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Gulf Power Ltd
Environmental & Social Review Summary
This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Heavy Fuel Oil - Thermal Power Generation
GULF POWER LIMITED
Date ESRS disclosed
May 31, 2011
Invested: December 6, 2013
Signed: November 8, 2012
Approved: October 31, 2012
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
IFC’s review included:
- Field visit to the proposed project site near Athi River area of Mavoko Municipality.
- Meetings with: Gulf Power management team; the area Chief and the village elders within a 5km radius of project site; the site hydro-geologist (from the Water Ministry); the assistant sales administrator from Superior Homes residential development; the agency managing director and the sewerage superintendent of the Mavoko Water and Sewerage Company; the representative of the municipal planning department of the municipal county of Mavoko; the director of compliance enforcement and other representatives of the National Environmental Management Authority (NEMA).
- Review of key documents such as Environmental and Social Impact Assessment for the power plant prepared by Nutek Solutions Ltd – April 2011; and Gulf Power human resources policy manual.
The project is the development of a greenfield 80 MW Heavy Fuel Oil (“HFO”) fired power plant, including a 66kv interconnector and backup metering equipment on a 20 years build-own-and-operate basis along the Nairobi –Mombasa highway in the Athi River area of Mavoko Municipality, Kenya (the “Project”). The Project will have a 20 year Power Purchase Agreement (“PPA”) with Kenya Power and Lighting Company (“KPLC”), the national transmission and distribution company. The PPA may be extended for 5 years based on mutual agreement between the Company and KPLC.
The developer of the Project is Gulf Power Limited (“GPL” or the “Company”), a special purpose company incorporated in Kenya by a consortium of Kenyan investors with a view to enter the power generation business in Kenya. The Project is one of 3 Independent Power Projects (“IPPs”) for which KPLC had sought Expressions of Interests (“EOI”), in June 2009. These IPPs were expected to generate 60-80 MW each using medium speed diesel engines with HFO as the fuel.
The projects were awarded through a competitive bidding process based on the lowest electricity charges. GPL submitted an EOI to bid for the Project. In the final bidding held on December 15, 2009, GPL was the lowest bidder for the development of an 80 MW plant on the Mombasa Road, Athi River Site and on that basis was awarded the concession.
Identified applicable performance standards
While all Performance Standards are applicable to this investment, IFC’s 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:
PS1 – Social and Environmental Assessment and Management Systems;PS2 – Labor and Working Conditions;PS3 – Pollution Prevention and Abatement;PS4 – Community Health Safety and Security; and
PS8 – Cultural Heritage.
The Project site land was acquired through a lease agreement with a private owner and no economic or physical resettlement took place. There are currently no economic activities undertaken on the site, however the EIA notes traces of pastoralists’ cattle routes bordering the site which may have to be rerouted. As such PS5 Land Acquisition and Involuntary Resettlement is not applicable.
PS6 Biodiversity Conservation and Sustainable Natural Resource Management is not applicable as the site is located in a degraded habitat mainly surrounded with commercial and industrial activities as well as the Nairobi-Mombasa highway and a residential development. The site is in a semi-arid area which is not optimal for agricultural use due to generally low water content and low natural fertility.
PS7 Indigenous Peoples (IP) is not applicable as the site is located in an urban area, and no IP were sighted in the area during the EIA.
Environmental and social categorization and rationale
The Project is one component of a larger World Bank lending program to KP&LC that will support the creation of three IPPs. The World Bank has categorized these IPPs collectively as Category “A” projects. The IFC-supported project sponsored by Gulf Power will have limited environmental and social impacts that can be readily managed through mitigation measures. Nonetheless and despite the modest E&S footprint, the proposed IFC investment has been categorized as “A” to maintain consistency with the World Bank’s categorization.
Key environmental and social issues and mitigation
The key environmental and social impacts include air quality, noise, occupational health and safety, community health and safety, traffic management, hazardous material and waste management, and access to water during both construction and operation. The Company has presented information on its planned policies and practices that will seek to address environmental and social risks and impacts to ensure that the proposed Project will, upon implementation of specific additional agreed measures, comply with host country laws and regulations and the IFC Performance Standards on Social and Environment Sustainability. Findings of the IFC’s review and conclusions are summarized in the paragraphs below. Additional actions to be undertaken by the Company are listed in the attached Supplemental Environmental and Social Action Plan (“SESAP”), which is complementary to the environmental and social management plan included in the EIA; the SESAP will be made conditions of IFC’s investment.
PS 1: Social and Environmental Assessment and Management Systems – IFC’s review considered the Company’s assessment of potential social and environmental impacts and risks from the early stages of the Project development, and its plans for mitigating and managing these risks on an ongoing basis through its management system which includes the elements listed below. The Company engagement with local communities regarding environmental, health and safety performance is discussed in the community engagement section of this document.
Environmental and Social Assessment
The Environmental (Impact Assessment and Audit) Regulations, 2003 in Kenya requires that an Environmental Impact Assessment (EIA) is undertaken for the type of activity of the proposed Project. Completed in April 2011, the EIA contains sections on environmental, social, economic impacts and cultural effects that the Project may have on the surrounding communities during both construction and operation; it also includes considerations of alternatives locations as well as not proceeding with the Project; and community and local authority consultation. In compliance with EIA guidelines, the Project EIA was publicly disclosed for comments from The National Environmental Management Authority (NEMA) and other stakeholders and NEMA has subsequently issued an EIA license for the Project. The EIA addresses the potential impacts from the Project and outlines proposed mitigation measures. The Project will feed power at 66KV to the national grid and supply two clients directly from the power plant. The 66KV transmission lines and the new switchyard to be constructed by KP&LC are considered associated facilities and have been addressed in the EIA following discussions between KP&LC and the EIA consultant. Apparently, KP&LC will use its existing land in developing the transmission lines as well as the switchyard and that no economic or physical displacement is anticipated. The EIA concluded that the potential environmental and social impacts from the construction of the transmission line and switchyard are low. KP&LC has commenced a process of submitting an environmental project report to the NEMA for the transmission lines as per NEMA requirement. The Company will however require that KP&LC put in place an environmental and social management plan with adequate screening mechanism and mitigation measures ensuring compliances with IFC performance standards.
Organizational Capacity and Management Programs
The successful implementation of the actions outlined in the EIA will require close collaboration between the Company and the EPC/O&M contractor, Wärtsilä, who will have a dedicated EHS supervisor on the site. The Company will hire an experienced Environment, Health and Safety (EHS) professional as well as community liaison person to develop and implement Gulf Power E&S management programs and review those of Wärtsilä for preconstruction, construction, operation and decommissioning phases ensuring compliance with the requirements of host country laws and IFC’s Performance Standards. Wärtsilä’s EHS site supervisor and the Company’s EHS team will ensure proper training of employees and subcontractor, raise occupational health and safety issues to staff, have joint meetings on OHS, and jointly investigate any incidents/accidents on the site.
The key E&S issues to be addressed by the management programs include management of: (i) construction waste; (ii) occupational health and safety practices and training during construction and operation; (iii) labor and working conditions including workers’ accommodation hygiene and food safety; (iv) air emissions and noise; (v) compliance with permitting requirements; (vi) emergency preparedness and response including first aid; (vii) water resources due to limited supply in the area;(viii) drainage and storm water runoff; (ix) chemical storage and handling; (x) traffic safety; (xi) solid and liquid waste; (xii) equipment maintenance;( xiii) auditing of contractors implementation of the construction environmental management plan (included in the EIA); (xiv) community engagement with regards to labor, health/communicable diseases and safety; (xv) environmental and social performance monitoring and internal reporting including verification of monitoring data by a qualified third party consultant.
The Company will identify training needs for the staff responsible for implementing the management programs. The EHS professional will ensure that employees have a robust training program on occupational health and safety and ensure that Wärtsilä equally provides training for contractors and subcontractors as per the requirements of Kenyan legislation under OSHA Act 2007.
Monitoring and Reporting
The Company will establish an E&S monitoring and reporting program for both construction and operation phases of the Project. Activities to be monitored during construction include: vehicles accidents, erosion control and water quality, noise and dust generation, waste disposal, employees health and safety practices including accidents and lost time incident and root cause analysis, and job creation within local communities. During operation, monitoring should include: point source and ambient air emissions, noise, occupational health and safety of employees and contractors, quality of effluent discharge, water and fuel consumption, sulfur content in fuel, green house gas emissions, and job creation within the local communities. Specific parameters will be allocated to each of the activities above in order to track, monitor, analyze E&S performance and ensure compliance with local laws and IFC performance standards. The outcome of the monitoring activities will be reporting internally and annually to IFC. Furthermore, the Company will use a qualified third party independent consultant to verify its monitoring data prior to submittal to IFC.
PS 2: Labor and Working Conditions. IFC’s review considered Gulf Power Limited’s practices with regard to fair, safe and healthy working conditions in its operations.
Approximately 100 jobs will be made available during the construction phase and 28 jobs during the operational phase. The Company has a well developed human resources policy manual which outlines the employee’s right under national employment laws as well as their rights with regards to wages and benefits. The human resources policy manual fully describes policies and practices with regards to equal opportunities; harassment; recruitment and selection including that of contractors and casual staff; induction; employment conditions (work hours, grievance procedure, code of conduct); employment services and benefits (salary advances, emergency loans, house loans); leave entitlements (annual leave, sick leave, maternity and compassionate leave); health management; work place security and safety; performance planning and career development; internships; retirement; retrenchment; disciplinary actions and exit interviews. Although the legal employment age in Kenya is 18, the Company may occasionally hire interns that are less than 18 years old. Prior to employment, potential candidates must present an identification card as well as their social security number and/or passport number. Each new employee signs a work contract and is provided with a copy of the human resources policy and manual.
The human resources policy manual also outlines the rights of employees to be unionized and has provisions for unionized and non unionized employees with regards to grievance mechanism (involving union in the process for unionized staff) and retrenchment (in accordance with union agreement for unionized staff).
The human resources policy and manual has also a policy on health and safety of the employees and visitors. The Company’s and Wärtsilä ESMPs include policies and procedures on occupational health and safety as well as training program which are crucial to the success of the Project. Staff on the site (employees, contractors and subcontractors) will be required to wear personal protective equipments such as hard hats, gloves, steel toe boots, goggles, ear plugs which will be supplied by the Company, Wärtsilä or subcontractors.
Designated staff will be trained in fire safety and spill response. Fire extinguishers, hydrants and pumps, first aid kits will be readily available at the Project site to ensure compliance with fire risk reduction rules of Kenya and international best practices. An occupational health and safety manual will be provided to all personnel on the Project site. The site HSE manager will regularly conduct health and hygiene inspection at the job site including workers’ accommodation to ensure compliance with medical and health rules and regulations. The Company will also refer to IFC/EBRD guidelines on workers’ accommodation. As per the E&S performance monitoring requirements in PS1, the Company will track, investigate, analyze, and report on incidents and accident and use lessons learned as part of the training program.
PS 3: Pollution Prevention and Abatement. IFC’s review considered the Company’s management of resource use, waste disposal, air emissions and noise on the surrounding human and natural environment in its operations.
The key pollution abatement issues of concern for Gulf Power and proposed mitigation measures for construction and operation phases are addressed in the environmental management plan and include: air quality (emissions and dust), noise, soil erosion, water supply, hazardous and non-hazardous waste management, workers’ accommodation effluent management, solid waste management, drainage and storm water runoff as well as impact on water quality of Athi river.
The Mavoko Water and Sewerage Company is the main supplier of water to residents and businesses. However, residents do experience water shortage during dry season. It is anticipated that the Company will source its water from the water company by connecting a water line to the power plant and/or sink a borehole within the site and treat water prior to use. The power plant will be equipped with a closed waste oil collection system.
All process water will be channeled through the oil and water separator and subsequently treated prior to discharge into the Athi River. Sanitary sewerage will be either channeled through the municipal sewer line or held in a septic tank and disposed off site by an authorized third party contractor.
Air quality issues during the construction phase such as dust from site excavation, vehicular moments, smoke from equipments and trucks will be mitigated through Wärtsilä’s construction environmental management plan. Furthermore, Wärtsilä will develop and implement a traffic management plan to ensure proper air emission management, planning of routes to be used by construction vehicles and safety.
The operational air quality impacts were assessed for nitrogen dioxide (NO2), sulfur dioxide (SO2), and particulate matter (PM). The sulfur content in the fuel will be 2% or less. Engines design specifications indicate maximum level of the stack emissions for sulfur dioxide , nitrogen oxides and particulate matter are consistent with the IFC EHS Guidelines for Thermal Power Plants 2008. The proposed power plant will have a continuous emission monitoring system for monitoring the quality of stack emissions. Air quality impacts were assessed using air dispersion modeling ADMS4 (UK model) and AERMOD (US model). As Kenya doesn’t have air emissions legislation in place, EC Directive 2008/50/EC on ambient air quality was used as reference. Ambient air monitoring suggests that existing air quality in the proposed Project vicinity is non-degraded. Impacts are small but based on the AERMOD some significant exceedances are predicted for hourly SO2 and hourly NO2 at the Lukenya School located 5km east north east of the proposed Project site, however daily SO2 figures and annual NO2 average are significantly less than EC limits. PM was well within EC limits. The EIA proposes seasonal monitoring for a period of a year should actual monitoring demonstrate compliance with EC limit, however, IFC will require that the Company conducts seasonal manual sampling for the life time of the Project due to presence of sensitive receptors. Should this indicate that the airshed ambient air quality exceeds EC’s or Kenyan’s air quality requirements once effective, the Company will implement additional pollution control measures to mitigate this condition. More specifically, in the case of exceedance of sulfur dioxide, reduced sulfur content in fuel will be utilized until emission standards are met; and in the case of exceedance in nitrogen oxides, the Company will utilize approved methods to reduce the concentration of NOx in the engine exhaust. The air quality monitoring program can be revisited if the Company is able to demonstrate at least 3 consecutive years of air quality monitoring data at least 25% less than EC Limits.
The construction phase will likely have adverse impact on ambient noise mainly due to use of heavy equipments and vehicles. It is predicted that the increase in noise will impact the surrounding 750m radius from the site. Site workers will be equipped with ear plugs. This nuisance will be limited to day time and to the construction phase albeit best efforts will be made to comply with WHO guidelines. The power plant will be designed to the requirements of ISO 15664: 2001 –“ Noise control design procedures for open plant”, measures will be in place to prevent/reduce operational noise impacts to third party, this include acoustic design. Based on the EIA the Project will comply with WHO guidelines for noise during the operational phase. The environmental and social performance monitoring will include day time and night time measurements to sensitive receptors such as Superior Homes which is located 300m away on the other side of the dual carriage way to ensure compliance with WHO guidelines as per letter of acceptance by NEMA.
Waste will be segregated into construction, domestic, hazardous, and oily sludge and managed in a manner consistent with WBG/IFC guidelines and local regulatory requirements. Both the contractor’s environmental management plan and the Company’s environmental management plan will include waste management procedures. Noting that there are no environmentally sound hazardous waste disposal facilities in the area of the Project, it is likely that Wärtsilä will be installing an incinerator at the plant to burn used oil and oily sludge. In this case, necessary permits will be obtained and air emissions will be monitored to ensure compliance with WHO guidelines.
Storage, handling and use of HFO at the facility can present potential hazard in relation to accidental spills and fire. Both Wärtsilä and the Company will develop an emergency preparedness and response plan for the construction and operational phase respectively. This will include establishment of a communication network between Wärtsilä, the Company and emergency services such as fire departments, traffic police, and local medical services. Furthermore, the system will be tested through a mock drill to confirm effectiveness of the system or rectify any identified oversight.
The Project is predicted to emit approximately 317,000 ton CO2 per year based on annual capacity factor of 65% and gross engine heat rate of 8,837 kJ/KWh and carbon emission factor of 78800 kgCO2/TJ. The Company will be required to report on GHG emissions as part of its annual E&S performance report.
PS 4: Community Health, Safety and Security. IFC’s review considered the Company’s capacity with regard to the management of the impacts of the construction and operation of its facilities on the health, safety and security of surrounding communities.
The EIA includes a comprehensive socio-economic impact assessment. According to the District Development Plan, Machakos District income distribution by activity is 70% from Agricultural sector and 11% from wage employment. The EIA indicates that urban poverty is prevalent in Mavoko as a large proportion of its residents live in informal settlements, and the income gap is growing larger with noticeable growth in luxurious residential estates such as Superior Homes located 300m across the Project site. Mavoko area is vulnerable to HIV/AIDS spread due to the fleet of trucks passing through the Mombasa-Nairobi highway; sex workers and truck drivers are identified as one of the core group and bridge for the infection to spread to the general population. The presence of workers’ camp on the Project site as well as truck drivers staying overnight could attract sex workers to the site.
The Company as well as Wärtsilä will include in their environmental management plans procedures to minimize health, safety and security impacts to surrounding communities from construction and operation phases. These procedures will focus on managing ambient air quality, noise, increased traffic and parking space, control of safety of delivery of raw materials, entry to the site from the dual carriage way, accident management, roadside spill response system, defensive driving and drugs and alcohol testing for truck drivers, health management including HIV/AIDS awareness and testing campaigns for site workers and local communities. A community grievance mechanism will be put in place to allow community to lodge their grievances. The Company will maintain a register of complaints during construction and operation phases including actions taken to address complaints.
The Company as well as Wärtsilä will put in place an emergency preparedness and response system that will be tested for its integrity as described in PS3 above.
The Company will be retaining security contractors to protect its personnel and equipments. The Company will ensure that security personnel have undertaken necessary screening and training in accordance with good industry practices. The Company will put in place a system to investigate any credible allegations of unlawful or abusive acts of security personnel, take action (or urge appropriate parties to take action) to prevent recurrence, and report unlawful and abusive acts to public authorities when appropriate.
PS8: Cultural Heritage. IFC’s review considered the Company’s assessment of potential cultural heritage in the project area and proposed mitigation measures.
The EIA indicates the area of Lukeyna Hills contains some of the most important Later Stone Age archaeological finds in Kenya. A survey of the site revealed low, thinly spread artifact density. As such, IFC requires that the contractor environmental management plan includes a chance finds protocol specifying what procedures will be undertaken should archeological finds be encountered. Neither the Company nor Wärtsilä will disturb any chance finds further until an assessment by a competent specialist is made and actions consistent with the requirements of this Performance Standard are identified. The Company will also require that KP&LC includes a chance finds procedure in its environmental management plan for the transmission lines.
Client's community engagement
The EIA includes a comprehensive socio-economic impact assessment which also outlines stakeholder consultation. The stakeholders identified as part of the stakeholder consultation plan include the Mavoko municipality planner, provincial administration-district commissioner, district officer and area, Athi river town community/general public and the village elders within a 5km radius of project site, pastoralists community, social groups, local industries, KPLC staff, chief, OCPD Athi River police. Interviews were conducted with these various stakeholders to assess attitudes toward the proposed Project including a household/residents survey where a random sample of over 100 local residents of different occupational status and gender were engaged. Furthermore, in accordance with the EIA requirement in Kenya comments from stakeholders were collected from the public consultation hosted by the provincial administration at the Project site in 12 March, 2010 and attended by 145 people. Some of the benefits and key issues sought by stakeholders are creation of jobs for locals including non tribal allocation of project benefits; increased security in the area as a result of night lighting; improved housing and infrastructure such as access to water (boreholes); construction of church, hospitals; and sponsoring local youth activities; protection of health and safety for residents; increased road traffic congestion during fuel deliveries; strains on local resources in particular water; health and housing facilities due to increased in population. Details of the stakeholder engagement as well as minutes of the meetings are included in the socio-economic assessment. These consultations included the provision of information about the project during the consultation and the stakeholders’ comments were judged to be free in their expression. The comments were all positive toward the Project, and no general or specific objections were made.
The Company will hire a community liaison person and work with the community to develop a stakeholder engagement plan, prior to commencement of construction activities, to manage concerns, perceptions and expectation of the communities including Superior Homes. This should include a communication strategy to keep the community informed of the risks and impacts from the Project and the mitigation measures in place; provide regular updates on the Company’s action plan with regards to community health and safety matters; advice on employment creation; creation of small businesses through the supply chain opportunities; community development opportunities; and set up a grievance mechanism.
Local access of project documentation
Gulf Power Ltd has been disclosing the various environmental and social assessment documents in accordance with Kenyan EIA requirements. Selected and updated documents are being made available at the following location in Kenya. For access to EIA or further information about the environmental and social impacts of the Project, please contact Gulf Power Ltd:
Mr. Abubakar Ali
Gulf Power Limited / Gulf Energy Limited
Geminia Insurance Plaza, Kilimanjaro Avenue,
Upper Hill, P.O. Box 61872-00200,
email address: firstname.lastname@example.org
Documents to be disclosed are as follows:
- ESIA (Environmental and Social Impact Assessment) + Appendices
- SESAP (Supplemental Environmental and Social Action Plan)
Availability of Full Documentation
The complete set of Category A documentation is available from the World Bank Infoshop:
World Bank Infoshop
1818 H Street, N.W., Room J1-060
Washington, DC 20433
Fax: (202) 522-1500 (USA)
Hours of Operation: 9:00am to 5:00pm (Monday through Friday)
The complete set of Category A documentation is also available locally at the following location:
Gulf Power Limited / Gulf Energy Limited
Geminia Insurance Plaza, Kilimanjaro Avenue,
Upper Hill, P.O. Box 61872-00200,
The following complete set of Category A documentation regarding the Gulf Power Ltd. has been released locally and to the World Bank Infoshop.
1) Environmental and Social Impact Assessment for the power plant prepared by Nutek Solutions Ltd – April 2011
2) Gulf Power – IFC Supplemental Environmental and Social Action Plan.
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