Photo by Giorgi Kekenadze

LUKHUNI HPP CASCADE PROJECT

ENVIRONMENT AND SOCIAL IMPACT ASSESSMENT REPORT ENVIRONMENTAL AND SOCIAL ACTION PLAN

Prepared by SRF Gamma

Tbilisi, 2012

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1. INTRODUCTION

Rusmetal Ltd was established in 2005. The main activity of the company is manufacturing of ferro‐ alloys (ferrosilicon manganese, ferrosilicon, ferromanganese, and ferrochrome). The company owns the license for several manganese ore mines in region: Brolis Kedi; Chkhari; Dzevri and is running Manganese Processing Factory in Terdjola municipality. In 2010 the company got set to develop hydropower scheme in Uravi, municipality. The scheme comprises three HPPs built on the Lukhuni River with total design capacity 30.3MW. The scheme also comprises three 10/35kV substation and 35kV overhead transmission line (total length 21km).

The project is being implemented stepwise.

LUKHUNI 1 HPP LUKHUNI 2 HPP LUKHUNI 3 HPP Installed Capacity 10.8 MW 12 MW 7.5 MW Annual Generation 66 GWh 74.00 GWh 46 GWh Construction Commencement May 1, 2015 August 1, 2010 May 1, 2020 Construction Completion December 1, 2019 December 1, 2014 December 1, 2024 Approximate Investment 18.18 million US$ 20.20 million US$ 12.62 million US$ Number of employees 84

As required by Georgian law, Rusmetal evaluated the project’s potential impacts on environmental and social aspects. Environmental and Social Impact Assessment (ESIA) report has been developed and submitted to the Ministry of Environment Protection (MoE) of for consideration. The ESIA, together with this report, and a Stakeholder Engagement Plan were also designed to meet the requirements of the European Bank for Reconstruction and Development (EBRD). Environmental impact permit for the project was issued in 2010.

During construction, and throughout operation of the HPP scheme, Rusmetal will need to implement a series of actions to avoid, reduce, or otherwise control potential impacts identified in the ESIA and to fulfil requirements/conditions set in impact permit issued by the MoE. These actions are summarized in this Environmental and Social Action Plan (ESAP).

The ESAP will represent a part of the financing agreements between the lender and developer of the project. The company will be responsible for annual reports on performance of the required actions and may be audited or otherwise evaluated by the lender throughout construction and operation stages of the project.

The table below constitutes the ESAP. It identifies the required actions, the basis of the requirement, the timing of the action, and the criteria to be used for determining whether the required action has been successfully achieved.

Implementation all of the actions is the responsibility of Rusmetal. In order to assist in implementation of the ESAP, external company may be hired.

When other companies perform work under contract to Rusmetal, the latter will be responsible for the contractors’ compliance with the requirements of this ESAP. This is expected to be accomplished by inclusion of requirements in contracts and subcontracts, and by direct oversight and supervision by Rusmetal as needed.

As agreed by the parties, this ESAP may be revised from time to time during project development. No changes will allow violations of Georgia law or of EBRD requirements for environmental and social performance.

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Environmental and Social Action Plan the Lukhuni HPP cascade

No. Issue/Action Source of Date to be complete Measure of success Requirement 0 Submit report on environmental, social, health and safety EBRD Each 6 months during  Submission of performance report performance, including status of each ESAP element construction, Annually during operation 1. Environmental and Social Planning 1.1 Develop and implement an Environmental and Social Management EBRD PR 1 Develop key construction  Development of construction System (ESMS) procedures (e.g. OHS, blasting, management procedures traffic management, waste  Development of an operational management, monitoring, ESMS community liaison) prior to construction. Develop operations phase procedures prior to the start of operations. 1.2 Ensure presence of a qualified on‐site Occupational Health and EBRD PR 2 Throughout construction and  Construction OHS representative Safety (OHS) representative at all times, with independent operations already appointed reporting lines to corporate management  Rusmetal to identify operations phase OHS representative prior to operations starting 1.3 Ensure availability of a qualified Environmental manager to report EBRD PR 1 Prior to construction  Designated person throughout directly to site manager, with independent reporting lines to construction and operation corporate management 1.4 Require all on‐site contractors to retain qualified environmental and EBRD ESP Prior to contractor activities  Appropriate clauses in contracts OHS managers for all activities for which they are responsible  Appointment of qualified personnel 1.5 Develop a waste management plan to guide management of all EBRD ESP Prior to initial EHS report.  Waste management in wastes to be generated during construction and operation EBRD PR 3 accordance with Georgia law and the plan  Annual data on waste generation and management

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No. Issue/Action Source of Date to be complete Measure of success Requirement 1.6 Appoint an independent EHS Consultancy to undertake periodic EBRD PR 1 Appoint: prior to first  External EHS monitoring reports external monitoring of key EHS issues as outlined in this ESAP. disbursement Monitor: every 6 months during construction and annually for the first 2 years of operations; Any additional monitoring requirements to be based on monitoring outcomes 2. Labour and working conditions 2.1 Develop/update HR Policy and Procedures/ Manual in English and Georgia labour law Within 3 months of  Submission of HR Policy and Georgian to fully comply with national law and EBRD and IFC EBRD PR 2 commitment of funds. Procedures to the representative requirements (Georgian Law to take precedence if there are any of the lenders for review conflicts with lender requirements).  Include in annual EHS report data on workers, including dismissals and new hires, collective bargaining developments, status of medical checks, etc. 2.2 Make the policy and procedures/manual (2.1 above) or a detailed  Availability of materials for summary available to employees in their languages workers in their languages 2.3 Develop and implement an occupational health and safety (OHS) EBRD PR 2 Rusmetal plan: prior to first  Submission of Rusmetal plan to plan to guide all activities on the project site(s) during all phases of BAT disbursement lender for review and approval activities. Contractor plan: prior to prior to construction contractor activities on‐site  Submission of contractor OHS plan(s) and approval by Rusmetal OHS manager  Annual report on OHS issues, including accident statistics and training. 2.4 On annual basis, review and update OHS plan as needed, and BAT Annually  Updated OHS plan as needed require contractor updates  Annual report

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No. Issue/Action Source of Date to be complete Measure of success Requirement 2.5 Develop a formal grievance mechanism for employees and EBRD PR 2 Prior to first disbursement  Submission (with first EHS report contractors and disseminate information about its uses to the under item 0) for review and workforce (in the language of the worker) approval by lenders of grievance procedure  Annual report to include information on worker grievances. 2.6 Develop and implement a contractor management plan and EBRD PR 2 Throughout construction and  Contractor compliance procedures to ensure contractors’ compliance with lender and operation Georgian labour requirements 2.7 Develop and maintain construction camps that are appropriate for Georgia law At all times construction camps  Compliance their locations and that meet the requirements of Georgian law and EBRD PR 2 are occupied  Annual reports of incidence EBRD PR2 2.8 Provide safe working conditions on‐site including requirements to EBRD PR2 Throughout construction and  Zero accidents for construction use personal protective equipment (head, hand and foot protection) Best practices. operation and operational period. by all workers involved in construction, operation and / or maintenance 2.9 Self monitoring of heavy/toxic metals (in particular arsenic) in Requirement of Throughout construction and  Monitoring records. drinking water sources, surface water and soil – in order to exclude the MoE operation  Annual report to include relevant any health risks information 3. Pollution prevention and abatement 3.1 Maintain up‐to‐date emergency response plan(s) to include EBRD PR3, Prior to construction Emergency response plan measures for taking actions to prevent or reduce impacts on people EBRD PR4 or property that could be affected by unexpected failures or events, and to provide for notification of potentially affected people. Prior to operation, notify people who may be affected how the plan may affect them in case of an incident.

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No. Issue/Action Source of Date to be complete Measure of success Requirement 3.2 Develop and implement erosion control plan to cover all site EBRD PR 3 Plan: prior to construction Mitigated adverse impacts on water operations (may be developed by contractor(s), but must be Best practice Implement: throughout quality reviewed and approved by Rusmetal and implemented by all construction and operation Approval by EHS manager contractors). Review and revise as needed  Specify use of good housekeeping practices and best management practices such as using silt curtains along all waterways, straw bales, check‐dams, and seeding.  Keep hard‐standing areas and road surfaces clean from mud and oil build up  Keep stockpiles covered, minimize bare ground near the spring or river.  Use kerbed systems to prevent run off to river. 3.3 Implement measures to prevent / reduce / control impacts to EBRD PR 3 As long as fuel and other  Mitigated adverse impacts on ground/surface water as a result of spills of fuel, lubricants and Best practice chemicals/solvents are stored  local groundwater and surface other chemicals. and used on‐site water  Store fuels and oils in bunded containers with 110% capacity.  No off‐site fuelling or oil/chemical  Ensure drip‐trays are in place where fuels or oils are stored or handling used.  Identify a designated bunded refuelling location  Conduct fuelling operations and use chemicals/solvents only over prepared impermeable surfaces  ‐ Train drivers and equipment operators in proper fuel management. 3.4 Prepare for cleanup of small spills (fuel, etc.), including (but not EBRD PR 3 Prior to construction  Provision of cleanup kits limited to): Best practice  Training records for drivers and  Cleanup kits (absorbent materials, etc.) carried in all vehicles operators and equipment at all times  Immediate cleanup of all spills  Training for drivers and equipment operators, and others who with no residual contamination use fuel, oil, other hazardous materials  Inspect all vehicles and equipment for leaks before use near or in water 3.5 Store tunnelling and other spoil only in prepared designated areas EBRD PR 3 Prior to spoil generation  100% of topsoil salvaged and approved by authorities and protected from erosion (to be specified Best practice stored in contained in erosion control plan)

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No. Issue/Action Source of Date to be complete Measure of success Requirement 3.6 To the maximum extent possible, use or allow others to use spoil piles/locations  Maximum beneficial use of spoil  Annual report on spoil use and storage 3.7 For spoil that cannot be used at all or for some extended period of For all spoil piles not being time, provide other permanent erosion control protection (to be used within a 30‐day period specified in erosion control plan) 3.8 Develop tunnel waste water management plan (in case available) EBRD PR 3 As long as observed  No slope erosion by tunnel waste Best practice water.  No impact on surface water quality 3.9 Implement mitigation measures and best management practices to EBRD PR 3 Throughout construction  Proper state of maintenance of prevent / reduce / control air pollution from fugitive dust and Best practice machinery, reduced emissions, vehicle / equipment emissions.  Absence of complains  Control dust emissions in dry periods by using water or other  Minimum dust generation dust suppression methods on roads and other areas that may generate dust  Ensure all vehicles carrying spoil and all stockpiles are covered  Switch vehicles and equipment off when not in use  Keep all motorized equipment and vehicles well maintained to reduce emissions. 3.10 Contain all sanitary wastes from all sites, provide appropriate EBRD PR 3 Throughout construction and  Reduction in the risk of water / treatment prior to permitted discharge Best practice operation  land pollution and impacts on  ecology  Annual report 3.11 Develop blasting plan to provide for minimum risk to workers and EBRD PR3 Throughout construction Limited blasting noise. Include members of the public. Plan should require all blasting during Best practices. information on blasting in ESHS daylight hours and limit the number of blasts per day. report 3.12 Implement water quality monitoring in waste water recipient water Georgian Law body 4. Community Health and Safety

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No. Issue/Action Source of Date to be complete Measure of success Requirement 4.1 Develop and implement procedures to protect public health and EBRD PR 4 Prior to the commencement of  Submission of traffic plan to EBRD safety, to include (but not be limited to): Best practice major construction works with first EHS report, after  Traffic management plan for all drivers and equipment Throughout construction and commitment of funds operators (speed limits, training, etc.) maintenance operations  Annual report on traffic  Public notice of blasting operations near areas open to the management, security, other public activities, including any incidents  Security to prevent unauthorized access to project sites, with appropriate training for guards.  Notice to local authorities and nearby residents during construction of transmission line and then during operations  Hazard signs/ notices on power pylons/poles 4.2 Establish and enforce appropriate rules to control behaviour of EBRD PR 2 Establish: before occupation of  Annual report on rules and workers who live in construction camps to avoid disruption of Georgia law camp enforcement actions communities Enforce: throughout construction 5. Land acquisition and compensation 5.1 Complete, disclose and implement “the land acquisition and Georgia law Disclose at least 60 days prior  Acquisition of rights to all land compensation plan” agreed upon by the lenders, in accordance with EBRD PR 5 to construction of the needed, by buying the land for Georgian, EBRD and IFC requirements transmission line the towers and right of way for the footprint of conductors.  Full compliance with Georgia law  Inclusion in EHS reports to EBRD the status of land acquisition and compensation 6. Biodiversity and natural resources conservation 6.1 Develop and implement a downstream flow monitoring programme Georgia permits Develop: prior to dam/weir  Maintain minimum flow rates to ensure minimum biological flow is maintained downstream of the EBRD PR 6 closure  Include in annual reports data on intakes (r.Lukhuni, r.Latashuristskali) Recovery plan Implement: after dam/weir flow rates (item 6.4) closure

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No. Issue/Action Source of Date to be complete Measure of success Requirement 6.2 Prepare a detailed baseline for fish and aquatic habitat and water EBRD PR 6 Prepare prior to first  Submission of monitoring plan to quality in the river Best practice disbursement lenders Also part of Implement prior to any in‐  Summary report on baseline fish potential stream work, including populations and aquatic cumulative impact construction of weir ecosystem mitigation 6.3 Prepare and implement a robust multi‐taxa aquatic monitoring Plan: prior to plant  Submission of monitoring programme to measure changes attributable to the project in fish commissioning programme to lenders. and other aquatic life and water quality in the Lukhuni, at the Implement: as required by plan  Annual report on fish populations upstream end of impoundment and downstream of the weir/intake throughout construction and 2 and ecosystem health, including years of operations changes from previous monitoring results 6.4 If fish populations decline or ecosystem health decreases If monitoring results show  Development and implementation significantly downstream of the weir, attributable to the project adverse downstream changes of a recovery plan. develop – via an adaptive management approach – potential  Recovery of fish populations and mitigation and offset measures, including any needed changes in ecosystem health project operations 6.5 Review of fish passage design adequacy to ensure sufficient EBRD PR 6 Prior to first disbursement  Construction of fish passage upstream & downstream fish movement at all times with minimum Best practice adequate to allow upstream and risk of mortality downstream movement by fish 6.6 Avoid weir construction and other in‐stream work during fish Throughout in‐stream  No adverse effect on fish/fish spawning periods construction spawning 6.7 Prohibition of use herbicides to control vegetation on transmission Best practice Throughout operation  Manual control of vegetation line corridor 6.8 Identify species composition and quantity of trees affected by the According to the Prior to construction, or as  Agreement records project. Agree tree felling in the forested area with relevant impact permit appropriate authorities conditions 6.9 Identify compensation measures in case any protected species are EBRD PR 6  Development and implementation identified. Best practice of a recovery plan. MoE requirement  Recovery of loss 6.10 Salvage and store topsoil prior to disturbing new land Best practice Before disturbing new land  No loss of topsoil

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No. Issue/Action Source of Date to be complete Measure of success Requirement 6.11 Monitor bird mortality along transmission line corridor. In case of EBRD PR 6 First two years of operation:  Include monitoring and bird excessive mortality, develop and implement bird protection plan) Best practice once during each year’s spring mortality data in annual reports. and fall migration season Thereafter: during routine maintenance 6.12 Following construction, regrade and revegetate EBRD PR6 End of construction Reduced adverse effects on disturbed areas with native grass and shrub species. Best practices.  flora and fauna

7. Cultural heritage  7.1 Develop and implement a chance find procedure and ensure the EBRD PR8 Prior to disturbance of new  Submission for review and staff are trained in its use land approval to lenders 8. Disclosure and stakeholder engagement 8.1 Implement the agreed SEP, including regular (at a minimum annual) EBRD PR 10 Throughout construction and  Submission of annual report on feedback to local stakeholders on the implementation of agreed operation stakeholder engagement and environmental and social mitigation measures related to impacts resolution of grievances to that could affect them. lenders.

Keep records of any grievances raised and associated responses provided.