused by the transmission lines associated with the generating facilities and by the railroad will be typical of linear infrastructure projects; usually only portions of landholdings are acquired for rights of way, and, while houses and other structures are not permitted certain uses such as grazing are allowed to continue. As noted above, although the Bank is not financing the lines, the resettlement policy document Eskom is preparing for the overall project will include information on the potential resettlement impacts of right of way acquisition. Safety of Dams (OPIBP 4.37) IX The dam safety policy does not apply to the components of the EISP because the ash disposal facility for the Medupi Power Plant is designed and operated as an essentially dry disposal facility. The minimum amount of water is used in ash disposal to prevent dust generation during transportation via conveyor belts and deposition. As soon as possible, topsoil is applied to the deposited ash in order to encourage revegetation. Projects on International Waterways (OPIBP 7.50) X I This policy applies to the Medupi plant because it will withdraw water from the Moloko River beginning in about 2015. The anticipated water demands for this and other developments exceed the water availability in the local Mokolo River catchment. The preferred option to augment water supplies is the utilisation of surplus effluent return flows in the Crocodile River catchment, by the construction of a pipeline transferring water to the prospective users in the Mokolo catchment. The Crocodile and Mokolo Rivers are tributaries to the Limpopo River, which is an international waterway. The other countries involved are Botswana, Mozambique and Zimbabwe. The government of SA subscribes to the SADC Revised Protocol on Shared Watercourses, in which article 4, subarticles l(a), and requires countries to provide each other with information regarding planned measures, while subarticle 1(b) prescribes the specific steps to be followed in the cases where such planned measures have possible adverse effects. The Limpopo Basin Permanent Technical Committee (LBPTC) (Botswana, Mozambique, RSA and Zimbabwe) and also the BotswanaIRSA Joint Permanent Technical Water Committee (JPTC), both at high level, have been established. to act as forums where co-operative arrangements for the utilisation and development of shared water resources can be discussed. According to the RSA Department of Water Affairs and Forestry, RSA informed the members of the LBPTC in accordance with the Revised Protocol about the planned developments at a formal meeting on 6 July 2007. The LBPTC was updated on progress during subsequent meetings held on 20 June 2008 and again on 31 October 2008. Similarly, information was provided at meetings of the JPTC, with the most recent having been a full presentation during the meetingheld on 29 July 2009. The projectd team is obtaining written documentation of the discussions so that the Bank can confirm that the notification requirement ofOP 7.50 has been met. Projects in Disputed Areas (OPIBP 7.60) IX Piloting the Use of Borrower Systems to Address X Environmental and Social Safeguard Issues in Bank- Supported Projects (OPIBP 4.00) III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: 10112/2009 B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: N/A C. Time frame for launching and completing the safeguard-related studies that may be needed: The specific studies and their timingl should be specified in the PAD-stage ISDS: The EIRs for the project components have already been made available by Eskom on their website, and have been disclosed locally in accordance with South African regulations, which are found to be equivalent and acceptable to the Bank's requirements for local consultation and disclosure. The SDR being prepared by the Bank will be disclosed in draft in October 2009 for consultation in South Africa. IV. APPROVALS Signed and submitted by: Task Team Leader: 11103/2009 ~ Reynold Duncan 1 Pankai Gupta Approved by: ,J I 1h~.V~J{'4- Acting Regional Safeguards 11/03/2009 Coordinator: Comments: Sector Manager: 1110312009 Comments: S.bramania~ I Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.