Technical Assistance Consultant’s Report
Project Number: 48480 December 2017
Nauru: Sustainable and Climate-Resilient Connectivity Project Financed by the Asian Development Fund
Prepared by Cardno Emerging Markets Fortitude Valley, QLD, Australia
For Ministry of Finance Implementing agency
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
Final Report (Feasibility Report) TA-9009 NAU: Sustainability and Climate Resilience in Nauru – Project Preparatory Technical Assistance (PPTA) Consultants
Final Report (Feasibility Report)
TA-9009 NAU: Sustainability and Climate Resilience in Nauru – Project Preparatory Technical Assistance (PPTA) Consultants
TA-9009
Prepared for Asian Development Bank (ADB)
15 December 2017
15 December 2017 Cardno i Final Report (Feasibility Report) TA-9009 NAU: Sustainability and Climate Resilience in Nauru – Project Preparatory Technical Assistance (PPTA) Consultants
Contact Information Document Information
Cardno Emerging Markets (Australia) Pty Ltd Prepared for Asian Development Bank Trading as Cardno (ADB) Project Name TA-9009 NAU: Level 11, Sustainability and Climate 515 St Paul's Terrace, Resilience in Nauru – Fortitude Valley, Project Preparatory Queensland 4006 Technical Assistance Australia (PPTA) Consultants
File Reference TA-9009 NAU Final Report Telephone: +61 7 3369 9822 - Version 3.docx Facsimile: +61 7 3369 9722 Job Reference TA-9009 [email protected] Date 13 October 2017 www.cardno.com
Version Number V3 Author(s):
Approved By: Induni Senarath Effective Date 15/10/2017 Project Manager
Date Approved: 15/10/2017
Document History
Version Effective Description of Revision Prepared by: Reviewed by: Date 1 21/09/2017 First Submission Scott Keane Induni Senarath 2 13/10/2017 Second Submission Scott Keane Induni Senarath 3 15/12/2017 Third Submission Scott Keane Induni Senarath
© Cardno. Copyright in the whole and every part of this document belongs to Cardno and may not be used, sold, transferred, copied or reproduced in whole or in part in any manner or form or in or on any media to any person other than by agreement with Cardno. This document is produced by Cardno solely for the benefit and use by the client in accordance with the terms of the engagement. Cardno does not and shall not assume any responsibility or liability whatsoever to any third party arising out of any use or reliance by any third party on the content of this document.
15 December 2017 Cardno ii Final Report (Feasibility Report) TA-9009 NAU: Sustainability and Climate Resilience in Nauru – Project Preparatory Technical Assistance (PPTA) Consultants
Acronyms and Abbreviations
ADB - Asian Development Bank AIDS - Acquired Immune Deficiency Syndrome BCR - Benefit-Cost Ratio BNPL - Basic Needs Poverty Line BoM - Bureau of Meteorology BOQ - Bill of Quantities CAPEX - Capital Expenditure CAWCR - Centre for Australian Weather and Climate Research CBA - Cost Benefit Analysis CEO - Chief Executive Officer CDTA - Capacity Development Technical Assistance CHS - Circular Hollow Section CPU - Central Procurement Unit CRVA - Climate Risk and Vulnerability Assessment CS - Construction Supervision DCIE - Department for Conservation, Industry & Environment DDR - Due Diligence Report DFAT - Department of Foreign Affairs and Trade (Australia) DMF - Design & Monitoring Framework DWT - Deadweight Tonnage EA - Executing Agency EIRR - Economic Internal Rate of Return EMMP - Environmental Mitigation and Management Plans EMP - Environmental Management Plan ENSO - El Nino Southern Oscillation Index EO - Explosive Ordnance EOD - Explosive Ordnance Disposal ERMF - Environmental Risk Management Framework ERW - Explosive Remnants of War ESMP - Environmental and Social Management Plan FIRR - Financial Internal Rate of Return FMA - Financial Management Assessment FMICRA - Financial Management and Internal Control Risk Assessment FMIS - Financial Management Information System FMAQ - Financial Management Assessment Questionnaire FPL - Food Poverty Line GDP - Gross Domestic Product HIES - Household Income & Expenditure Survey HIV - Human Immunodeficiency Virus IA - Implementing Agency ICCP - Impressed Current Cathodic Protection IHO - International Hydrographic Organization IMO - International Maritime Organization IP - Indigenous People IPA - International Procurement Agent
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IPSA - Initial Poverty Social Assessment IR - Involuntary Resettlement IRR - Internal Rate of Return ISPS - International Ship and Port Facility Security GAAS - Generally Accepted Accounting Standards GoN - Government of Nauru GPR - Ground Penetrating Radar GRM - Grievance Redress Mechanism GRT - Gross Registered Tonnage JICA - Japan International Cooperation Agency kPa - Kilo Pascal LOA - Length Overall M&E - Monitoring & Evaluation MDB - Multi-lateral Development Banks MetOcean - Meteorological and Oceanographic MOF - Ministry of Finance MOT - Ministry of Transport MOU - Memorandum of Understanding MPa - MegaPascal NGO - Non-Governmental Organization NOAA - National Ocean and Atmospheric Administration NPA - Nauru Port Authority NPDP - Nauru Port Development Project NPV - Net Present Value NRC - Nauru Rehabilitation Corporation NSDS - National Sustainable Development Strategy NUC - Nauru Utilities Corporation NZ - New Zealand O&M - Operations & Maintenance OIMIP - Outer Island Maritime Infrastructure Project OPEX - Operating Expenditure Pa - Pascal PAO - Procurement and Admin Officer PACCSAP - Pacific-Australia Climate Change Science and Adaptation Planning Program PDA - Project Design Advance PFS - Pre-Feasibility Study PFSO - Port Facility Security Officer PIANC - Permanent International Association of Navigation Congress (recently known as ‘The World Association for Waterborne Transport Infrastructure’) PNG - Papua New Guinea PPRA - Project Procurement Risk Assessment PPTA - Project Preparatory Technical Assistance PRA - Procurement Risk Assessment PRIF - Pacific Region Infrastructure Facility PV - Procurement Vouchers PVC - Polyvinyl Chloride REA - Rapid Environmental Assessment
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RFP - Request for Proposals RDU - Radio Detection Unit ERMF - Risk Management Framework RO - Reverse Osmosis SBD - Standard Bidding Documents SCF - Shadow Conversion Factor SiD - Safety in Design SOE - State Owned Enterprise SPRSS - Summary of Poverty Reduction & Social Strategy SPS - Safeguard Policy Statement SPT - Standard Penetration Test STD - Sexually Transmitted Disease TA - Technical Assistance TEU - Twenty Foot Equivalent Unit THC - Terminal Handling Container TOR - Terms of Reference TTU - Trailer Unit UCS - Unconfined Compressive Strength ULS - Ultimate Limit State US - United States UXO - Unexploded Ordnance WACC - Weighed Average Cost of Capital WACOP - Waves and Coasts in the Pacific WSA - Water Supply Code of Australia
NOTE
In this report, “$” refers to US dollars unless otherwise stated
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Executive Summary
The island of Nauru has no protected port to facilitate international trade. Instead, general cargo unloading is conducted at sea by the transfer of individual containers by ship’s gear into small self- propelled barges which are then unloaded in the safety of a small harbor. Fuel imports and phosphate exports are handled at a separate facility which comprises two cantilevered loading arms. A complex system of anchored buoys and mooring chains enables these vessels to be held off the reef during transfer operations. This is only the case in limited / suitable conditions, beyond which the vessels are necessarily moved off the mooring system to prevent damage and / or grounding. In rough weather the transfer of cargo from vessel to barge is a dangerous operation which is often suspended until seas abate. Consequently the unloading of a container vessel can take several weeks to complete. Conversely the back loading of empty containers occurs in a reverse, time consuming operation and can also require significant time to achieve. The port is a lifeline to the people of Nauru since 95% of goods are imported to the country through sea. Food, diesel fuel, commercial and consumer goods are imported to Nauru through Aiwo harbor. Therefore, the country’s major economic operations rely on the availability of a reliable port. Only a minor amount of cargo is imported through air (via flights from Australia and Solomon Islands). The Government of Nauru has requested ADB for project preparatory technical assistance (PPTA) for the preparation of a project to improve the port facilities at Aiwo. The scope intended the construction of a wharf for berthing vessels, an approach causeway from shore to wharf, and replacement of derelict buildings with new structures for the harbor master’s office, staff amenities, gatehouse, plant workshop, secure fencing and a heavy duty industrial pavement in a container storage yard. The project also includes capacity building and institutional strengthening of Nauru Port Authority (NPA) to enhance the efficiency of port operations, port security, asset management, occupational health and safety and reforms to tariff structure. As input to the preparation of this Draft Final Report (Feasibility Report), the following tasks have been completed: 1. Reviewed the concept of the port facilities proposed in the Pacific Region Infrastructure Facility (PRIF) Pre-Feasibility Study (PFS) and Japan International Cooperation Agency (JICA) Preparatory Study (2014); 2. Undertook analysis of wind, wave, sea level, temperature, rainfall and climate change, resulting in a report MetOcean Design Criteria; 3. Prepared of a Climate Risk & Vulnerability Assessment (CRVA) report 4. Considered alternative locations and structural concepts for the wharf; 5. Completed Ship simulation modeling which provided critical information on the navigational and vessel maneuvering aspects for the wharf options; 6. Completed Unexploded Ordnance (UXO) assessment, geotechnical investigations, topography, bathymetry and cadastral surveys (as part of Project Design Advance (PDA) project) 7. Prepared preliminary wharf designs (as part of PDA project) to enable cost estimates to be provided; 8. Completed economic analysis of the proposed project; 9. Completed environmental assessment; 10. Completed social/poverty, gender and resettlement studies; 11. Completed financial management assessment & analysis 12. Completed with monitoring and evaluation; 13. Completed procurement planning and risk assessment; 14. Completed Port reform activities
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Upon completion of the data review, a considerable risk in the proposed project was identified as the constructability of the proposed quay wall recommended in the PRIF PFS. Some of the constructability issues identified were wave impacts during construction, working from a barge rather than a land based plant, ability to create a level base, possible sliding of concrete blocks, durability and strength of large scale concrete blocks (unreinforced), and safety issues with divers in the water while blocks are placed. Therefore, two alternative design options which were originally proposed in JICA preparatory study, were modified and proposed for analysis. A total of six upgrade options were identified, including: - Do Minimum – Repairing and maintaining the current facilities
- Option 1 – a new quay wall constructed on the reef edge north of the existing harbor with an accessible causeway connecting to the existing container yard. Vessels moor parallel to the reef edge.
- Option 2A –a berth pocket dredged into the reef immediately north of the existing harbor. The berth is oriented approximately 450 to the reef edge. A wharf constructed to the south side of the berth connecting the existing container yard. A breakwater built on the north-west or seaward side of the berth.
- Option 2B – a berth pocket dredged into the reef immediately north of the existing harbor. The berth is oriented approximately 450 to the reef edge. A wharf constructed to the south side of the berth connecting the existing container yard. (Similar to Option 2A, but excludes a breakwater).
- Option 3A – a piled wharf with two working faces. Two berth pockets on both sides on the wharf dredged into the reef at 450 to the reef edge. The wharf in between the berth pockets. A breakwater built on the north-west or seaward side of the berth.
- Option 3B – a piled wharf with two working faces. Two berth pockets on both sides on the wharf dredged into the reef at 450 to the reef edge. The wharf in between the berth pockets. A breakwater built on the north-west or seaward side of the berth. (Similar to Option 3A, but excludes a breakwater) Options 2 and 3 were developed to align the berth pocket and vessel with the critical wave direction. The options were developed to provide a sheltered berthing area and greater resilience for the port design to enable it to operate in a much wider range of conditions. The cost of these six upgrade options are shown in Table 1. The options evaluation process considered each of these upgrade options in comparison to a Base Case Do Nothing option, in which maintenance of the existing mooring system was allowed to lapse. This is considered the Base Case because this would be the option continued by Government of Nauru (GoN) unless a new port was proposed. This option is suboptimal due to the risks, safety issues and time consuming operations involved. The capital cost of this base case option is negligible (Table 1).
Table 1 Summary of Engineering and Cost Estimates of the Design Options Option Description Engineering Cost Estimate Do Nothing (Base Mooring system is no longer US$0M Case) used Do Minimum Repairing and maintaining the US$28.4M current facilities
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1 PRIF PFS proposed quay wall US$ 71.4M and causeway 2A* Wharf, one berth pocket with US$62.5M (Concept breakwater Design) US$69.56M** (Detailed Design in progress & inclusion of PDA Consultant Cost) 2B Wharf, one berth pocket US$60.6M without breakwater 3A Wharf, two berth pockets with US$78.7M breakwater 3B Wharf, two berth pockets US$73.9M without breakwater *Option 2A was identified as the preferred option through the evaluation process and progressed to detailed design level and costing estimation. ** US$ 3.042 M as the cost of Project Design Advance (PDA) was included in Option 2A cost estimate as advised by ADB on 13 Nov 2017.
Table 2 Project Cost Estimates Feasibility Study versus Detailed Design
Description Feasibility Study Detailed Design
Output 1- Climate Proofed Port Infrastructure 62.70 67.60 Off-shore works 45.87 54.87 Berthing Channel 7.84 9.66 Breakwater 6.47 0.27a Wharf 31.56 44.94 On-shore works 7.29 11.22 Port Buildings 5.83 8.83 Building Services 1.46 0.00 b Building Demolition 0.00 2.39 c Civil Works Contract 53.16 66.09 Port Equipment 6.76 0.00 d Supervision Consultant Services 2.78 1.50 Output 2- Reforms for NPA 2.50 0.00 e Sub Total 65.20 67.59 Government in-kind Contribution 0.00 3.00 f Total Project Capital Cost 65.20 70.59 a The breakwater will be constructed as a composite structure along with the wharf against a standalone structure in the feasibility study designs. This resulted in substantial cost reduction for the breakwater in the latest cost estimates. b In the latest cost estimates, the cost of building services is included under port buildings. c The demolition of buildings were initially expected to be undertaken by the port authority. The government subsequently requested this is to be included in the project. d Port equipment is expected to be financed separately by JICA under a bilateral agreement with the government and as such excluded in the latest cost estimates. e Port reforms are implemented through ongoing technical assistance financed by a A$3.3 million grant from the Government of Australia parallel to the project and as such excluded in the latest cost estimates. f. Salaries, audit fees, aggregate supply, taxes and duties were included as an in-kind contribution.
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A. Technical Suitability and Climate Resilience The ‘Do Minimum’ scenario retains the existing offshore mooring chain and buoy system, but includes upgrade or replacement of a number of components that have reached the end of their service life, as well as including installation of new onshore equipment and onshore works that would be common across all project options. A ship simulation exercise was conducted to determine the most appropriate configuration for the wharf and breakwater.
(i). The simulation for Option 1 showed that arrival of the vessel without assistance (tugs) was significant maneuverability issues for berthing and controlling speed of berthing. It further showed that the departure of the vessel in benign conditions could easily result in the vessel grounding on the adjacent reef. It was concluded that the movement of the vessel at the wharf combined with cargo handling limits was highly improbable other than in ideal conditions. (ii). The simulation for Option 2A showed that the arrival of the vessel for Port Side (reversing the ship in) was not difficult and relied heavily on pusher barges. Therefore, it was decided that maneuvering the vessel at ‘slack’ water would become an operational parameter under this configuration. The simulation showed that vessel departure, with the assistance of tugs/pusher barges was satisfactory even in worsening conditions. (iii). Since Option 3A follows the same angle of berth as Option 2A, a separate simulation for this option was deemed unnecessary since the alignment of berth pockets was in the same angle. As part of the PPTA study, Meteorological and Oceanographic (MetOcean) criteria were identified. The MetOcean criteria presented information for design purposes on wind, waves, sea level, temperature and rainfall; discussion of likely currents at the port site and potential impacts of climate change and its impact on the design process. The design wave conditions and climate change predictions were based on numerical wave models driven by reanalysis winds in the case of the design and by climate models for future predictions. The accuracy of the wave modelling was crucially dependent on the accuracy of the wind fields used to drive the model. The climate change models varied in spatial resolution. These models were not able to properly resolve tropical cyclones (typhoons in the western Pacific). However it was identified that tropical cyclones caused the most extreme waves in Nauru (Trenham, et al., 2013), CAWCR report CTR068 states: “Note the predicted extreme values are underestimates due to not fully resolving tropical cyclones.” Due to the uncertainty in future wave climate predictions, it was important that the selected design option for the port in Nauru to be resilient and robust, and not critically sensitive to changes in wave conditions, particularly increases in extreme wave conditions. It was identified that the proposed options 2 and 3 provide far greater resilience to any future changes in wave climate, possibly unforeseen by existing models. Based on the ship simulation and MetOcean design criteria, it was identified that Options 2 and 3 were climate resilient compared to the Base case, Do Minimum and Option 1. Option 2A was identified as the preferred option. The provision of a breakwater as part of the option was seen to provide safer operating conditions, enhancing operational times of the wharf and aid in protecting the long-term condition of the asset in response to climate change. The provision of two berths (Option 3) will not be cost-effective as elaborated in the economic analysis.
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B. Economic Analysis To compare and contrast the potential six upgrade options, an economic assessment was undertaken comparing the net performance of each option against the costs and benefits of adopting a Do Nothing Base Case scenario. Table presents estimates of Net Present Value (NPV), Economic Internal Rate of Return (EIRR) and Benefit-Cost Ratio (BCR) of the individual concept options assessed in comparison to the Do Nothing base case scenario. Where the BCR is less than 1 it indicates that is economically preferable to Do Nothing rather than adopt the relevant upgrade option (and vice versa for where the BCR is greater than 1). Table presents the economic assessment results for the identified preferred concept option (Option 2A) following advancement of detailed design.
Table 3: Estimates of NPV, EIRR and BCR of concept against Do Nothing (Base Case) Do Minimum Option 1 Option 2A Option 2B Option 3A Option 3B NPV -$5.4 -$10.8 $5.5 $6.0 -$5.1 -$3.8 (US$M) BCR 0.84 0.81 1.11 1.13 0.92 0.93 EIRR 6.1% 6.9% 10.2% 10.4% 8.1% 8.3%
Option 2A that was identified as the preferred option during concept stage was modified during detailed design. This involved proposing the wharf on the northern side of the berth pocket with an accessway connecting the existing container yard. A revetment was proposed immediately to the north of the wharf instead of the separate breakwater structure proposed during concept design.
Table 4: Estimates of NPV, IRR and BCR of Option 2A (detailed design in progress & inclusion of PDA consultant cost) Option 2A NPV 2.33 (US$M) BCR 1.04 EIRR 9.4% BCR = Benefit-Cost Ratio, EIRR = Economic Internal Rate of Return, NPV = Net Present Value Source: Cardno estimates
Projects with a positive EIRR and a BCR greater than one are considered to be economically viable. C. Governance Assessment Financial Management. The financial management assessment concluded that the overall financial management risk is substantial. It reveals that the executing agency, Government of Nauru (GoN) Ministry of Finance, has a low risk due to the existence of a financial management information system (FMIS) in the country, including effective budgeting and control systems. The Ministry of Finance has experience in managing and implementing projects financed by ADB and other international funding institutions. However, the risk of the implementing agency (NPA) was deemed high due to no experience in managing and implementing foreign funded projects, including ADB funded projects. Proposed mitigation measures include (i) providing institutional strengthening for NPA including the development and implementation of FMIS for port operations/management, an asset management and maintenance plan, and support to improve NPA’s accounting systems; (ii) undertake a tariff study and reform for the ports; (iii) the inclusion in the construction supervision (CS) team of a financial management specialist to provide project accounting and financial reporting support; and (iv) training in ADB procedures that will be required in procurement, disbursement, and
15 December 2017 Cardno x Final Report (Feasibility Report) TA-9009 NAU: Sustainability and Climate Resilience in Nauru – Project Preparatory Technical Assistance (PPTA) Consultants project management. The project is deemed worthwhile and feasibile, since Nauru has no efficient port in place. Procurement. A Project Procurement Risk Assessment (PPRA) was carried out in accordance to ADB Guidelines. Based on the assessment conducted it was determined that there exists both strengths and weaknesses in the GoN Procurement Process, but nothing that would put the project procurement for the project at unacceptable risk provided that ADB Procurement Guidelines were followed and that ADB’s Project Delivery Consultant was in place to take direct management responsibility. The Government, nor the current International Procurement Agent (IPA) has the relevant experience in the Procurement of major capital works projects under International Competitive Bidding. D. Environmental and Social Safeguards Assessment The Initial Environmental Examination (IEE) concluded that there were no identifiable environmental significant impacts, no critical important terrestrial or marine habitats impacts, all impacts are site specific, irreversible and can be minimized through appropriate mitigation measures. In accordance with ADB Safeguard Policy Statement 2009 (SPS), the project was categorized through a Rapid Environmental Assessment (REA) ‘Port Development’ checklist as a Category B environment. The environmental impacts are minor, localized, and acceptable, providing that the set of mitigations measures set out in the EMP are implemented and monitored properly. E. Poverty, Social and Gender Assessment The Poverty, Social and Gender Assessment identified key issues in the basic needs poverty line and the increase in living costs as the country depends highly on imported goods and fuel. The education and health sectors suffer from a chronic shortage of skilled staff. Lifestyle diseases (diabetes, obesity), and low education attainment (especially in secondary education) are another symptom for low social development. It is expected that the project will have positive impact in, creation of new jobs for men and women and improving the health situation of Nauruans by medical supply and affordable prices for fresh produce, which influences a healthier diet. The project was assigned Category C for Involuntary Resettlement (IR) in respect of ADB SPS, which means that displacement of people or property is not an issue. The same Category C applies for Indigenous Peoples (IP) as the assessment concluded that the population in the project area is not considered to be distinct from the mainstream society. The project scope is not expected to affect any distinct and vulnerable group of indigenous peoples as defined by SPS, and does not require an Indigenous people’s plan. The project outputs will be delivered in a cultural appropriate manner. Social safeguarding measures have been proposed. A Gender Action Plan and Due Diligence Report for Safeguards were also prepared. This report highlights in detail inter alia land acquisition processes and compensation in Nauru and specifically the number of lots, which will need to be leased by the executing authority before construction phase begins. F. Reforming the Port Authority Port reform will be critical to ensure that the infrastructure is sustainable, delivers servcies to people and the business, and generate value for money for Nauru. Major reform measures are considered critical irrespective of the development of a new Port facility at Aiwo in Nauru, and are also vital for ensuring sustainability of the new development required. Broadly, the reform measures include: (i) Significant investment in new equipment for efficient port operations and logistics provision; (ii) Adoption of a tariff structure based on equipment replacement and recovery of operating costs only, achieving no net increase in tariff from what is already proposed for implementation by NPA as gazetted by GoN, whilst longer term allowing for payment of a concession or lease payment to GoN by a lessee;
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(iii) Implementation of appropriate systems (Financial Management, Asset Management, Operations and Maintenance etc); (iv) Division of organisational structure into commercial and regulatory elements and provision for future privatisation or lease of the commercial element; (v) Management support to be implemented prior to the commencement of construction of the new port including Chief Executive Officer (CEO), Operations Manager, Finance Manager, HR Manager, Maritime Officer, Maritime Legal Specialist and Financial Management and Asset Management System Project Manager. These roles are to continue for varying lengths up until or including transfer of operations under a lease arrangement; (vi) Implementation of training programs to address deficiencies in technical skills throughout the Port staff and to enable more efficient allocation of labour; (vii) Significant institutional and governance related reforms including provisions for future lease arrangements and performance management arrangements.
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Table of Contents
Acronyms and Abbreviations iii Executive Summary vi 1 Introduction 1 1.1 Background 1 1.2 Current Port Operation Methodology 3 1.2.1 Mooring System 3 1.2.2 Offshore Container Transfer and Associated Risks 4 1.2.3 Port Operations during Monsoon Periods 5 1.2.4 Status of Port Buildings 5 1.3 Need for New Port 7 1.4 Options Considered till 2015 for Developing a Port for Nauru 8 1.4.1 2009 Reeves Construction Services Pty Ltd and BMT WBM Pty Ltd Study 9 1.4.2 2009 ADB Scoping Study for Nauru Port Development 9 1.4.3 2011 Nauru Economic Infrastructure Strategy and Investment Plan 10 1.4.4 2012 World Bank / AusAID Port Infrastructure Priority Needs Assessment 10 1.4.5 2014 JICA Preparatory Study 10 1.4.6 2015 PRIF Pre-Feasibility Study 10 1.5 Scope of Technical Assistance 11 1.6 Objectives of the Feasibility Study for Aiwo Port 11 1.7 Scope of this Report 12 2 Engineering Assessment & Investigation 14 2.1 Preliminary Assessment 14 2.2 Ship Simulation Modeling 15 2.3 Wharf Design Philosophy 18 2.4 Cost Estimates 28 2.5 Other Engineering Considerations 30 2.6 Project Design Advance Activities 30 2.6.1 UXO Assessment 30 2.6.2 Topography and Underground Services Survey 31 2.6.3 Bathymetry Survey 31 2.6.4 Geotechnical Investigations 33 2.6.5 Cadastral Survey 34 2.7 Go – No Go Decision Point 34 2.8 Summary 35 2.9 Detailed Design Basis 35 2.9.1 Design Features 35 2.9.2 Wharf Structure 36 2.9.3 Design Optimization and Availability 37 2.9.4 Terminal and Buildings 41 2.9.5 Services 43 2.9.6 Other 44 2.9.7 Constructability 44 3 Economic Assessment 46 3.1 Summary and Recommendations 46 3.2 Guidelines 47
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3.3 Economic Analysis 47 3.4 Project Costs 47 3.5 Project Benefits 49 3.6 Cost Benefit Analysis (CBA) 50 3.7 Conclusion 51 4 Financial Analysis 53 4.1 Financial Internal Rate of Return (FIRR) 53 4.2 Financial Performance and Projections 54 4.3 Summary and Recommendations 55 5 Environmental Studies 56 5.1 Findings 57 5.1.1 Terrestrial Assessment 57 5.1.2 Marine Assessment 57 5.2 Anticipated Impacts and Mitigation Measures 59 5.3 Conclusion 60 6 Social Assessment 63 6.1 Safeguarding 63 6.2 Social Impacts 63 7 Poverty, Social, Gender and Resettlement 65 7.1 Land Acquisition and Resettlement 65 7.1.1 Land Acquisition/Resettlement 65 7.1.2 Next steps 69 7.2 Social and Poverty Assessment 69 7.3 Poverty 70 7.4 Consultation, Participation, and Disclosure – Communication and Consultation Plan 70 7.5 Grievance Redress Mechanisms (GRM) 71 7.6 Gender Assessment 72 7.7 Summary and Recommendations 73 8 Financial Management Assessment 74 8.1 Summary and Recommendations 79 9 Procurement 80 9.1 Procurement Responsibility in Nauru 80 9.2 Procurement Risk Assessment 81 9.2.1 Project Procurement Risk Assessment Process 82 9.2.2 Planning the assessment 82 9.3 Procurement strategy 83 9.3.1 Identify potential bidders for civil works 83 9.3.2 Local Capacity Development 84 9.3.3 E-Procurement 84 9.3.4 Contract Packaging 85 9.4 Draft Bid Documents 86 9.5 Project Procurement Risk Assessment Summary 86 9.5.1 Strengths 87 9.5.2 Weakness 87 10 Climate Change and Disaster Risk 88 10.1 Policy Context 88 10.2 Vulnerability 89
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10.3 Climate influencing factors 90 10.4 Approach to climate change assessment 90 11 Port Reform 94 11.1 Overview 94 11.2 Current Constraints and Opportunities 94 11.3 Development of Port Infrastructure 94 11.4 Improving Financial Performance 95 11.5 Upgrading Safety and Security 96 11.6 Improving Institutional Performance and Capacity Building 97 11.7 Reform Activities and Timeline 98 12 Monitoring and Evaluation 101 13 Conclusions and Recommendations 103 13.1 Conclusions 103 13.2 Recommendations 104 13.2.1 Financial Analysis 104 13.2.2 Environmental Assessment 104 13.2.3 Poverty, Social, Gender and Resettlement 104 13.2.4 Financial Management 105 13.2.5 Procurement 105 13.2.6 Port Reform 105 13.2.7 Climate Change and Disaster Risk Assessment 106 Appendix A: Neptune Pacific Line Correspondence 108 Appendix B: Government of Nauru Letter on Mooring System 109 Appendix C: Concept & Final Options 110 Appendix D: Ship Simulation Report 111 Appendix E: Concept & Detailed Option 2A Cost Estimates 112 Appendix F: Final UXO Report 113 Appendix G: Operability Comparison Report 114 Appendix H: Economic Analysis Report 115 Appendix I: Least Cost Approach Report 116 Appendix J: Financial Analysis Report 117 Appendix K: Initial Environmental Examination 118 Appendix L: Marine Assessment Report 119 Appendix M: Safeguards Due Diligence Report 120 Appendix N: Poverty, Social and Gender Assessment 121 Appendix O: Gender Action Plan 122 Appendix P: Financial Management Assessment 123 Appendix Q: Project Procurement Risk Assessment 124 Appendix R: Climate Risk and Vulnerability Assessment 125 Appendix S: MetOcean Criteria Report 126 Appendix T: Final Port Reform Report 127 Appendix U: Design & Monitoring Framework (DMF) 128
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Appendix V: Contribution to the ADB Results Framework 129 Appendix W: Meetings 130
Tables
Table 1 Summary of Engineering and Cost Estimates of the Design Options vii Table 2: Estimates of NPV, EIRR and BCR of concept against Do Nothing (Base Case) ix Table 3: Estimates of NPV, IRR and BCR of Option 2A (detailed design in progress) ix Table 4 Container and Tanker Throughput Historically 8 Table 5 : Wharf location options - Advantages and Disadvantages 25 Table 6: Structural concepts considered for the wharf - advantages and disadvantages 27 Table 7 : Infrastructure Cost Estimates (Concept Design Stage) 29 Table 8: Advantages and Disadvantages of the Infrastructure Options 36 Table 7 Peak-to-peak vessel movements at which point container unloading may be unsafe 38 Table 8: Advantages and Disadvantages of Each Alignment Option based on Optimoor Analysis and Construction Methodology 40 Table 9 : Container throughputs assumed for container yard planning 41 Table 10 : Provision of Building Areas 43 Table 11 NPV, IRR and BCR of Option 2A 46 Table 12: Project (with) and Do Nothing (without) cost estimates 48 Table 13 Summary of Present Value Benefits ($M) 50 Table 14 Summary CBA 50 Table 15 Estimates of NPV, IRR and BCR of Option 2A 51 Table 16 Sensitivity Analyses 54 Table 17 Table of individuals met by the Environmental Specialist on 25, 26, 27 & 29 Nov 2016 during the in- country visitation 56 Table 18 : Descriptions of Design Land Areas 67 Table 19 : List of Landowners and Leases for Nauru Port Development Project 68 Table 20 Risk Assessment and Management Plan 74 Table 21 Time-bound Action Plans 78 Table 22: Details of Potential International Bidders 83 Table 23 : Risk Assessment Findings 91 Table 24 : Assessment of Residual Risk following Application of Adaptation Measures 92 Table 25 – Summary of the Cost of Reform Activities (A$ million, mid-2017 prices) 98
Figures
Figure 1-1: Location of Nauru on World Map (Google Earth, 2017) ...... 1 Figure 1-2: Nauru Harbor 1908 ...... 2 Figure 1-3: Nauru Harbor 2016 ...... 2 Figure 1-4 Project Site (Google Earth, 2016) ...... 3 Figure 1-5: Tanker unloading on to container barge ...... 4 Figure 1-6 : Offloading ...... 4 Figure 1-7 Offloading from container barge...... 4 Figure 1-8 : Status of Port Buildings (Shed 1) ...... 5 Figure 1-9 Status of Port Building Structures (Harbormaster Building) ...... 5 Figure 1-10 Status of Port Structure Buildings (Shed 1 – Internal View) ...... 6 Figure 1-11 Status of Port Structure Buildings (Shed 2 – External View) ...... 6 Figure 1-12 Status of Port Structure Buildings (Shed 2 – Internal View of Roof)...... 6 Figure 2-4: Concept Option 1 ...... 22
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Figure 2-5: Concept Option 2 ...... 23 Figure 2-6: Concept Option 3 ...... 24 Figure 2-7: Bathymetry Survey ...... 32 Figure 2-8 General Port Layout Plan (Option 2A) ...... 36 Figure 2-9 Optimoor Analysis - Southern Alignment Option ...... 39 Figure 2-10 Optimoor Analysis - Northern Alignment Option ...... 39
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1 Introduction
1.1 Background 1. Nauru is a Micronesian island with an area of 21 km2 located in the Pacific Ocean. It is located northeast to Papua New Guinea and Solomon Islands, southeast to Federated States of Micronesia, south of Marshall Islands and northwest of Tuvalu. The location of the country is also shown in Figure 1-1 below. Nauru has a population of about 10,982 (2013). The small island nation hosts its population on the shores around the island. The inner part of the island is used for phosphate mining.
Figure 1-1: Location of Nauru on World Map (Google Earth, 2017)
2. In the 1970s Nauru had the highest Gross Domestic Product (GDP)/capita in the world. By 2003 the economic and financial situation continued to deteriorate, as the phosphate reserves, the main natural resource, have become nearly exhausted. A complete collapse of the economy has only been averted by continuing donor support, particularly Australia’s humanitarian and development assistance. The country is plagued by frequent fuel, power and water shortages while the cost of living has increased. The education and health sectors suffer from a chronic shortage of skilled staff. Lifestyle diseases (diabetes, obesity), truancy in schools and low educational attainment are symptomatic of the neglect of the social sectors. Employment ratio declined to 47% in 2011 from 84% in 2002. Unemployment rate was 23% in 2011. Since 2012, the re-opening of the Australian immigration detention center has created job opportunities. Phosphate mining has seriously affected the environment of Nauru. The mining methods employed in the extraction of phosphate for some 90 years have devastated the country. The
TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 1 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report natural vegetation and phosphate-rich top soils have been removed from over 70 percent of the land area, leaving a wasteland at the center of the island, thus preventing the dispersal of a rapidly-increasing population from the coastal fringe, heightening land pressures and disputes around that fringe. The lack of subsistence economy by a non-existent farming or gardening culture pushes the growing population in total dependency on imported goods and to increasing poverty. 3. Nauru Port, located at Aiwo, on the west of the island, is limited in its ability to unload general cargo from container vessels and fuel from tankers. The harbor in 1908 and 2016 are shown in Figure 1-2 and Figure 1-3. In addition, the loading of phosphate into bulk carriers is dependent on a complex system of anchored buoys and moorings, which currently are out of operation. Container vessels are unloaded by ship’s gear individually into self-propelled barges which transfer them to the small protected harbor where a crane unloads the barge. In rough weather the transfer from vessel to barge is a dangerous operation which is often suspended until seas abate. Consequently the unloading of a container vessel can take several weeks to complete. Conversely the back loading of empty containers occurs in a reverse operation and can also require significant time to achieve. This practice poses significant safety issues to personnel as well as presenting great challenges to the efficient transfer of cargo. The project site is shown in Figure 1-4. 4. Several studies have been undertaken in recent years by Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and Pacific Region Infrastructure Facility (PRIF) to investigate options for the upgrade of port facilities, primarily to provide a wharf at which vessels could berth for cargo unloading. All the studies are discussed in Section 1.4 in this report.
Figure 1-2: Nauru Harbor 1908 Figure 1-3: Nauru Harbor 2016
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Figure 1-4 Project Site (Google Earth, 2016)
1.2 Current Port Operation Methodology
1.2.1 Mooring System
5. Initially developed to enable the loading of phosphate vessels about 90 years ago, the mooring system at Aiwo comprises a complex system of deep sea anchors (in about 540m water depth), chains, connecting plates, shackles and ten mooring buoys. Phosphate bulk vessels are moored prior to loading and must be able to be pulled away from shore during the repositioning of the cantilever loaders into appropriate holds. 6. Produce tankers (Fuel vessels) also used the mooring system during fuel discharges. A flexible rubber hose was lowered from a loader to sea level and connected to the tanker’s manifold to enable the pumping of fuel to onshore tanks. This operation is inefficient and it presents safety and environmental issues. The operation has to be discontinued when there is risk of weather events and associated repositioning of the vessels.
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7. Cargo vessels have used the facilities to moor during container offloading and back loading but have not been able to do so since the mooring system has become inoperable (the mooring system was upgraded in May 2017). The mooring activity for cargo vessels is the same as the process followed by phosphate vessels and tankers. Currently container vessels drift along the coast while being unloaded by ship’s gear into self-propelled barges which transfer them to the small protected harbor where a crane unloads the barges.
1.2.2 Offshore Container Transfer and Associated Risks
8. There is significant risk during the unloading (or backloading of empty containers) of a container vessel as each container is handled by the ship’s crane into or from a self-propelled pusher barge. Sea conditions dictate when these operations are feasible and can extend the loading/unloading period to several weeks. NPA workers are at risk as they attempt to land the containers into the small pusher barges.
Figure 1-6 : Offloading Figure 1-5: Tanker unloading on to container barge
Figure 1-7 Offloading from container barge
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1.2.3 Port Operations during Monsoon Periods
9. During the monsoon period (approximately December to February), the sea conditions on the west of the island can become too severe for container cargo unloading. During these three months, at certain times, it has been the practice during bad weather to relocate the operation to Anibare Fishing Harbor on the east coast. Here the container vessel drifts offshore while unloading into pusher barges which convey the containers to a quayline within the Fishing Harbor for unloading by crane. These containers are stored locally and transferred by truck to Aiwo for unstuffing.
1.2.4 Status of Port Buildings
10. There are three major buildings in a severe state of disrepair: they have significant corrosion of the steel structure and one has an asbestos cement roof. The NPA are investigating demolition options for the existing facilities. It should be noted that asbestos cement debris is prolific within the port area and within the island.
Figure 1-8 : Status of Port Buildings (Shed 1) Figure 1-9 Status of Port Building Structures (Harbormaster Building)
1.2.4.1 Shed 1
11. The main shed at Aiwo Port is an aluminium clad steel framed shed of approximately 100m x 30m in dimension. This shed consists of 16 bays/sections, and in most places the sheeting is supporting elements of the structure with major structural elements almost completely corroded away. The shed also includes lower level crane rails. Figure 1-10 shows the existing condition of this shed, which should no longer be used and should be demolished immediately.
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Figure 1-10 Status of Port Structure Buildings (Shed 1 – Internal View)
1.2.4.2 Shed 2
12. This shed is approximately 70m x 35-40m and is an asbestos roofed steel frame building. Wall cladding is perforated steel sheeting. The roof is a sawtooth / trussed configuration. Internally, the shed consists of 8 ‘rows’ at 3 bays wide, and 3 rows at 2 bays wide. The shed includes crane rails in each section. The figures below show the current condition of this building. As the shed is no longer utilised and the area will be re-allocated for Port activity, it should be demolished..
Figure 1-11 Status of Port Structure Buildings Figure 1-12 Status of Port Structure Buildings (Shed 2 – External View) (Shed 2 – Internal View of Roof)
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1.2.4.3 Shed 3
13. Is an asbestos clad (roof and walls) building of approximately 55m x 17m. It has 13 steel portal frames and metal purlins and braces. The figure below shows the current condition of this building. Due to the condition of this structure, as well as location within the Port land, it should be demolished.
Figure 1-13 Status of Port Structure Buildings (Shed 3 – External View)
1.2.4.4 Customs Office Building
14. There is an existing brick and asbestos building to the north of the site which will requireremoval. The current state of the building is in disrepair and it should be demolished..
1.2.4.5 Harbourmasters Office
15. The old harbourmaster building also requires demolition / removal and whilst consisting of masonry and fibro sheeting the steel bracing and frame beneath the building is highly corroded.
1.3 Need for New Port 16. Provision of the new port facilities are critical for the future of the inhabitants of the island as this is the only channel for importing goods into the country. The port represents a life line to the people of Nauru with the majority of imports (95%) arriving by sea. All imports to the country comprise of food, goods and fuel. Nauru’s major export is phosphate, Limestone rock and aggregate has also been a minor export historically. Any interruption to regular shipping, either the regular tanker deliveries (average of eight per year) or container vessels (up to 12 per year, but less at present with one operator withdrawing service), has the potential to severely impact on the population of Nauru in terms of power, food and water shortages. In particular, the consequences of the failure of the port facilities would be dire for the local economy, workplace and public safety, regional connectivity and the habitability of Nauru, as it relies upon import of
TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 7 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report bulk fuel which is used for power and water generation on the island. Container vessel throughput during 2015 – 2017 and tanker (fuel) product throughput during 2015 – 2016 is shown in the table below. Table 4 Container and Tanker Throughput Historically
Year Cargo Tankers No. Import Export Breakbulk No. Diesel Unleaded Jet A1 Vessel (TEU) (empty) (mt) Vessel (mt) Petrol (mt) calls (TEU) calls (ULP) (mt) 2015 6 1217 1,554 3 (part 57,800 13,000 25,188 year) 2016 7 1746 2267 6 41,241 5,865 12,907 2017 4 (to 677 916 Note 1 April) *Note 1 – Breakdown of fuel for 2017 unavailable during preparation of this report 17. The current container operator, Neptune Pacific Agency, provides all containers to the Island. Due to the poor state of the port and barges, unloading this container ship is a lengthy and costly process exacerbated by refrigeration and fuel costs which are transferred to the consumers. There may be a possibility of Neptune Pacific Agency withdrawing its services to Nauru due to the port’s non-compliance to International Maritime Organization (IMO) requirements in relation to the International Ship and Port Facility Security (ISPS) code. It is noted that the shipping company Matson have ceased shipping to Nauru in November 2015 due to low margins. The shipping operator withdrew due to delays which impacted financial viability. As discussed in the economic assessment later on in this report (Section 3), the high operating costs associated with servicing Nauru has led to the current shipping monopoly. The lack of adequate port facilities and long waiting times, has contributed to a lack of competition within the Nauru shipping market, and therefore high container rate costs. Letters from Neptune Pacific (29 January 2016 and 6 April 2017) discuss the costs being passed on to the consumer due to increases in tariffs as proposed by NPA and recovery costs. These letters are included in Appendix A. 18. As discussed in Section 1.2.1 above, an offshore mooring system exists at Aiwo since a quay is not available for large ships. This mooring system utilized by phosphate vessels requires yearly maintenance and replacement which is usually a burden to public finance. During monsoon season from December to February, phosphate vessels experience difficulty in loading phosphate due to bad weather. Vessels are required to steam offshore and wait till seas abate. This affects the exportation of phosphate. GoN has confirmed commitment to utilize the new port for all imports and exports within 5 years of the recent replacement of the mooring system (by May 2022). Therefore all future exports of the island would be required to use the new facility instead of repairing the existing mooring system. The letter provided by GoN on this commitment is provided in Appendix B.
1.4 Options Considered till 2015 for Developing a Port for Nauru 19. There have been several studies in recent years aimed at improving or providing new port facilities for Nauru.
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1.4.1 2009 Reeves Construction Services Pty Ltd and BMT WBM Pty Ltd Study
20. This study focused on craneage, container handling and the two major port buildings (structural steel frame sheds). The main recommendations were: Due to the buildings’ unsafe condition, curtail operations inside the buildings Procure additional operating equipment (new barge, crane and spares) Continue to use existing cranes for container unloading Demolish unsafe buildings Construct a new portal lifting frame for lifting containers and barges. 21. The cost of these recommendations was US$10.8 million.
1.4.2 2009 ADB Scoping Study for Nauru Port Development
22. This study was a high-level assessment that focused on the engineering aspects of improving the port. Some of the factors considered during the study were environmental conditions; the country’s potential for economic growth; conditions of existing facilities; limitations on constructing an enclosed harbor due to topography of the island; and environmental and social impacts from the new development. Five development scenarios were assessed as shown below: Development Scenario 1 – Upgrading Existing Port (A$ 11.2 million): provide improvements in the efficiencies of handling general cargo, in particular containers, to improve turnaround times. This include additional mooring buoys; additional multi- purpose vessels and barges; additional crane; and reconfiguration of container yard. Development Scenario 2 – New Unprotected Port (A13.1 million): provision of a berth on the edge of the reef connected to the existing port by a rockfill causeway. Improvement in landside storage area. Further investigation of this scenario recommended during the project’s feasibility stage. Additional facilities and lengthening of berth structure if phosphate loading is required. During adverse weather, safe berth at reef edge may not be possible. Development Scenario 3 – Berth Beneath Cantilevers (A$13.8 million): new quay wall positioned adjacent to the existing phosphate cantilevers. Two breasting dolphins sited between the cantilever foundation pedestals. Procurement of new facilities for loading phosphate not required. All weather protections is not eliminated. This scenario cannot be used as the first stage for a protected harbor since due to insufficient space for a harbor basin. Development Scenario 4 – New All-Weather Port (Scarlett Lucy vessel): development assuming Scenario 2 is Stage 1 of the all-weather port and is completed. Stage 2 of the scenario entails smaller version of the all-weather harbor constructed with an additional cost of A$ 31.4 million. Development Scenario 5 – New All-Weather Port (phosphate ships): development assuming Scenario 2 is Stage 1 of the all-weather port and is completed. Stage 2 of the scenario entails larger version of the all-weather harbor constructed with an additional cost of A$ 92.7 million. 23. Development Scenarios 2 or 3 were recommended for further study due to their potential to improve port facilities with tangible benefits for Nauru..
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1.4.3 2011 Nauru Economic Infrastructure Strategy and Investment Plan
24. This plan was prepared by the Planning and Aid Division of the Government of Nauru, assisted by consultants from Pacific Infrastructure Advisory Centre. Based on the ADB financed study discussed in Section 1.4.2 above, he major recommendation was development of a new quay wall constructed on the edge of the reef north of the existing harbor accessible by a causeway (Development Scenario 2) and movement existing outer buoys to Anibare harbor (A$ 14.4 million). The all-weather port facility scenarios were ranked supplementary due to their large capital and recurrent costs.
1.4.4 2012 World Bank / AusAID Port Infrastructure Priority Needs Assessment
25. This study was directed at providing short term craneage solutions and longer term planning of port infrastructure development requirements. The major recommendation was: A new Port Manager with international experience be appointed to improve the poor management of port operations.
1.4.5 2014 JICA Preparatory Study
26. JICA assessed seven options but concluded that, based on savings in maintenance and ship costs, the project was not economically feasible. Thei options included: A new quay wall south of the existing Aiwo harbor (US$37.3 million in 2014) A new quay wall north of the existing harbor (US$77.5 million in 2014) Several layouts with the quay wall, both north and south of the existing harbor, and perpendicular to the shoreline were dismissed as adequate quay lengths could not be secured.
1.4.6 2015 PRIF Pre-Feasibility Study
27. Pacific Region Infrastructure Facility considered port proposals from earlier studies and proposed three options be further investigated: Option 1 - A new quay wall on the edge of the reef north of the existing harbor, and accessible by causeway. No opportunity for replacing the existing phosphate loading arrangements (costing A$23.0 million in 2015). Option 2 - A new enclosed harbor basin excavated from the reef and coastal land north of the existing boat harbor. The basin suitably sized to accommodate container and general cargo vessels, but not phosphate ships. Existing phosphate loading arrangements to be retained. (costing A$97.7 million in 2015) Option 3 - A new quay wall on the edge of the reef south of the existing harbor below the phosphate cantilever loaders and berthing dolphins to accommodate all types of vessels (costing A$31.2 million in 2015). 28. The three development options were assessed against a range of criteria such as economic parameters, technical issues, engineering issues, operational efficiencies,
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1.5 Scope of Technical Assistance 31. The Government of Nauru requested ADB for project preparatory technical assistance (PPTA) for the preparation of a project to improve the port facilities at Aiwo. The project includes the feasibility assessment, design and construction of a wharf for berthing vessels, an approach causeway from shore to wharf, replacement of derelict structures with new buildings for the harbor master’s office, staff amenities, gatehouse, plant workshop, secure fencing and a heavy duty industrial pavement in a container storage yard. The project also includes the preparation of the terms of reference for consultants to be engaged for capacity building and institutional strengthening of the NPA to enhance the efficiency of port operations, port security, asset management, occupational health and safety and reforms to tariff structure. 32. The PPTA studied due diligence on technical, climate change, economic, financial, environmental, as well as land acquisition and resettlement of indigenous people, governance, poverty and gender issues. An option analysis for the management of port operations is currently being prepared together with an assessment of the requirements for a capacity development technical assistance (CDTA) for institutional strengthening of NPA. 33. A separate study, Project Design Advance (PDA) has undertaken unexploded ordinance surveys, geotechnical investigations, topographic, bathymetric and cadastral surveys. These investigations provided technical information to enable the selection of a preferred location and method of construction for a new port.
1.6 Objectives of the Feasibility Study for Aiwo Port 34. The aim of the feasibility study is to determine a feasible port design that will: Minimize downtime due to weather and complex interactions of infrastructure; Remove dependence on time-consuming and dangerous at-sea cargo transfers;
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Remove reliance on aging infrastructure including the mooring buoy system and cantilever loaders; Reduce freight costs through lower demurrage and faster turn-around for container and general cargo vessels; and Provide a safer and quicker transfer of fuels to the island.
1.7 Scope of this Report 35. The PPTA Consultant prepared this report under a Contract for Consultant’s Services with the Asian Development Bank under contract TA-9009 NAU: Port Development Project – PPTA Consultants (48480-001). 36. This feasibility study report covers the approach and outcomes of the information gathering phase, the development of options, the assessment of and consultation on options and the nomination of a preferred option. This report describes the subjection of this preferred option to feasibility study, including technical, economics, safeguards assessments, climate change adaptation and disaster risk management. 37. The structure of this report comprises: Section 1: Introduction – This section describes the background, current port operation methodology, options considered so far for developing a new port, rationale for new port facilities, current shipping line correspondences (Appendix A), Government of Nauru correspondence (Appendix B), scope of technical assistance, objectives and the Go-No Go decision point. Section 2: Engineering Assessment and Investigation – This section discusses engineering assessments, options considered (Concept drawings in Appendix C), ship simulation modelling (Appendix D), cost estimates (Appendix E), surveys (Appendix F), design optimization and availability (Appendix G) and constructability. Section 3: Economic Assessment –This section summarizes the methodology and findings of the economic analysis of the Project. It is complemented by the Economic Analysis Report in Appendix H and Least Cost Approach Report in Appendix I. Section 4: Financial Analysis - This section discusses the financial analysis conducted. The Analysis report is provided in Appendix J. Section 5: Environmental Studies – This section summarizes the findings of the environmental assessment, anticipated impacts and mitigation measures. The section is supplemented with a comprehensive Initial Environmental Examination (IEE) (in Appendix K) and Marine Assessment Report in Appendix L. Section 6: Social Assessment – This section discusses the safeguarding and social impacts of the project. A Due Diligence Report on Safeguards is provided in Appendix M. Section 7: Social/Poverty, Gender and Resettlement – This section of the report discusses safeguarding, land acquisition and resettlement, social, gender and poverty assessment, consultation, participation and disclosure, grievance redress mechanism (GRM), and gender mainstreaming. A Poverty, Social and Gender Assessment Report and a Gender Action Plan are provided in Appendices N and O respectively for further details.
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Section 8: Financial Management Assessment – This section discusses the financial management assessment (FMA) (Appendix P). Section 9: Procurement – procurement tasks, responsibility in Nauru, risk assessment, strategy and draft bid documents are discussed in this section. It is supplemented with a ‘Project Procurement Risk Assessment’ which is provided in Appendix Q. Section 10: Climate Change and Disaster Risk – This section discusses the policy context, vulnerability, climate influencing factors and approach to climate change assessment. A Climate Risk and Vulnerability Assessment (CRVA) in provided in Appendix R and MetOcean Design Criteria provided in Appendix S. Section 11: Port Reform – This section discusses the port reform activities. The Fina Port Reform Report is provided in Appendix T . Section 12: Monitoring and Evaluation – This section discusses the Design & Monitoring Framework (in Appendix U) and Contribution to the ADB Results Framework (Appendix V) Section 13: Conclusions and Recommendations
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2 Engineering Assessment & Investigation
2.1 Preliminary Assessment 38. Previous studies by ADB, JICA and the pre-feasibility study (PFS) by PRIF were reviewed. 39. Constructability of the proposed quay wall recommended in the PRIF PFS and as part of the scope of works for the PPTA consltant was considered a major risk. Consideration was given to issues relating to the foundation (both ability to support the mass concrete blocks and providing a level and/or keyed foundation for placement) as well as stability of construction equipment and accuracy/safety of placement. It was noted that many past projects using this type of construction have been undertaken in ‘the dry’ as compared to in exposed near shore environments where rock and concrete armoring is more common. Hence options and/or application of alternate construction techniques were reviewed. With the examination of all existing and concept facilities, the study considered the port’s deep draft navigation, berthing areas, associated dredging, break bulk and containerized cargo transfer methods, and the improvements necessary to other infrastructure and supporting facilities including shipping and cargo handling methods. With regard to navigation areas, initial reef material and dredging requirements were also taken into account. 40. Preliminary assessments relating to wave climate, berth operability / availability and constructability all raised sufficient concerns with respect of the preferred PRIF development option that alternative layouts were considered in parallel. As the orientation of the proposed wharf is dependent on wave climate, a separate wave assessment study was undertaken (see Appendices M and L for MetOcean Design Criteria Report and Climate Change and Vulnerability Assessment respectively). The MetOcean Criteria concluded that wave climate in the vicinity of Nauru is dominated by wave from the east, generated by the north-east and south-east trade winds. However strong winds with a westerly component were identified during the years 1997, 2015 and to a lesser extent of 2001 and 2009. It was identified that the local wave climate will determine the operability. The concept layouts (Options 1, 2 and 3) assessed based on early specialist review are provided in Appendix C and are summarized below: Do Minimum – This option involves the improvement of the existing facilities (mooring system). This system is limited by the weather and in particular wind direction and velocity. During adverse weather conditions, the vessels are necessarily moved off the mooring system to prevent damage and/or grounding. When the mooring system is damaged and requiring repair, ships are forced to off-load while drifting in the open sea. Option 1 (as proposed in the PRIF PFS) - A quay wall constructed on the edge of the reef with a causeway connected to the existing container yard. Vessels moor parallel to the reef edge and would be exposed to the ambient wave conditions. Option 2 - A berth is cut into the reef platform immediately north of the existing port and small boat harbor. The berth is oriented approximately 45° to the reef edge with an axis aligned at about 243° to the south west. A wharf is constructed on the south side of the berth connected to the existing container yard on shore. A breakwater is built on the north- west or seaward side of the berth. This option provides a relatively sheltered berthing area as waves from the south-west are rare. This option builds greater resilience into the port design as it is able to operate in a much wider range of conditions than Option 1.
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Option 3- An expansion of Option 2, with two berths cut into the reef flat with a wharf in between and a breakwater on the north-western side. Similar to Option 2, this option has greater resilience in the design since it is able to operate in a much wider range of conditions. This option was proposed to account for additional capacity by providing two berths. 41. These layouts possess a quay orientation that considers the operational wave climate as it relates to berth availability. The alignment is such that waves predominantly cause pitch and surge motions rather than roll and sway motions. The vessel types expected to use the facility will be less sensitive to pitch and surge motions. The wave climate operational data confirmed the preferred alignment of the quay.
42. Associated with the wave climate as well as ship mooring forces on the quay line there were significant concerns regarding the stability of a segmental mass gravity block quay construction as well as constructability issues. Although this layout has been retained as an alignment option, it has required the consideration of an alternative design and construction methodology to that initially presented as a preferred solution. 43. Geotechnical studies validated the proposal to excavate a berth pocket and to provide a wharf aligned in the most favorable direction to the waves. 44. So that the options with the alternative alignment could be progressed, it was proposed that ship simulation modeling was undertaken to identify parameters following other related study inputs (i.e. waves and currents and ability of the reef to be excavated).
2.2 Ship Simulation Modeling 45. Ship simulation modelling is an exercise carried out to assess berth arrangements and limiting operating parameters for a proposed wharf/jetty facility. It is usually carried out using a simulator and bridge equipment. Ship models and the port area model (the area of interest) are some of the data required for this activity. As well as alignments and environmental impacts, it also provides input to the assessment of other assets required for safe vessel handling (i.e. tugs). 46. It is critical that the operability and any constraints of concepts be clearly understood. Ship simulation modelling was therefore required to enable a better understanding of the scale and alignment of the development, port support functions (i.e. towage) and assess design parameters. It is evident that shipping operational/safety requirements for navigation had not been assessed in previous studies. By undertaking ship simulation modeling and incorporating wave and current information, the exercise allowed proper assessment of the ability to navigate the vessel into the proposed berth and / or basin area under prescribed conditions/limits and further consider impacts on maneuverability including need for and capacity of tugs. 47. In this exercise, undertaken at the Australian Maritime College (AMC), a Port Model for Nauru was based on a building block model. This was selected to allow ready modifications through the simulation exercise. The intent as such is to allow modifications to breakwater or wharf alignments readily throughout the planning phase of the exercise. 48. Whilst AMC has numerous ship models in its own library, some of the vessel characteristics required for the Nauru exercise were smaller than those that AMC had. As such the exercise made use of one (1) of their models (handy size bulker) whilst models were obtained for the:
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Tanker Small geared container vessel Next gen container vessel On receipt of these models, they were tested by the hydrodynamicist and simulation manager before use in the exercise. 49. Ship Simulation Modelling assisted with the selection of an optimal port design. It also assisted in identification of peripheral issues such as fendering systems, as well as the personnel and skills/training requirements associated with the Port Reform element of the project. 50. Full Mission Bridge Ship Simulation was undertaken at AMC (Launceston, Tasmania) on 8th and 9th September 2016 (see full report at Appendix D). This included the following personnel: Helmsman; Nauru Harbor Master; Director (Maritime), Ministry of Transport, Nauru Design Engineer (PDA Consultant); and Port Reform Specialist (PDA and PPTA Consultant). 51. The building block based Port Model had been previously prepared, utilizing standard elements that could be rapidly reconfigured to represent changed alignments or breakwater lengths and the like, for the two major options under consideration. Option 1: A rock fill causeway connecting a 120m long wharf located along the edge of the reef, adjacent to the existing harbor (preferred PRIF option) (Refer Option 1 drawing in Appendix C); and Option 2: A 30m wide wharf adjacent to a 50m wide berth pocket dredged into the reef with an approximately 170m long breakwater on the seaward side (Refer Option 2 drawing in Appendix C). Option 3: Since wharf and breakwater in this option follows the same angle as Option 2, simulation was not undertaken for Option 3 52. This was combined with the selection of different ship models representing the existing and future vessel types and dimensions associated with trade in Nauru, and assessment of future design vessels. In addition to ship models, other inputs included tugs of various bollard pull, and various environmental conditions (i.e. wave, tide currents, and wind). 53. The simulation exercise was run effectively as follows: Initial familiarization runs and sensitivity assessments for the Pilot Arrivals of various ship types and environmental configurations for Option 1 Departures under various environmental configurations for Option 1 including necessary external / towage assistance Arrivals Port side and Starboard side to for Option 2 under different environmental configurations including configuration of pusher barges and / or towage options.
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Departure of Port and Starboard side to vessels from Option 2 under different environmental configurations and towage / external assistance.
Figure 2-1 : Ship simulation activity
54. The result of the simulation showed that arrival without assistance (tugs) was problematic for Option 1, with frequent loss of control and re-maneuvering the vessel to the berth (refer plots in Simulation Report in Appendix D). Whilst pusher barges were not tried it is considered they may have been suitable for use under ‘light’ (i.e. benign) conditions. Departure however was a different issue from Option 1, whereby even under light conditions this was problematic and could easily result in the ship grounding on the adjacent reef. As conditions worsened (i.e. conditions under which the Pilot would remove the vessel from the berth in any case) the need of a large tug of the order of 40T bollard pull and with azimuth drives became necessary. This combined with movement of the vessel at the wharf versus cargo handling limits showed that Option 1 was highly improbable other than in ideal conditions. It was also evident that Option 1 required isolated fore and aft mooring / berthing dolphins and ideally also a dredged departure pocket for the ship to use while ‘pivoting’ on the berthing dolphin.
Figure 2-2 : Ship simulation activity in progress
55. Simulation showed that the arrival maneuver for Option 2 for starboard side to was relatively simple, even considering stopping the vessel before the end wall of the berth pocket /
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port hardstand area. Departure however under this configuration was very difficult without external assistance and even then not recommended unless in ideal conditions. By comparison however, the arrival of the vessel for Port side (reversing the ship in) was not too difficult and relied primarily on pusher barges. A resolution afterwards was that the Pilot would be very comfortable with this maneuver at ‘slack’ water and that this would become an operational parameter under this configuration. The departure also worked relatively well even in worsening conditions with the assistance of a smaller tug and / or pusher barges. Vessel movement at berth even under heavy conditions was far more suitable to reduce likelihood of damage and to allow cargo loading activity. 56. Whilst the facility would be lit, it was decided it was unlikely to require navigation aids for the approach and that arrival of the vessels in particular would normally be during daylight, in slack water (i.e. top or bottom of the tide when tidal currents are minimal). 57. A simulation video was made of the vessel at the berth in Option 1 configuration under average conditions. This showed significant pitch and roll motions of the vessel. The motions were shown to the extent that Option 1 would be likely to cause the vessel and / or wharf infrastructure damage and certainly limit handling or transfer of cargo. This was also undertaken to provide an indication of mooring line tensions and effects on typical construction options under consideration. Since a vessel simulation is not as accurate as other means with respect to vessel motions, mooring analysis was considered as part of further design development (discussed in Section 2.9.3). 58. Many of the above aspects, whilst critical to the design and orientation of the future Port facility, provided valuable input to future training and capacity considerations relevant to thePort Reform scope. These will be considered in association with the types of personnel and training required for existing versus future operation of the Port, as well as Port maintenance and operating requirements and costs. Some elements are also likely to trigger the need for tariff considerations (i.e. use of tugs versus pusher barges for example). 59. The opportunity was also taken whilst at the Maritime College to show the Nauru personnel the facility and discuss after hours the range of training options potentially available for Nauruan people in future, both as on site or in country training options.
2.3 Wharf Design Philosophy 60. It was recommended that the wharf be designed for vessels larger than currently calling at Nauru to ensure port facilities can accommodate longer and deeper vessels. The design vessel adopted for the project was based on an assumed future vessel that may call to the island if a port was available. The size of vessel was chosen based on a search of vessels currently calling to surrounding islands that may add the small island to a liner run. Vessels must be geared general cargo vessels. It was observed that there are relatively few vessels above 160 m Length Overall (LOA) and that vessels beyond 160 m would be less protected at berth due to the projection of the bow beyond the reef in the preferred layout option. Catering for a 160 m vessel therefore provides a good balance between cost and benefit. Similarly, for any future provision, bulk vessels presently utilized for Phosphate are generally not as long (with respect to LOA) as the proposed cargo design vessel. Product (Fuel) tankers also have a considerably smaller LOA. 61. The vessel fleet profile should also consider the smallest vessels that may use the facility. This is important mostly for fender spacing to ensure the hull of the small vessel does not make contact with the wharf. It is likely that future Purse Seine fishing vessels making transhipment in Nauru will be the smallest vessels to use the facility. No reliable data on Purse Seine fishing
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63. Based on the above, whilst draft of the proposed facility is sufficient, any future consideration for the cruise sector might involve either lightering ashore or berthing the vessel (there is sufficient wharf length to still berth and offload) with a tug or similar support services on standby in case of unsuitable weather that might require mooring line assistance to hold the vessel in place due to the overhang into open water. This is not dissimilar to some other Pacific Island cruise locations where the ship anchors or drifts and lighter people ashore (i.e. Kiriwina Island). 64. The selected design vessel was typified by the China Navigation Company / Swire Shipping owned Chief Class vessels which services other Pacific islands and whose principal characteristics are: Length overall (LOA) 158m Beam 22m Maximum draught 8.35m Deadweight tonnage (DWT) 13,970t
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Figure 2-3 : The Kokopo Chief
65. Concept options were considered all using steel Circular Hollow Section (CHS) piles embedded in the coral rock. It was expected that piles would need to be shallow driven and anchored. 66. Option 1 comprises a rock fill causeway connecting a 120m long wharf located along the edge of the reef, adjacent to the existing harbor. Two mooring dolphins are also proposed for this option. The PRIF PFS in 2015 considered 50 tonne unreinforced concrete blocks keyed into each preceding block layer and founded on a prepared level base. It was envisaged these blocks would be constructed in a pre-casting yard to be established in Nauru. The key challenge for this option is expected to be the reliance on marine plant and diving works as well as the stability of the blocks against wave and mooring loads. 67. A third option (Option 3) was also considered. Both Options 2 and 3 are aligned in the most favorable direction to minimize wave effects on the structures. Option 2 comprises a 30m wide wharf adjacent to a 50m wide berth pocket dredged into the reef with an approximately 170m long breakwater on the seaward side. Option 3 is a variation on Option 2 and provides two berths, one on each side of a 30m wide wharf. Each berth pocket is dredged into the reef, and are 30m wide on the landward side and 50m wide on the seaward side of the wharf. For clarity, the options with breakwaters are named Options 2A and 3A; those without breakwaters are named 2B and 3B. 68. Drawings showing these options (including the breakwaters for Options 2A and 3A, which are considered optional) are shown in Figure 2-4, Figure 2-5 and Figure 2-6 below and are provided in Appendix C. 69. As a result of wave studies and ship simulation exercises the preferred arrangement is Option 2 for the reasons summarized in Table 5. The preferred infrastructure concepts shown in the drawings have been discussed with an experienced Pacific maritime contractor who has indicated a preference for a suspended deck on steel piles. All options will be under consideration in the detailed design phase. Table 5 and Table 6 below summarize the advantages and
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Figure 2-4: Concept Option 1
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Figure 2-5: Concept Option 2
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Figure 2-6: Concept Option 3
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Table 5 : Wharf location options - Advantages and Disadvantages
Option General Design Features Main Advantages Main Disadvantages Mooring System - No dredging required and - Still results in delayed offloading times; 1. Do - Deep sea anchors Economical option - Does not address climate change and will involve periods Minimum - Chains - Limited unexploded ordinance of inactivity due to high wave activity; - Connecting plates risk - Requires continued maintenance of barges to unload - Shackles container ships. According to the GoN the maintenance - Mooring buoys cost for the mooring system is US$6 to 7 million every 5 to 6 years. This leads to high lifecycle costs. The NPV estimated is U$ -5.4 million. Wharf - Limited dredging required - High risk vessel departure maneuver with simulation 2. Reef - 120m long - Vessel is less exposed to Edge revealing that wind and waves ‘push’ the vessel onto the - 30m wide current forces at berth reef. A high powered azimuth tug may be required to assist (Option - 2 mooring dolphins - Limited unexploded ordinance the ship off the berth and to safely maneuver to sea. 1) risk There is a high upfront cost for this tug as well as an Causeway operational and maintenance cost to consider. - 150m long causeway - Dredging from a spudded barge (costly and timely) is likely - 10m wide dual lane required to excavate rock with Standard Penetration Test (SPT) ‘N’ values of 50+ Dredging - Construction in exposed environment will increase Trim edge of reef to -10m LAT construction cost to account for weather risks - Vessel ‘beam on’ to waves likely resulting in lower berth availability - Fenders are unlikely to last more than 5 years. - Stability and / or interconnectivity of block units - Manufacture quality on island (QA, materials, handling) Wharf - Alignment of berth pocket will - Arrival and departure maneuvers must be undertaken 3. Berth - ~160m+ long - Pocket result in waves ‘head on’ to during ‘slack tides’ due to current pushing vessels onto the - 30m wide, with adjacent wharf apron / vessels at berth, minimizing reef and fenders at high speed (will effect berth availability (Options cargo area wave related movements but not significantly) 2 and 3) - 1 mooring dolphin - Construction can take place ‘in - Current forces up to 1m/s parallel to the reef are expected the dry’ with no or minimal to cause movement of the future 176 m design vessels. A Ramp to Shore reliance on marine plant deep water dolphin for the fore line will be required in the - 25m by 7m - Most of the reef can be future excavated without drill and Dredging blast - Operational advantage in cargo movements
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- Excavate berth pocket 165m by 50m to - 10m LAT. (For Option 3, second berth pocket is 130m by 30m to -10m LAT.)
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Table 6: Structural concepts considered for the wharf - advantages and disadvantages
Option Advantages Disadvantages Piled . All construction would be undertaken . 50 kPa + uplift forces in a 1/500 year ARI ‘suspended’ from land with no or limited downtime event will impact the deck soffit in an wharf risk from waves extreme event leading to the need for . Less reflective for improved basin wave expensive tension piles. The ground climate conditions warrant installation of anchors (grouted to piles and substrate) for transferring actions. Drill-drive-drill would be required. . More formwork is required relative to a piled retaining wall . Safety in Design (SiD) workshop identified that challenge of maintaining the soffit of the deck in exposed swell conditions. . More excavation relative to a piled retaining wall. Gravity wall . Durability advantages if steel . The units would be placed under water to reinforcing can be avoided avoid hydrostatic pressure behind the wall. . An Ultimate Limit State (ULS) bearing It would be challenging to place the units pressure of 750 kPa has been advised and this would likely require marine plant which is favourable for gravity and divers. structures . More excavation relative to a piled retaining wall. Piled retaining . All construction would be undertaken . A strong rotary drill rig will be required to wall (preferred) from land with no or limited downtime advance piles to sufficient depth risk from waves . Good capacity to absorb wave and berthing forces . High deck load capacity . Easy to mount fenders . No initial earthwork required and overall less excavation is required relative to a gravity wall and suspended pile structure
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2.4 Cost Estimates 70. Cost estimates were prepared for the six concept options for input into the preliminary economic assessment and were based on the following assumptions: Lost time due to weather during dry season can be made up outside of a 5 day week Surplus excavated material to be dumped only - no allowance to spread and compact. No specific inclusion for armoring of a batter slope but this is well covered in the project/ design risk allowance (15% of cost). Dredging methodology is based on using the Ronphos 200T excavator which is assumed in working order. Assessment of the utility of this excavator will be an element of the proposed contractor site inspection during tendering phase of the project. This would be part of the responsibility for the contractor to price this cost in if the equipment is unsuitable. Assumed rate allows for fuel and basic maintenance but not major service items. No marine plant has been allowed for. All piling is from land on a temporary platform supported on permanent piles. All excavation is also from land with temporary access bunds allowing plant to remain above water level. Pumps have been allowed to prevent hole from filling once bunds are in place. Tension anchors for front rows of piles have been allowed in lieu of sockets as it will be impracticable to build sufficient temporary works to enable a large rotary drill rig to access the piles. A small percussion rig will be used to drill the anchor holes supported on a temporary platform moved along the wharf. On shore work is based on similar work in Papua New Guinea (PNG). Mobilization and demobilization of plant and materials will be by barge from Brisbane or by container from New Zealand (NZ) as best suits. A margin of 15% has been applied for Head Office overhead and profit. No estimate of risk is currently included in the rates but design creep and risk of 15% is suggested. An overall Project Contingency of 20% is suggested. This high value considers the remoteness of Nauru and the need to mobilize most equipment from Australia or New Zealand. This contingency value may need to be revised as detailed design is undertaken. It is assumed that sea water will be used for dust suppression and for compaction of coral fill. A rate of $1/m3 is allowed for fresh water used in the camp. An allowance of $20,000 has been made for a small waste water treatment plant or septic system in the camp. Cost inputs exclude taxes and other duties. No allowance has been made for bonds to Nauru Government for plant, buildings or other equipment intended to be removed after construction. No rental for site compound has been allowed for. It is assumed that construction site compounds will be located within the existing port limits and will not affect port operation of other associated activities. No escalation has been allowed for. No Government charges for the project were allowed for. As only construction time, not time on site, for major plant such as cranes, the estimate assumes they will be demobilized at the end of the first year and returned as required. It is assumed that older equipment would be taken to the island and hence plant costs are at the low end of the range.
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Freight and barge costs have been kept as low as possible and these may need a delay contingency. Building fitout A$646,037 added to all options Equipment (4 tractors/trailers at A$250,000/tractor or trailer and two 30T forklifts at A$ 750,000/forklift) totaling up to A$ 2,500,000 added to all options. Under review with the client and Port Reform Specialist. Port control equipment A$ 500,000 added to all options Under review with the client and Port Reform Specialist. 5% of sub-total added to all options as implementation costs
71. Costs have been calculated in A$ and converted to US$ at a rate of 1 A$ = 0.76 US$ on 22 October 2016. 72. The cost estimate spreadsheets for Concept Design Options 1, 2A, 2B, 3A and 3B (located in Appendix E) indicate the cost estimates. The cost estimate for Option 2A based on detailed design (in progress) is included in Appendix E. The sections that follow in this report discuss the selection of Option 2A as the preferred design option. 73. The base scenario (mooring system and onshore works) has not been estimated in detail but has been assessed from recent GoN budget allowance for refurbishment and installation of offshore works. Preliminary costs of the infrastructure are detailed in Table 7 below. Table 7 : Infrastructure Cost Estimates (Concept Design Stage) Base Option 1 Option 2A Option 2B – Option 3A – Option 3B - Scenario (US$mil) – With Without With Without (US$mil) breakwater breakwater breakwater breakwater (US$mil) (US$mil) (US$mil) (US$mil)
Preliminary and 8.5 11.2 11.2 11.2 11.9 11.9 General Dredging 0.9 4.0 4.1 7.0 7.0 Causeway 3.9 Mooring Chains 5.1 and Buoys Breakwater 3.3 4.0 Wharf 16.8 16.1 16.1 21.7 21.7 Services 1.2 1.1 1.1 1.1 1.1 Onshore Works 3.8 3.8 3.8 3.8 3.8 3.8 Fitout for Buildings 0.6 0.6 0.6 0.6 0.6 0.6 Tug/Barge 0.9 8.5 2.6 2.6 2.6 2.6 Equipment 2.1 2.1 2.1 2.1 2.1 2.1 Port Control 0.4 0.4 0.4 0.4 0.4 0.4 Equipment Consultant 1.0 2.2 2.1 1.9 2.4 2.3 Implementation Contingency and 6.1 19.8 15.4 16.9 22.1 20.5 Sundry
Total 28.4 71.4 62.5 60.6 79.7 73.9
‘* Costs are converted from AUD to USD on the 22 October 2016, 1 AUD = 0.76 USD. ‘** Costs for the Base Scenario are based on correspondence with the GoN and general engineering assumption. Final figures would need to be investigated further.
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2.5 Other Engineering Considerations 74. A key element of the project success will be the ability to achieve suitable rate of return from the proposed infrastructure. The project team has engaged with industry in order to identify as many users, and associated demand, for any proposed infrastructure. 75. The Specialist visits have identified possible equipment already on the island that could be very useful in construction of the options under consideration, and would reduce lead times and costs / risks associated with importing suitable equipment by future contractors. 76. The three existing port buildings discussed in Section 1.2.4 which are in a very advanced state of disrepair had been proposed to be demolished possibly by making use of other funding sources. At the current stage of the PDA project, this is no longer the case and will now likely now be included in the construction contractor’s scope of works for the project. Nauru Port Authority, with support of the GoN, is planning to undertake some works in the interim; however both the extent and status of these works cannot be confirmed at the time of preparation of this report. In addition to the removal of derelict buildings (and more particularly asbestos), the primary aim is to achieve compliance with International Ship and Port Facility Security (ISPS) issues as identified by United States (US) Coast Guard. This is particularly for fencing which would be completed as part of the proposed port development project. Demolition, and more particularly disposal of materials, will need to comply with best practice as well as GoN policy for disposal (i.e. asbestos). 77. The assessment of the extent of the proposed container storage yard (based on the PRIF Option 1) has identified that the project foot print extends over seven lots; namely 131, 204, 205, 206, 207, 208 and 209.The layout includes empty standard storage areas, reefer points and orderly management for ease of access to import containers when customers are ready to pick up. Although not part of the detailed design, an area for other storage (such as cold stores) has also been allowed in the layout.
2.6 Project Design Advance Activities 78. A number of surveys and investigations were conducted from August to September 2016 and are summarized below.
2.6.1 UXO Assessment
79. World War II operations in the Pacific led to Nauru being subjected to a broad spectrum and volume of air and naval delivered munitions from both the Axis and Allied forces. Hazardous Explosive Remnants of War (ERW) contamination from ordnance that has either not functioned, or not functioned as designed is a certain byproduct to the delivery of Explosive Ordnance (EO) during military conflicts. EO that has either not functioned, or not functioned as designed is commonly referred to as Unexploded Ordnance (UXO). There is also a residual hazard of stockpiled, cached, and dumped ordnance which after many years may be in an unstable and potentially very hazardous condition. 80. The aim of the UXO survey was to assess the presence of any potentially dangerous ERW remaining from World War II. The unexploded ordnance survey comprised an ERW Focused Historical Desk Top Review. The review provided historical data of bombardments and attacks throughout 1940 to 1945. 81. The desk top review was followed by a geophysical survey of the site. An Explosive Remnants of War Risk Assessment and Risk Mitigation Plan were prepared subsequently. The TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 30 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report risk assessment concluded that there is high probability that hazardous ERW would be encountered during the project. It was recommended that 100% area coverage ERW remediation service should be conducted prior to the commencement of the proposed Nauru Port Development Project. Due to the problematic site conditions, high levels of non-ordnance related ferrous waste, the surf zone, and the small size, yet still hazardous nature of some ordnance types, there will remain a small residual risk of ERW contamination on the site. It was recommended that a qualified Explosive Ordnance Disposal (EOD) Technician should be engaged as an ERW Safety Officer and should be present on-site for any construction phase of the ADB Nauru Port Development Project. The ERW Safety Officer would provide advice regarding ERW remediation certification and ERW mitigation requirements, conduct small area clearance for unanticipated works outside the ERW remediation certified area, and also provide an immediate response to any ERW finds. 82. The final UXO report that was prepared as part of the PDA project, is attached as Appendix F for further information on the assessment.
2.6.2 Topography and Underground Services Survey
83. The topography survey covered Footprints and floor levels of all buildings; Levels across the project site; Major Vegetation; Mooring system components (land side only); Mooring buoys (position at sea level only); Visible services at ground level; Intertidal area levels; Edge of road network; Level grid over the internal levels of the buildings; Additional levels on old building floor areas; Survey of all wharf structures in the Aiwo port area. 84. The underground services scanned the location of the Reverse Osmosis (RO) line and other services running parallel to the RO Line. The RO line was to be located on the land and the intake line on the reef. Services lines along the buildings and where they connect to the buildings and the project site were identified. A Ground Penetrating Radar (GPR) was used to scan the area on an approximate 5 meter grid in diagonally opposite directions to identify if there were any services. A Radio Detection Unit (RDU) was used to scan for underground power. Power is the only service that can be located using the RDU unless it can be clamped onto other metallic services (i.e. communication cables, metal water lines etc.) 85. A section of the onshore RO pipeline connecting to the pump station was not identified during the underground services scanning investigation due to a number of containers obstructing access to the area during the survey.
2.6.3 Bathymetry Survey
86. A bathymetric survey was undertaken incorporating side scan of an area outside the existing boat harbor and as far as the 100m contour. Soundings were undertaken to determine the contours of the port area. Draft restrictions prevented survey of most of the reef; however the surveyors were able to extrapolate and interpolate the reef edge throughout the survey area. Survey Control was WGS84 and supplied by the topographic surveyors. Survey data fitted seamlessly with the topographic survey. Soundings in the deep water were difficult to receive as the slope and depth of the terrain caused most of the transducer energy to be deflected out into the deep water. However, adequate responses within of the transducer energy were received to confirm accurate depths within International Hydrographic Organization (IHO) guidelines. 87. The bathymetry survey is shown below in Figure 2-7.
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Figure 2-7: Bathymetry Survey
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2.6.4 Geotechnical Investigations
88. Twelve boreholes were drilled on the reef and five were completed onshore. In addition eight test pits were excavated onshore but since rock was not encountered in these, the land boreholes were undertaken. As a result of UXO survey, it was determined that any intrusive work conducted during the investigative stages of this project would require the presence of an EOD Technician to conduct small area ERW avoidance searches. This was undertaken and resulted in relocation of two reef boreholes and the abandonment of two onshore boreholes. 89. A three man dive team investigated the reef edge to a depth of 15m on 16 September 2016. A 36 minute video recording of the reef edge between the northern boundary of the site and the northern harbor wall (and return) was produced. The video indicates features to approximately 15m depth. The main features of the footage include: No undercutting of reef edge; Very rough face of the sloping reef; and Large amounts of debris, especially chain, broken piles and pipes. 90. The subsurface conditions at the proposed Nauru Port site comprised the following stratigraphy: Land area: Fill (within the confines of the onshore port container yards only) - The composition of the fill ranged from coral gravels to medium to coarse coral sands which appear to have been placed behind the wharf quay wall to provide level building platforms. Gravels and boulders were encountered along the northern portion of the container yards where the yards are separated from the beach by a 4m high limestone boulder revetment. Whilst not encountered in our investigations, there was a significant amount of construction rubble (including asbestos sheeting) present elsewhere on the Nauru Port site; Holocene beach deposits - The beach deposits were encountered underlying the fill within the on-shore areas of the port. These materials generally comprised medium to coarse sand with some coral gravel, and were typically medium dense with measured SPT “N” values of between 13 to 28. The beach sands were generally 2-3m in thickness. These deposits typically thickened moving eastward away from the port quay wall. Coral limestone rock - The basal unit in the terrestrial investigations was the coral limestone rock. The coral limestone was typically moderately strong to strong with minor voids. Generally, 0.8m of competent coral limestone rock was proven within the land based investigations. Reef area: Coral Limestone Crust - A crust of 0.8-2.5m thick coral limestone was consistently present in all the reef boreholes. This crust typically comprised weak to moderately strong coral limestone with some voids. SPT ‘N’ values within this material were generally in excess of 50. Intact core was recovered for laboratory testing (unconfined compressive strength-UCS) with measured strengths of between 5 to 42 MPa. The reef surface was
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generally flat across the site, but some potholed areas were present at the outer margin of the reef as well as several suspected bomb craters from World War II. Coral detritus - Underlying the crust of coral limestone was a layer of broken, voided coral gravels and sands. The coral detritus layer was typically between 2.0 to 5m thick. SPT ‘N’ values within the coral detritus ranged from 6 to 50, however the majority of the SPT test results ranged from 20-30. Coral Limestone rock - The lowest unit encountered in the investigations, and which was proven for up to 3.7m comprised coral limestone rock. This rock appears to have been dolomitized to form moderately strong to strong rock. SPT ‘N’ values within the rock exceed 50 blows, indicating very strong rock. The penetration of the SPTs generally reduced with depth with only 20mm of penetration being recorded for 50 blows in some cases.
2.6.5 Cadastral Survey
91. The aim of the cadastral survey was to define the land ownership parcels within the port limits and at its periphery. This work was undertaken during the period of the topographic survey from 14 to 25 September 2016. 92. The Nauru Department of Lands and Surveys was requested to provide all spatial connections and details in relation to the lease boundaries of the affected land parcels in the port area. The Chief Surveyor indicated that the supplied file has been adjusted from boundary marks found over the Island. The majority of these marks were found within the Top Side area where little or no development has occurred in the last 70 years. 93. In addition to the above information the Department of Lands and Surveys have all the Portion Boundaries in a digital format. The digital file is known to contain errors and it appeared that this data was compiled using information provided by the Nauru Phosphate Corporation. With the limited background information obtained in this investigation the task of verifying and or upgrading the data that has been made available was considered to be a major task. Also with the lack of original boundary marks in the port area, major assumptions would need to be made and these would be impossible to check. Therefore it was recommended that the Portion Boundaries as provided and as shown in the survey are adopted. They have been provided by the Nauru Department of Lands and Surveys and the only adjustment made has been a block shift to the adopted survey co-ordinate datum. No scaling or rotation has been carried out. 94. A plan was prepared by the Cadastral Surveyor showing all of the lease boundaries in the port area with their dimensions shown. This plan was sent to the Nauru Lands Department on 17 November 2016 for checking against their records. The digital file that the Nauru Lands Department supplied was adopted but the Department may have used other hardcopy plans and copies of the original Lease Plans to verify the boundaries. On 2 December 2016, the Nauru Chief Surveyor verified the plan as correct.
2.7 Go – No Go Decision Point 95. The project had a go or no-go decision point (31 October 2016) based on the findings of the geotechnical investigations and surveys (topographic and bathymetric) carried out during the PDA as well as the findings of the economic assessment (PPTA). The investigations and surveys determined the extent of UXO and relative difficulty of clearance and disposal of ERW and the capacity of the reef to accommodate wharf structures. The economic assessment provided the Net Present Value (NPV) (i.e. the value of net future benefits/costs converted into present dollar
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2.8 Summary 97. Based on Ship simulation modelling, MetOcean criteria, constructability and engineering assessments of the proposed options, Option 2A was chosen as the preferred design option. This option was endorsed by the NPA on 22 December 2016.
2.9 Detailed Design Basis 98. The detailed design consists the following infrastructure: Wharf structure Breakwater Navigable waters and berth pocket (dredged areas) Storage and terminal building Container Yard Perimeter Fencing Services
2.9.1 Design Features
99. The proposed option that has been agreed comprises a 30m wide wharf adjacent to a 50m wide berth pocket dredged into the reef with an approximately 170 m long breakwater on the seaward side. The wharf is a suspended concrete slab supported on steel piles. The berth pocket is aligned in the most favorable direction to minimize wave effects on the structures and moored vessels. The breakwater is located on the seaward side of the berth pocket to provide protection from waves from directions from west to north. The location is sheltered from waves from north through east to west of south by the island itself. Waves form the south west are rare and thus the berth optimizes the potential operability. 100. Figure 2-8 shows the masterplan of the port layout at concept stage.
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Figure 2-8 General Port Layout Plan (Option 2A)
2.9.2 Wharf Structure
101. In addition to layout options, a number of infrastructure options were considered together with an experience Pacific Maritime Contractor. Table 8 summarizes the advantages and disadvantages of each option.
Table 8: Advantages and Disadvantages of the Infrastructure Options Option Advantages Disadvantages Piled . Waves are not forced to ‘break’ on . The ground conditions may warrant ‘suspended’ structure due to lack of vertical wall installation of anchors (grouted to piles wharf . All construction would be undertaken and substrate) for transferring actions. from land with no or limited downtime Rock drilling may be required for installing risk from waves anchors. . Less reflective for improved basin . Need to drill through the annulus of the wave climate pile to advance the pile to the design toe depth. . Corrosion of piles . 50 kPa uplift forces will impact the deck soffit in an extreme event leading to the need for expensive tension piles. Gravity wall . Durability advantages if steel . It may be challenging to place the reinforcing can be avoided seaward units as this will likely need to be . A Ultimate Limit State (ULS) bearing done underwater using marine plant and pressure of 750 kPa has been advised divers. . Works may be undertaken in the dry . Interaction between the gravity structure and steep cut slopes will need to be assessed using Finite Element Analysis Retaining wall . The top 6 m of dredged berth pocket . High tonnage of steel required (unless would need to be cut at a batter of bored concrete piles can be used) 1V:1.7H. Below this the excavation could be vertical. The fill behind the TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 36 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
Option Advantages Disadvantages wall would therefore be minimal and . Impressed Current Cathodic Protection the earth pressure low. (ICCP) likely to be required. . Good capacity to absorb wave forces . A very strong rotary drill rig will be . High deck load capacity required to advance piles to sufficient depth (and also for bored piles) . Easy to mount fenders
. Berthing forces are transferred back into the natural rock
Causeway/Breakwater
102. The breakwater will be designed for the survival wave and current conditions. The breakwater structure will be designed to cater for the waves overtopping during storm conditions. It is understood that suitable natural rock is not available locally and coral dredged from the channel will be the best construction material available in bulk. The breakwater design will endeavor to maximize use of the excavated coral with minimum imported construction material.
Aids to Navigation
103. The proposed Aids to Navigation are limited to two lateral markers, placed at the edge of the reef and marking the horizontal extent of the dredge pocket.
Dredging
104. Dredging will be required for the project to create a berth pocket. The slope stability of dredge batters will refer to the guidance provided in the geotechnical report. Rock armor will be placed over slopes to decrease reflectivity of the basin boundaries and mitigate waves.
2.9.3 Design Optimization and Availability
105. Following the selection of Option 2A as the preferred alignment, considerable work was progressed in relation to construction methodology and wharf availability. In relation to constructability, the key issues to be addressed were (i) protection of detritus layers within the dredged profile and (ii) the ability to pile through the limestone rock material. In association with these assessments are the two primary construction methods (i) deck on piles or (ii) piled face (i.e. contiguous or sheet piles) with reclaimed deck area. 106. The new Port will cater primarily for container trade and tanker vessels. A key challenge of the design was to provide a layout that maximized available weather windows. The new Port will be able to provide the small island nation with the benefit of quick vessel turn-around and interest from shipping companies that may already be serving surrounding countries and may add the island nation to their liner service at a more competitive shipping rate. Such an arrangement also results in demurrage risk for the new Port (noting that demurrage costs are already an issue at the existing port). Vessels on a liner route will not accommodate large delays. An operability assessment was made using a mooring analysis package, specifically Optimoor’s Wave Response Module. A Hydrodynamic Coefficient File (HCF) for a container vessel was used to best resemble the vessels specific hull characteristics below water (i.e. the vessels block coefficient).
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107. There are several publications that provide safe movement limit data for vessels at berth. The published movement limits for coastal freighters unloading from a ships gear were taken from BS6349-1 [2] (Maritime works – Part 1-2: General – Code of practice for assessment of actions) and the movement limits for coastal freighters have been summarized in Table 9.
Table 9 Peak-to-peak vessel movements at which point container unloading may be unsafe Type of Motion Limit
Surge 1.0 m Sway 1.2 m1 Heave 0.6 m Yaw 1° Pitch 1° Roll 2°
108. In addition to movement limits, the Port’s pilot was consulted on conditions at which he would depart port. The advice received was that swell of 1 m and worsening would likely result in the need to depart port. 109. The following options for wharf alignment were assessed during the Optimoor analysis: i. Wharf on Northern Alignment of the Berth Pocket (refer to Figure 2-9) ii. Wharf on Southern Alignment of the Berth Pocket (refer to Figure 2-10)
110. The Optimoor analysis revealed that the critical movement limits for both options were roll and heave. It was found that where the vessel at berth was aligned to head-on or oblique waves considerable operability was achieved relative to where the vessel was beam-on. An in-shore wave model was created to determine the optimum berth alignment to narrow, as much as possible, the directional spectrum of waves impacting the vessel (i.e. aligning to waves that are head-on or near head-on). It was found that the wave height limits were very sensitive to the wave period which ranges at the site between 4 and 9 second typically. A vessel was estimated to require at least 72 hours of favorable metocean conditions in order to arrive, unload, load and depart.
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Figure 2-9 Optimoor Analysis - Southern Alignment Option
Figure 2-10 Optimoor Analysis - Northern Alignment Option
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111. The following table summarizes the advantages and disadvantages of each option.
Table 10: Advantages and Disadvantages of Each Alignment Option based on Optimoor Analysis and Construction Methodology
Northern Alignment Southern Alignment Secant / Contiguous Pile with Suspended Piling Deck Significant increase in Overall availability Allows close Fewer piles year round operability of the alignment is dredging limits compared to through protection 93% (noting dredging in Secant/Contiguous provided from hard rock material) Piling. associated revetment whilst providing structure. Some protection to detritus benefits in layer. Reduction in maneuvering vessel for dredging and berthing due to working associated revetment into dominant swell. protection – costs and traditional wharf ADVANTAGES Overall availability of deck construction the alignment is and piling costs of 98.67% order of $25m Most inoperable days in any month is 9
More exposed Significant number of Need to anchor condition that, whilst hard and soft piles as piles to potential aligned to swell in well as contiguous uplift forces. Also order to reduce roll piles (cost of approx. associated increase of vessel at berth, $11m) required to in area for dredging results in lower protect detritus layer, such that all detritus availability. and need to core layers / dredged these in hard rock. areas are then Most inoperable protected by days in any month traditional is 21 seawall/revetment
DISADVANTAGES structure (i.e. almost double the dredge volume and additional 36,000m2 of revetment.
112. Based on the availability results listed in Table 10, the Northern Alignment option was selected as the proposed design layout. Basis to the selection of the northern wharf location using contiguous and secant piling to protect the detritus layers as well as provide the quayface for the wharf development is listed in the table above. A review of persistence of conditions revealed that most of the operational benefits of the chosen alignment were realized during El Nino years where swell is commonly from the West. During El Nino years it is just as important to receive container vessels on the Island and the analysis showed that the number of downtime days in these years improved considerably in the chosen alignment relative to previously considered alignments. The availability / operability report is included in Appendix G. Figure 2-10 shows the resultant detailed Port Layout.
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2.9.4 Terminal and Buildings
Container Throughput 113. One container vessel calls at the Nauru Port every month. The vessel off-loads imported goods and loads empty containers from the port. On the basis of trade data and other information gather from the site/ stakeholders the following container throughput has been assumed for the planning of container yard:
Table 11 : Container throughputs assumed for container yard planning
Number of 20’ dry containers unloaded per voyage 170-220
Number of 40’ dry containers unloaded per voyage 02
Number of 20’ reefers unloaded per voyage 30
Number of 20’ empty containers loaded per voyage 220-300
Container dwell time Up to 10 days
Number of containers not cleared from the yard before 20 arrival of next ship (10%)
Number of reefers not cleared from the yard before arrival 0 of next ship (10%)
Standard 20’ container dimensions 6058mm (20’) x2438mm (8’) x2590mm(8.5’)
Standard 20’ container ground slot dimension 6358mm x 2738mm (300mm spacing between containers)
Container Handling
Ship to Shore Transfer
114. The containers will be loaded and unloaded using ship’s gear and no shore based crane will be provided. The facility will be designed for a maximum of 12 moves per hour per crane. It is noted that in the berth design, installation of shore to ship crane at a future date is achievable; however may require alterations in the berth to yard transfer system.
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Berth to Yard Transfer
115. For planning purpose, it is assumed that the containers unloaded from the ship will be transferred from berth to yard via tractor – trailer unit (TTU) and yard handling will be using Reach stackers. Yard Container Storage 116. The container terminal is designed considering the following parameters, conforming to Permanent International Association of Navigation Congresses (PIANC) Working Group 135 Report: Width of container stack = 3 wide (3 x 2.5 = 7.5m) Average height of stack = 3 stack height (3 x 2.6=7.8m) Width of reefer stack = 3 wide (3 x 2.5 = 7.5m) Average height of Reefers =3 stake height (3 x 2.6=7.8m) Spacing between stacks = 16m Road lane width = 3.5m 117. Empty container to be bulk stacked and to be handled with empty handling forklifts. The 40’ containers, if any will be handled using existing forklifts and therefore main access roads to be minimum 12m wide. 118. The issue of unstuffing (unloading of the container) has been considered as part of the Port Reform activities, associated with staffing, safety and ISPS compliance arrangements. This has been an infrequent activity within the Port; however used to be more common when the shipping provider did not allow containers to be taken off site. In more recent times that was impractical and lead to a change whereby most (if not all) containers have more recently been taken away and then returned later after unloading. Under revised security and ISPS arrangements, unstuffing would be allowed within the Port terminal area, however it is proposed that this would be given the lowest priority – i.e. all other container deliveries offsite would be finalized before unstuffing is allowed. This is due to safety as well as security considerations. Regarding security, and associated ISPS requirements, it is proposed that this activity could be done under supervision of the Port Facility Security Officer (PFSO) or other Maritime Security Guard, with appropriate vehicle inspections on and off site as well. Breakbulk Cargo 119. In the past there has been periods involving significant breakbulk cargo associated with construction activity in Nauru. While the new proposed yard space would be suitable for use for interim breakbulk storage, the Neptune Pacific vessel is now loaded from the AutoStrad terminal in Brisbane, and as such break-bulk cargoes will be more expensive in future as the terminal is not able to simply convert operations to handle these cargoes.
Parking 120. All equipment will have a dedicated covered parking spot. There are allocations for trucks and car/ bike parking. Weighbridge
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121. One weighbridge is provisioned near the gate for installation in future for weighting of containers when exports increase or regulations dictate. X-Ray Scanner 122. One set of x-ray scanning probes is allowed for future provision on the outgoing lane, in line with the above. Buildings
Gate Buildings
123. The Gate building will be designed to include one incoming and one outgoing 3.5m wide lanes to cater for incoming and outgoing trucks. One 7.5m wide gate will be provided to cater for non-truck traffic and oversize cargo. 4m wide control building will be provided between incoming and outgoing truck lanes.
Other Buildings
124. The following area will be provisioned for other buildings: Table 12 : Provision of Building Areas Building Area
Shed with Equipment 66mx22m Storage Areas
Office Building including 20mx15m Amenities
Cold Storage 25mx20m
Generator 12mx12m Room/Substation
Container washing area 12mx4m
2.9.5 Services
All stormwater drainage infrastructure will be designed in accordance with AS/NZS 3500:3, relevant statutory best practice guidelines for management of stormwater runoff and requirements in the Policies and Procedures. The design of new water mains associated with these works is to be undertaken in accordance with Water Supply Code of Australia (WSA) 03-2002. The design for potable water services shall provide for a potable outlet at the berth and at key locations (i.e. shed, ablution blocks, etc.) Provide three-phase power supply with outlet sockets, rated at 63 amps per outlet for each berth on wharf The sewage reticulation design associated with the proposed works is to be completed in accordance with AS3500: Parts 0-3 National Plumbing and Drainage Codes. TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 43 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
Lighting (TBC) is to be provided on the finger jetties and hardstand area. The illumination level for the light installation shall be a minimum of 50 lux and designed in accordance with AS1680.2 and AS1680.5. Light installation to provide illumination for safe operations and access to and from the finger jetties.
2.9.6 Other
Pavements
125. The earthworks for the project will be designed and constructed to adhere to relevant local and international (likely Australian) standards.
Security Fencing
126. Security fencing and gates shall be installed as per AS 1725 and other relevant standards. Security fencing shall be a Type 2-T-B – top and bottom rails with 3 barbed top as per Appendix K of AS 1725. The fence will have following characteristics: Chain link fabric height – 2100mm Black Polyvinyl Chloride (PVC) coated chain link fabric Heavy duty 3.15mm chain link fabric Vertical 3 barbed top extension Top and bottom rails
Ladders
127. Ladders will be provided along the operational length of the wharf for safety, allowing for a person who is in the water to climb onto the structure. Ladders shall be installed at regular intervals as per the requirements of AS1657 and AS 4997. The maximum spacing will be no greater than 60 m.
Edge Protection Vehicle Barriers
128. The side edges of the wharf (non –berthing) will be protected with a regular level 250 kN rated concrete containment barrier in accordance with AS 5100.2. ‐ Handrails
129. Handrails for all structures will be designed for occupancy type C3 per AS 1170.1
2.9.7 Constructability
130. One of the key challenges in the design will be in ensuring the design considers the practical limitation of construction on the remote island nation of Nauru. The following limitations on construction have been established through consultation with a marine construction consultant: There are no major contractors operating on the Island with Canstruct leaving in early 2017
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EIGIGU is a local construction company with just over 100 employees. Skilled worked are charged out at $5.50/hour There is an opportunity to use the Ronphos 200T excavator for dredging/excavation works Any barges, heavy land based equipment (with the exception of the excavator) and diving equipment will need to be mobilized by the contractor A ready-mixed concrete plant is on the island that uses crushed coral. The selling rate is $147/m3 (Japan International Cooperation Agency 2014). There are no concrete testing laboratories Aggregates can be procured in Nauru but all other RC materials need to be procured elsewhere (e.g. cement and reinforcement). Gravel sizes range from 40 mm down to 5 mm The avoidance of marine plant will be critical given the sites open exposure to swell waves and the relative low sensitivity of marine construction plant (e.g. 0.15 m wave limit for some operations). There is no safe refuge for marine plant in adverse conditions Mobilization and demobilization of plant and materials will be by barge, likely from Brisbane Below RL -5 m, it is expected that excavation need assistance to rip the rock (e.g. drill and blast) Some elements of the project construction could be affected by coral sea cyclonic activity (i.e. wave action at site) and as such has been catered for in respect on total construction timeframe considered during estimation All drilling work would need to be done by a large rotary drill due to the hardness of the rock according to the geotechnical investigations Armor rock of avarying maximum size can be sourced from the island. In addition to the availability of this material, an engineering assessment of material properties will be undertaken as part of the PDA project in near future, particularly as it relates to aggregate supply and quality.
131. A meeting was held between two representatives from Cardno’s design team and seven representatives from the NPA and the Planning & Aid Division of Ministry of Finance, Nauru. The meeting was held at the Port of Nauru on the 20th of February 2017. Cardno presented the design basis for the new Port and revised master plans including marine and landside layouts. The aim of the meeting was to obtain feedback from stakeholders and update the design basis and master plans as required. Feedback from the meeting indicated that the NPA were content with the design basis for the onshore and offshore port elements.
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3 Economic Assessment
3.1 Summary and Recommendations 132. A cost benefit analysis of the preferred option (2A) was undertaken in comparison with a Do Nothing base case. The Do Nothing options assumes that the existing maintenance program for the mooring system ($5M every five years) was abandoned and utilization of tug boats to aid in fuel vessel control would be adopted to maintain operational capacity of the Port (container vessels would be able to unload without mooring through the use of pusher barges). A do nothing scenario in which the port was allowed to close was not considered a realistic option. The limitations and costs associated with existing infrastructure is such that only a single shipping line now services Nauru (Captain Quiros) and it is understood that this company is also considering pulling out from operations due to the very high operational costs. The economic costs to Nauru associated with the loss of all container shipping operation would be extremely high. The Do Nothing does not include any upgrade or replacement of onshore components that have reached the end of their service life. 133. Costs of each options were developed based on the project bill of quantities for each option, and adjusted with a Shadow Conversion Factor (SCF) of 0.92 to non-traded goods and services (estimated as 30% of total project cost) and a Shadow Wage Rate Factor of 0.75. These factors were equally applied to project benefits identified. 134. Benefits for each option were determined based on current and forecast port demand requirements, and included: Port call cost savings Pusher Barge Cost savings. Avoided Charter Vessels and Operational Costs Port Operation Savings. Savings from greenhouse gas emissions Incremental port call benefits 135. The table below presents estimates of Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit-Cost Ratio (BCR) of the current project, in comparison to the base case, under the options considered. Table 13 NPV, IRR and BCR of Option 2A
Option 2A NPV (US$M) 2.33 BCR 1.04 IRR 9.4%
136. Projects with a positive EIRR and a BCR greater than one are considered to be economically viable. Based on the current assessment adopted and the costs associated with the Do Nothing to maintain port operational viability, economic returns from the proposed project are seen to outweigh the associated costs. Using a 9 per cent discount rate, the proposed NPDP shows a positive BCR implying that for each dollar spent on the project, economic benefit values TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 46 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report are generated in the order of $1.04. This low return is considered to reflect the limited incremental benefits identified in the form of future vessel demand. Further demand projections that reflect Nauru’s changing economic prospects will provide greater clarity as to project performance.
3.2 Guidelines 137. The Economic Analysis follows the guidelines set by the Asian Development Bank’s “Guidelines for the Economic Analysis of Projects (2017), supplemented by other ADB relevant policies and guidelines, including: ADB Operations Manual Bank Policies: Economic Analysis of Projects (2003) Key areas of economic analysis of investment projects (2013).
3.3 Economic Analysis 138. The economic assessment was undertaken through a cost benefits analysis (CBA). The CBA compared the performance of the preferred option (Option 2A) to the Do-Nothing scenario. A cost effectiveness analysis was previously undertaken. This included a high level CBA of all potential upgrade options against the Do-Nothing scenario. Option 2A was identified as the preferred option and taken forward to detailed design. This economic analysis provides a more detailed assessment of the economic costs and benefits of Option 2A in comparison to undertaking the Do Nothing base case scenario. 139. A 30-year period was used for the evaluation with a residual value of 40% of capital costs assumed, based on the significantly improved port facilities with 50 years of engineering design life of the new assets. A two-year construction period was assumed, with the upgraded port opening in 2020. An economic internal rate of return (EIRR) was estimated and evaluated against the ADB target rate of 9% 140. To ensure financial estimates were adjusted to economic values due to potential market distortions (e.g. lack of market transparency, information distribution and inequality in transaction costs), a world price numeraire was applied to both identified costs and benefits. Non-Traded inputs (i.e. those not imported/exported by Nauru) are estimated at their market price equivalent and then adjusted to the world price by multiplying by a Shadow Conversion Factor (SCF) of 0.92, adopted from the 2014 ADB Electricity Supply Security and Sustainability Project for Nauru. No adjustment for Tradable portions of cost/benefits is applied. In the absence of detailed labor cost estimates, the labor component of costs and benefits was adjusted through use of an industry-standard Shadow Wage Rate Factor (SWRF) of 0.75. No adjustment to economic prices for leisure time was made. 141. All taxes and custom duties were excluded from the analysis. Similarly, price contingencies were excluded from the analysis. 142. In accordance with the distinction made in the ADB 2017 guidelines for economic appraisal, the project benefits were evaluated in terms of non-incremental (e.g. resource cost savings) and incremental (e.g. willingness to pay) benefits. Given the nature of the project, the key benefit identified is the non-incremental benefits, directly to shipping lines through lowered vessel times and port operation costs. Incremental benefits associated with generated shipping traffic are low in comparison. The resource cost savings were utilized as representative of the willingness to pay for generated trips and estimated using the rule of half.
3.4 Project Costs 143. The project plans to provide Nauru with improved port facilities, improving accessibility of cargo, fuel, and emergency relief vessels under all weather conditions. Construction works of each of the upgrade option will broadly include: (i) dredging and seawall construction, (ii)
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provision of a new wharf, (iii) construction of a breakwater, (vi) provision of upgraded operational / storage facilities. 144. There are no capital costs associated with the Do Nothing scenario. Ongoing operational and maintenance costs are primarily related to the provision of tug-boats to support port operations in the absence of a mooring system.
145. A Bill of Quantities was developed for the Do Nothing and Preferred Option by the project engineers after canvasing the potential market in Australia, Fiji and New Zealand and the subsequent cost estimates are expressed in United States Dollars. 146. The principal investment cost is the provision of a wharf designed to sufficient standards to permit year-round operation. There is a substantial mobilization cost given that the expertise and materials will have to be imported from overseas due the remoteness of Nauru. Dredging and breakwater costs, although material, represent a smaller portion of overall project costs. 147. As advised by ADB on 13 Nov 2017, US$ 3.042 M as the cost of Project Design Advance (PDA) was included in the total project cost. The following Table 14 summarizes the derivation of economic project capital costs (excl. maintenance and operational costs).
Table 14: Project (with) and Do Nothing (without) cost estimates Without Project ($) With Project ($) Difference ($) Financial Cost (excl. 0 69,551,944 69,551,944 price contingency and taxes)
Labor component 20% 20% Non-traded 30% 30% component SWRF 0.75 0.75 SCF 0.92 0.92 Economic Cost 0 63,643,485.24 60,790,089.24 (excluding contingency and taxes)
148. A two-year construction period was assumed, with an equal distribution of costs. This returned a present value of capital costs of$32.5M for 2018 and $31.1M for 2019. 149. The provision of additional infrastructure will increase maintenance requirements. For the purposes of this assessment annual maintenance cost were estimated as 1% of total capital costs, with additional periodic maintenance requirement of 2% every five years. This returned a net present value of maintenance cost of $5.5M. 150. The design service life of 50 years, will leave 20 years of service life post the end of the CBA assessment period. Utilizing a straight-line depreciation, a residual value of 40% of the capital worth was assumed in the final assessment year (2049). This resulted in a present value benefit of $1.6M.
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3.5 Project Benefits 151. The estimated quantifiable benefits include the following: a) Port call cost savings. Under the ‘with project’ scenario, the number of days vessels will spend in the port will decrease from 21 to 3 days in good weather. The savings were estimated based on the normal traffic of 10 ship visit per year over the project life time at the operating cost of $6,750 per day (this daily rate is considered highly conservative and includes wages, fuel and other resources) and average historic mooring times adjusted for a no-mooring system scenario. The present value of the saving from port call costs is estimated to exceed $11.2 million. The SCF, a labor component of 30% and non-traded component of 20% were used to convert the benefit to economic prices. b) Pusher barge cost saving. The project will reduce pusher barge costs. Cargo vessels moored offshore currently unload containers onto pusher barges which ferry the containers to the existing shallow harbor where they unload directly to shore. This process is time consuming and incurs high pusher barge costs at average $640 per hour. Currently, two pusher barges on 12-hour shifts operate to load unload each vessel. The present value of pusher barge cost saving is estimated $13.3 million.
c) Avoided charter vessels and operational costs. The project will avoid the need to charter vessels. Without the project, the current mooring system will become inoperable in 2020, resulting in shipping lines ceasing services to Nauru. In this event, government would have to charter container vessels to maintain the country’s lifeline (i.e. imports/exports). The cost of a charter vessel is valued at $6,750 per day plus an additional 18-day hire period per vessel call to travel to and from Nauru. A present value saving of over $23.3 million is estimated as the avoided cost of chartering vessels (a non-incremental present value saving of $21.0 million and an incremental benefit of $2.3 million).
d) Port operation savings. The project will eliminate the barge ferrying process and generate minor operational benefits. These include: (a) reduced risk of worker injury through reduced handling activities (non-incremental) - $0.05 million per year; (b) reduced risk of equipment and cargo loss/damage through reduced handling and improved systems (non-incremental) - $0.05 million per year3; (c) labor savings (non- incremental) – $0.13 million per year through reduced stevedoring components; and (d) support for transshipment (fish storage and processing) and other vessel operation costs (e.g. bunkering) - $0.18 million per year (incremental). All benefits were adjusted through the SCF and SWRF based on estimates of non-tradable and labor components.
e) Savings from reduced greenhouse gas emissions. A $8.6 million climate change benefit was identified due to reduced greenhouse gas emissions associated with the project. The value of reduced emissions was assessed based on estimated fuel use by pusher barges and berthed container and fuel vessels. Standard CO2 fuel emission 4 factors (3,179 kg of CO2 per ton of fuel ) was adopted in estimating CO2 emissions. An inflation adjusted estimated price of carbon emissions ($37.03 per CO2/t) were also adapted in estimating this.5
f) Incremental port call benefits. The project will reduce vessel costs in terms of distance travelled, waiting time at port and additional pusher barge and tug boat requirements. It
3 Anecdotal evidence indicates losses of containers with values in excess of $0.3 million per event. 4 Intergovernmental Panel on Climate Change. 2014. Climate Change in the Pacific: Scientific Assessment and New Research report. Geneva. 5 ADB Guidelines for the Economic Analysis of Projects. TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 49 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
is considered that this will encourage additional port calls (through one or more shipping lines servicing Nauru). An additional two container vessel visits and one additional fuel vessel visit is anticipated per year. Using the estimated cost reductions and rule of half, the value of this incremental benefit was estimated to be approximately $2.3 million per year.
152. A range of further benefits associated with the project have been identified but not incorporated within the CBA (see Appendix H) 153. Table 15 summarizes the quantified benefits of the Project Case in comparison to the Do Nothing. Table 15 Summary of Present Value Benefits ($M) Benefit Non-Incremental Incremental TOTAL Port Call Cost 11.2 - 11.2 Savings Pusher Barge 13.3 - 13.3 Savings Vessel Charter & 21.0 2.3 23.3 Operational Costs Port Operational 1.7 1.4 3.1 Savings Generated Call - 4.6 4.6 Incremental Benefits Savings from 8.6 - 8.6 Reduced Greenhouse Gas Emissions TOTAL 55.8 3.7 64.1
3.6 Cost Benefit Analysis (CBA) 154. The Cost Benefit Analysis (CBA) integrates all discounted costs and benefits of the Project, relative to the Do-Nothing base case, to produce its summary economic indices: Net Present Value (NPV), Economic Rate of Return (EIRR) and Benefit-Cost Ratio (BCR). 155. The CBA utilized a 30-year horizon (in addition to two construction years), with quantifiable costs and benefits are discounted at 9% per annum. 156. The CBA results of the preferred option in comparison to the base case are shown in Table 16. Table 16 Summary CBA Option 2A PV of Capital Costs ($M) 56.1 PV of Maintenance Costs ($M) 7.3 PV of Residual Value* -1.6 PV TOTAL COSTS ($M) 61.76 PV of Port Call Cost Savings 11.2 ($M)
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PV of Pusher Barge Savings 13.3 ($M) PV of Vessel Charter & 23.3 Operational Costs PV of Port Operation Savings 3.1 ($M) Generated Call Incremental 4.6 Benefits PV of Savings from Reduced 8.6 Greenhouse Gas Emissions ($M) PV of TOTAL BENEFITS ($M) 64.1 NPV ($M) 2.33 BCR 1.04 EIRR 9.4% *negative cost represents a Project benefit
3.7 Conclusion 157. The economic assessment shows an EIRR of 9.4% for Option 2A - comprising a 30m wide wharf adjacent to a 50m wide berth pocket dredged into the reef with an approximately 170m long breakwater on the seaward side. This is marginally above the ADB standard target rate of 9%. 158. Table 17 presents estimates of Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit-Cost Ratio (BCR) of the preferred option in comparison to the base case. Table 17 Estimates of NPV, IRR and BCR of Option 2A Option 2A NPV (US$M) 2.33 BCR 1.04 IRR 9.4%
159. Projects with a positive EIRR and a BCR greater than one are considered to be economically viable. Based on the current assessment adopted and the costs associated with the Do Nothing to maintain port operational viability, economic returns from the project are seen to outweigh the associated costs. Using a 9 per cent discount rate, the proposed NPDP shows a positive BCR implying that for each dollar spent on the project, economic benefit values are generated in the order of $1.04. This low return is considered to reflect the limited incremental benefits identified in the form of future vessel demand. Further demand projections that reflect Nauru’s changing economic prospects will provide greater clarity as to project performance. 160. Marginal increases in costs or decreases in forecast benefits will realize an IRR of less than 9%. However, it is noted that the economic assessment adopts a number of highly conservative assumptions. In particular, the adopted container vessel charter operational / hire cost of $6,750 per day is considered low (values are likely to be between $10,000 and $25,000. When a value of $10,000 per day is adopted then projects IRR increases to 11.3% and a NPV of $13.7M. 161. To further assess this, the sensitivity of the project to incremental benefits was assessed. In the event that the port upgrade works to not generate additional container and fuel visitation, then the IRR would drop to 8.6%, showing the economic performance of the project to be weakly linked to growth in shipping demand. Conversely, if realized demand exceeds that forecast by an additional container and fuel vessel per year, the IRR increases to 9.9%. The port upgrade will provide infrastructure that supports and facilitates the long-term growth of Nauru. However, the TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 51 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report project itself is unlikely to be the key driver behind this growth. It is also recognised that vessel demand for Nauru is highly variable and uncertain within Nauru due to its location, size and industries. This economic analysis assumes a base case container vessel call frequency of 10 vessels per year. This is lower than historic vessel call rates and less than one a month; a typical frequency for the provision of many containerized goods within the pacific. A contraction scenario of six vessels per year was also assessed as a sensitivity test. An IRR of 6.3% was observed. This indicates that the ongoing economic stability of Nauru is important to the economic feasibility of the project. 162. An Economic Analysis Report and Least Cost Approach Report is provided in Appendix H and Appendix I.
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4 Financial Analysis
163. The financial analysis of the project was carried out in accordance with Financial Management and Analysis of Projects of the ADB.6 The financial evaluation considered the cost of the overall investment in all project components and compared this with the financial internal rate of return (FIRR) to ascertain the financial viability of the project. NPA staff has cooperated in attempts to accurately determine volume and sales data, but the recording inadequacies leave a high degree of uncertainty7. Consequently, assumptions of some key parameters were based on the best estimates of the NPA and consultant. 164. A pre-requisite for the GoN to obtain funding for the implementation of this project was a commitment to use the new port for all imports and exports within 5 years of the recent replacement of the mooring system (May 2017). The letter provided by GoN on this commitment is provided in Appendix B.
4.1 Financial Internal Rate of Return (FIRR) 165. Financial Costs and Benefits: The financial analysis quantified the costs and benefits of the project for the implementing agency (NPA). The costs included (i) capital costs for dredging, rock protection works, wharf, building works, (ii) consulting services during implementation and (iii) contingency . 166. Tariffs: NPA charges fees for port entry, pilotage, mooring and berthage for phosphate ships and fuel ships based on GRT based on the tariff rate. For cargo ships, container handling charges for discharging and back loading of containers are charged additionally for each container. NPA receives payment through shipping agents for phosphate shipments. Since 2011, tariffs have been imposed on these various types of port fees based on gross registered tonnage (GRT) of a vessel8 and quantity of containers loaded and unloaded in the port. In 2016, the Government of Nauru (GoN) announced new tariffs, which has, to date, not been implemented due to concerns by stakeholders on the level of increase. Prior to this, port fees have been in effect, are based on 2011 tariff regulations. The financial analysis assumes that the tariff increases are implemented over three years with 30% of the proposed increase in 2017/18, 30% in 2018/19 and 40% in 2019/20 based on the 2016 tariffs schedule, as approved by Parliament and gazetted. 167. Weighted Average Cost of Capital: The financial evaluation is conducted at project level. The incremental revenues are compared against the weighted average cost of capital (WACC) for the project. To calculate the WACC, the approach followed has been to calculate a real, pre-tax WACC based on the cost of the ADB and Australian grants equivalent to the cost of equity of Nauru. The cost of equity has been calculated based on proxy 10-year bond9, with maturity and project risk premium of 0.20. This nominal WACC has been converted to real pre- tax WACC using n foreign inflation rate of 1.5% and a tax rate of zero. The derived value is thus 1.31%.
6 ADB. 2005. Financial Management and Analysis of Projects. Manila. 7 Prior to 2015/16, there has been no financial recording, reporting and auditing of NPA accounts. 8 Port Authority (Fees) Regulation 2011. 9 Based on 10-year Australian treasury bond of 3.7% . TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 53 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
168. Calculation of FIRR: The project has a FIRR of 2.89%, and a financial net present value, using a financial discount rate equal to the WACC of 1.31, of $22.5 million. Sensitivity analysis was carried out on the following key parameters: i. increase in capital costs; ii. increase in O&M costs; and iii. decrease in revenues 169. The results are sensitive to fuel prices and tariffs. At present, the NPA does not fully recover costs for is operations. 170. Adverse movements of several variables, such as increases in capital costs and O&M costs and delays in completion, have marginal impact on the project FIRR, as these are all passed through in the current and proposed tariffs. The variables considered for the sensitivity analysis were a 10% increase in capital costs, a 10% increase in O&M costs, and 10% decrease in revenues (Table 18). Even in a worst-case scenario, the lower FIRR compares favorably with the estimated WACC of 1.31, substantiating that the project is viable. Sensitivity analysis further shows the FNPV will be positive, indicating the financial viability of the project. Table 18 Sensitivity Analyses
Scenario FIRR (%) FNPV ($ million) Base case 2.89% 22.5 10% increase in O&M 2.16% 12.0 10% increase in capital costs 1.67% 5.4 Decrease in revenues by 10% 1.86% 7.1 WACC 1.31 Source: PPTA estimates.
4.2 Financial Performance and Projections 171. The GoN still lacks significant tax revenue, largely as a result of the narrow tax base, and relies heavily on revenue from the state-owned enterprises (SOEs) that manage the production of phosphate. 172. The NPA provides port services to Nauru, with major clients in the phosphate, fuel and cargo businesses. Port tariffs for all customer categories have been set well below full cost- recovery levels. The NPA accounts indicate that tariffs will have a significant impact on NPA’s finances. The NPA is fully funded by government, and does not pay dividends to the sole shareholder (GoN). The financial performance of NPA was analyzed based on financial statements provided for July 2014 to January 2017 period. The analysis revealed that NPA had net revenues $3.74 million and total costs of $7.84 million. However, this included the cost of extraordinary expenses (special projects), resulting in a net loss for the NPA of $4.11 million for the period. Special projects have been described as extraordinary but necessary expenses in order that port operations are not hampered due to malfunctioning of equipment, lack of competent personnel, and the absence of infrastructure needed to carry out the operations of the port. After the new port is commissioned, the financial performance of the NPA is projected to improve as a result of the project The financial projections are provided in Appendix 1 to 3 in the ‘Financial Analysis’ Report in Appendix J of this report.
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4.3 Summary and Recommendations 173. At present, the NPA does not fully recover costs for its operations. The financial analysis based on data of 3 years revealed that NPA had net revenues $3.74 million and total costs of $7.84 million. The proposed project has a FIRR of 2.89%, and a financial net present value, using a financial discount rate equal to the WACC of 1.31, of ($22.5 million). Even in a worst-case scenario, the lower FIRR compares favorably with the estimated WACC of 1.31, substantiating the financial viability of the proposed project. 174. The following financial covenants to the grant agreement are recommended for the project: Implement accounting and operating systems to capture correct revenues – not just automated systems but business processes and rules/regulations as well Implement 2016 tariff in phases as follows: 30% in 2017/18, 30% in 2018/19, and 40% in 2019/20. Implement tariff reforms through adjustments to meet the recovery of costs10. Cost efficiency – review cost structure, streamline and remove unnecessary spending. The NPA shall prepare regular audited project financial statements (APFS) and audited entity financial statements (AFS), plus other opinions, and submitted annually by an external auditor acceptable to ADB. ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 14 days of the date of their receipt by posting them on ADB’s website. NPA shall install computerized financial management systems based on the new port operations, based on international best practice, Ministry of Finance (MOF) system and Pacific Ports system. NPA shall hire qualified accounting and finance staff to perform the necessary financial management function. Financial performance indicators shall be reported on a reqular basis, including profitability ratios, i.e.gross profit margin (GPM), operating margin (OM), return on assets (ROA) , return on equity (ROE), return on sales (ROS) and return on investment (ROI). 175. The Financial Analysis is provided in Appendix J.
10 This is proposed to be implemented initially, but with further review and inter-relationship between expenses and cargo types, as well as agreed profit margins etc, thereafter has been undertaken. The tariff study needs to be implemented to ensure the viability of the proposed project. TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 55 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
5 Environmental Studies
176. An Initial Environmental Examination (IEE) was prepared as defined in the ADB’s Safeguard Policy Statement 2009 (SPS) and the country safeguards requirements of the Republic of Nauru. This document is presented in Appendix K. The IEE presents a discussion of potential environmental impacts associated with the design/pre construction, construction and operational activities of the proposed NPDP and include mitigative measures and a plan to implement all recommended mitigative and monitoring actions associated with the project. These activities are detailed in the IEE Environmental Mitigation and Management Plans (EMMP). 177. In general, the key tasks for the IEE includes qualitative and quantitative environmental impact assessment of the existing terrestrial, coastal intertidal and subtidal marine environments associated with the Nauru Port and the potential environmental impacts of the project’s proposed redevelopment activities. This work involved completion of the standard steps as defined in ADB’s SPS 2009 and included an Environmental and Social Management Plan (ESMP) as well as findings of all public consultations, a grievance redress process and appropriate climate change issues. 178. Key activities undertaken during preparation of the IEE included: Terrestrial Site Assessment – undertaken with the NPA staff providing background information pertaining to past activities and operational activities; Coastal and Marine (Intertidal and Subtidal) Ecological Assessment - undertaken with senior marine staff from the NFMRA associated with the Port’s coastal and marine areas. Included visual, photographic and detailed transects. Assessment of Neighboring Ecological Systems (terrestrial and marine) adjacent to the NPA boundaries with special emphasis on environmental input sources and impacts to the coastal and marine areas. This included potential anthropogenic sources (not port derived) of pollution associated with waste water systems and sewage discharge points. Assessment of environmental areas on the island that may receive wastes derived from the port activities (i.e. rubbish dump, land fill area – associated with the mines land rehabilitation program). Preparation of a detailed marine assessment. Stakeholder meetings - including key government and private sector agencies (see Table 19) to initiate project contact and to solicit information and documentation relevant to the environmental issues associated with the Port and associated activities.
Table 19 Table of individuals met by the Environmental Specialist on 25, 26, 27 & 29 Nov 2016 during the in-country visitation Stakeholder Position Contact Mr. Anton Jimwereiy CEO Nauru Ports Authority [email protected] Mr. Henry Cocker Deputy Secretary [email protected] Planning & Aid Division, Ministry of Finance. Mr. Beeing Yeeting Fisheries Specialist Nauru Fisheries and [email protected] Marine Resource Authority (NFMRA).
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Mr. Jonas Star Fisheries Extension Officer – Coastal Not supplied. NFMRA Mr. Delvin Thoma Acting Senior Coastal Fisheries Officer [email protected] NFMRA Ms. Erana Aliklik UN Coordination Officer - UN [email protected] Mr. Blake Thackrah Plumbing Coordinator – Canstruct PH: 5570097 company Ms. Mavis Depaune Secretary - Department of Commerce, [email protected] Industry and Environment (DCIE). Ms. Camilla Solomon Nauru ADB representative [email protected] Mr. Taufia Papol Chief Account Nauru Government [email protected] Mr. Shawn Otal Government Consultant Asset [email protected] Management Mr. Grahma Leing Secretary of Justice [email protected] Ms. Novena Itsimaera Planning & Aid Division (PAD), Ministry [email protected] of Finance.
5.1 Findings 179. The data collected and acquired during the in country assessments were analyzed and are summarized in the following subsections:
5.1.1 Terrestrial Assessment
The terrestrial assessment identified the port land area and shoreline has been previously cleared of all vegetation and natural ecosystems. Land reclamation throughout the site is apparent. Poor standards of waste management throughout the port were recorded. Petrochemical collection and storage, general garbage, infrastructure (buildings), old equipment and asbestos roofing/cladding, both affixed to the roof and in piles throughout the port site are problematic. The correct demolishing, storage and disposal management of these issues is required and detailed processes and guidelines have been included in the EMP. It is however acknowledged that recent changes in senior management within the port have shown considerable commitment for improvement.
5.1.2 Marine Assessment
Intertidal Reef Flat
The reef flat sites are homogenous throughout the port site and extend into the adjacent ecosystems. The reef flat is horizontal with limited vertical relief, completely exposed during periods of low water and is dominated by several species of macro and micro algae. Algae percentage coverage remain similar throughout all sites; however higher densities were recorded in inshore areas located in close proximity to the communities residing to the north of the port boundaries. TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 57 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report
Very low numbers of marine invertebrates were located; however the black sea cucumber Holothuria atra was found in moderate densities throughout the northern intertidal reef flat sites. Hard coral coverage and biodiversity throughout the intertidal reef flat is extremely low (a very small number of encrusting colonies) and are located only in areas close to the reef crest and/or the small depressions in the reef, most of which are bomb craters. The intertidal reef flat areas associated with the port have been heavily impacted by anthropogenic activities. This includes channels cut through the bedrock, port retaining break walls, anchorage points and associated chains, all of which have had a direct negative impact on the sessile marine resources, habitat and ecology of this environment. The intertidal reef flat terminated in a distinctive wave dominated reef crest. This region is subjected to oceanic waves and as such is dominated by coralline algae.
Subtidal Reef
The subtidal reef ecosystem is relatively homogenous throughout the port site and extends into the adjacent ecosystems. The subtidal reef is composed of a distinctive gentle sloping reef edge – 2 to 6 meters in depth and extends to the reef slope that in some parts includes a distinctive shelf (no wider than 10 meters) before it rapidly drops away into the outer reef slope and beyond. The reef edge is dominated by macro algae and has been cut and channeled in several areas to allow the desalination intake and discharge lines to be deployed, the port channel itself and is impacted by a number of mooring chains. The mooring chains dominate the reef edge and upper reef slope in the southern areas of the port. The reef upper and lower reef slope directly opposite the existing port entrance and to the north has a very low percentage of live hard coral coverage. Areas to the north and south of this area (outside the projects area of influence) in contrast in general shows a higher percentage coverage of live hard coral (up to 95% in some cases), although biodiversity is low. Healthy populations of finfish were seen during the assessment with the majority associated with algal grazing and planktivores. Population stocks of predator finfish were recorded as very low. Population numbers of macro invertebrates (e.g. bivalves, gastropods, echinoderms, etc.) were very low which may be a direct result of local fishing pressure, although a number of octopi were located. The reef slope has a considerable amount of equipment located throughout the port site (e.g. truck tires, old chain, pipes, steel frames). Heavy mooring chains are located in a number of intertidal and subtidal locations throughout the port site. The chains located in the south that remain in use have impacted the reef slope in areas where they move and these areas are scraped clean of all benthic attached organisms. 180. Further details can be found in the Marine Assessment Report presented in Appendix L.
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5.2 Anticipated Impacts and Mitigation Measures 181. The project has been categorized through the Rapid Environmental Assessment (REA) “Port Development” checklist, as environment Category B in accordance with ADB Safeguard Policy Statement 2009 (SPS). The site has a number of small scale, but nevertheless potential adverse construction environmental impacts that are site-specific all are reversible, and mitigation measures can be designed and implemented readily. 182. Three distinctive potential environmental impacts were highlighted through the REA. These can be summarized as impacts associated with (i) the pre-construction/design phase, (ii) the construction phase which includes the demolition of the ports existing infrastructure (buildings) and (iii) operational/management phase of the Port. It was identified that the majority of potential impacts associated with this project are within the construction phase, and the operational phase to a much lesser degree. 183. The IEE includes an Environmental Risk Management Framework (ERMF) which has been prepared based on international best practice. The ERMF describes the processes undertaken to evaluate the risks associated with the activities of the project and a risk assessment matrix. A total of 21 potential environmental risks were screened through the ERMF. Three (3) associated with the pre-construction (design) phase, fourteen (14) associated with the construction phase and four (4) associated with the operational phase of the NPDP. 184. The Risk Management Framework (RMF) identified that there are no identifiable significant environmental risks for the NPDP project scope of works; however a high level of risk was recorded for four (4) construction phase activities. This includes two major scope of work activities for the terrestrial component of the project including; Site Contamination – Land Based Hazardous Material (specifically residue petrochemicals on site) and Site Contamination – Land Based Asbestos (roof sheeting) and two associated with the marine component of the project including; Site Construction – Marine Environment (physical disturbance of the intertidal reef flat for the proposed NPDP scope of works) and Flora and Fauna Removal – Marine Environment (associated with the scope of works). 185. The two terrestrial high level risks associated with the scope of works for the NPA site includes the presence of asbestos (roof and cladding) and residue petrochemical products, albeit at significant low levels (refer figure 5 a & b). Both risks will be addressed during the demolition of the ports existing infrastructure (e.g. buildings and machinery) and general whole of site clearance during the construction phase in preparation for the development of the new ports infrastructure facilities. 186. The decommissioning of the existing port infrastructural components (the three sheds, customs office building and the Harbormasters office refer figure 40) and the collection, storage and disposal of existing asbestos roofing and cladding material, petrochemical and other harmful/toxic waste material will be undertaken using internationally acceptable practices which will greatly reduce potential environmental and OH &S issues. Due diligence is required to ensure these substances are managed through internationally accepted safeguard protocols as described below to ensure minimum further disturbance and contamination of the port’s facility grounds. 187. All asbestos material located within the ports existing’s buildings and grounds will be collected from the site and stored in shipping containers (held within the NP site) and managed according to national protocols and codes of practices to prevent exposure to staff. It is mandatory (refer EMP) that all workers who are working with asbestos are provided with suitable asbestos
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PPE and that the site should be clear of asbestos before construction of the ports new infrastructure is initiated. In addition, all hazardous wastes (oily wastes, used batteries, fuel drums) need to be separated and stored, transported and disposal of in a manner to prevent further contamination and shall be undertaken consistent with national regulations and code of practice. 188. Impacts to the terrestrial environment and resources associated with the NPDP will be very insignificant as the environment existing at the site has already been highly modified and the presence of terrestrial flora and fauna extremely low. 189. The two marine high level risks includes the expansive scope of works to be principally undertaken on the intertidal reef flat including the removal of the reef flat for the berthing pocket, the construction of the breakwater, wharf including the piles required to support the structure and the backfilled area between these structures and the foreshore. The scope of works for these activities is considerable with approximately 150,000m3 of material to be removed from the intertidal reef flat to create the berth pocket and alteration to the reef flat to construct the breakwater and suspended wharf. 190. These activities have a direct negative impact on the sessile benthic marine resources located within the impact areas, however due to the paucity of sessile flora and fauna in this area impacts to these resources are seen as not significant (refer marine assessment report). In addition, the projects scope of works will not impact the island coastal or marine biodiversity nor will it affect the areas ecological functions, financial or cultural importance. 191. The high level recorded for these activities when appropriate mitigation measures are implemented decreases the level of risk in all cases to low. Subsequently with the careful implementation of the recommended mitigation actions (detailed in the EMP) there are no significant environmental concerns for the project associated with the sessile and mobile marine resources in the area of influence. 192. Material removed from the intertidal reef flat to create the berth pocket will be principally used to develop the breakwater which may be armored and backfill area behind the new port infrastructure on the ports foreshore. Additional construction material will be sourced on island directly from the rock quarries located within the island phosphate mine. Similarly, unused or inappropriate material (including rocks, grave and sand) sourced from the berth pocket for construction will be transport to the island phosphate mine and used to backfill old mining areas and incorporated directly into the mines rehabilitation activities. All transport activities required for these activities have been detailed in the project EMP and will follow current island regulations associated wit the movement of mine derived material. 193. An Environmental Management Plan (EMP) has been prepared to address the environmental impacts during the design, construction and operational phases of the project. This is provided in Table 3 of the IEE. It outlines the key environmental management and safeguards that will be initiated by the project proponent to manage the project’s key environmental impacts. It provides tools for mitigating or offsetting the potential adverse environmental impacts resulting from various activities of the project and management measures that are to be applied during the project’s implementation to avoid, reduce and mitigate adverse environmental impacts.
5.3 Conclusion 194. The IEE concludes that there were no identifiable significant environmental impacts, no critical important terrestrial or marine habitats impacts, all impacts are site specific, irreversible and can be minimized through appropriate mitigation measures. Impacts arising from the TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 60 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report construction including the demolition of the existing ports infrastructure buildings and machinery and operational phases of the project are minor, localized, and acceptable, providing that the set of mitigations measures set out in the EMP are implemented, and monitored properly. Key impacts include; The NPDP is located within the existing land parcel of the Port that has been highly modified (cleared, filled, built on) and does not support any terrestrial ecological or biological (flora or fauna), endemic, endangered or significant biodiversity. The Nauru Port land site does not have any freshwater (rivers, streams), forests or agriculture. The NPDP includes the coastal foreshore, intertidal reef flat and sub tidal reef slope. The coastal foreshore and intertidal reef flat areas have been highly modified (dredged, built on, rock walls) whilst the sub tidal shallow water reef areas have been impacted by port activities (e.g. mooring chains, existing harbor entrance) resulting in the degradation of benthic habitat and the removal of sessile benthic marine resources. The intertidal reef flat ecosystem associated with the NPDP does not support any marine shallow water ecological or biological (flora or fauna) endemic, endangered or significant biodiversity. Hard coral is all but absent in this area and as such the proposed dredging area (berth pocket) and adjacent area of influence have negligible impact on marine benthic resources. The subtidal reef edge, and upper slope ecosystem associated with the NPDP does not support any marine shallow water ecological or biological (flora or fauna) endemic, endangered or significant biodiversity. Hard coral coverage and biodiversity in the region proposed for the NPDP scope of works has a very low level of coverage. Impacts on the terrestrial and shallow water marine ecosystems and their environments resulting from the projects construction activities are expected to be minor and manageable. Impacts on the environment associated with the intertidal reef resulting from the physical dredging of the area and subsequent increased short lived sedimentation has a low impact on the marine fauna and flora due to the scarcity of resources located within and adjacent to the projects the area of influence and the constant movement of sea water throughout the area (tidal currents and oceanic waves). The NPDP site does not impact any terrestrial or marine conservation and/or protected area/s, sites of cultural, customary or heritage significance nor any national or international endangered or protected species. Due diligence and proactive management of all pre-construction, construction including demolition of the existing infrastructure and operational activities will ensure limited disturbance to the daily business activities undertaken within the Port and surrounding business and community activities. Nauruan laws and regulations associated with labor, employment, OH&S need to be adopted by the pre-construction contractors monitored by the NPA. 195. Climate change adaptation measures have been included in the pre-construction design and implemented activities. The pre-construction, construction and operational EMP identifies potential environmental impacts arising from the project along with a corresponding schedule and monitoring of mitigation measures to ensure potential impacts are maintained at insignificant TA-9009 NAU –Final Report – Feasibility Report.docx 15 December 2017 Page 61 of 151 TA-9009 NAU: Sustainable and Climate Resilient Connectivity in Nauru – PPTA Consultants (48480-001) Final Report – Feasibility Report levels. It also includes the institutional arrangements for implementing the EMP to ensure its effectiveness. 196. The proposed scope of works associated with the project are environment-friendly and will result in the substantial increase in the efficiency and safety of the Nauru port operational functions. This will result in more frequent inbound and outbound movement of shipping containers and commodities providing increased business opportunities and income generation for the nation and foreign trade.
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6 Social Assessment
197. The Specialist started input on 24 November 2016 till 09 December 2016 with a field visit to Nauru. The specialist met with the Team Leader, CEO and other key staff of the NPA, Nauru Department of Lands: Survey, Records and Management and different stakeholders. The existing port area and boundaries of the proposed port development were assessed to identify affected persons and other beneficiaries of the project like neighboring communities. 198. Meetings and first contact were done with the Department of Finance Planning & Aid Division, and the Department for Conservation, Industry and Environment (DCIE). The specialist discussed various strategies of community and stakeholder consultations with the Social Sector Planner, Acting Secretary of DCIE and also the ADB Country Coordinator. The specialist further met with government officials, civil society representatives and landowners. Apart from project related documents and other background reports a study was done on the secondary data from the Nauru Household and Population Survey (Household Income and Expenditure Survey (HIES), 2012/13) to retrieve data for the poverty, social and gender assessment. Meetings were held with officers from the Nauru Bureau of Statistics together with the Monitoring & Evaluation) M&E Specialist and the receipt of raw data from the Bureau was arranged for further analysis. Two landowner meetings were held and the Specialist met with Leaders of the Community Committee of Aiwo District and Location, an area adjacent to the planned port (Northern end), which is part of Denigomodu District.
6.1 Safeguarding 199. Safeguarding work was carried out in respect to the visited sites and according to ADB’s Safeguard Policy Statement (SPS) from 2009. Apart from environment, the policy addresses key safeguard areas like land acquisition and resettlement and indigenous peoples. A separate Due Diligence Report (DDR) on Safeguards is provided in Appendix M.The project does not trigger any safeguards on indigenous peoples, which is also stated in the Initial Poverty and Social Assessment (IPSA) provided in Appendix N in this report. Gender as mainstream was addressed in all key areas: community consultation, communication and disclosure, land acquisition and resettlement, core labor standards and grievance redress mechanisms. Gender indicators reflect outcomes of all social and environment assessments in the Monitoring Framework. A Gender Action Plan, provided in Appendix O, was designed with performance targets and activities according to three main project outputs on constructed port infrastructure, strengthening of NPA capability and efficient project management. A thorough assessment of gender issues in Nauru was done and elaborated in section nine of the Poverty, Social and Gender Assessment Report (Appendix N) According to ADB’s key policy principles affected persons were identified and main beneficiaries consulted. 200. The situation of main beneficiaries and affected persons were screened and described in the DDR.
6.2 Social Impacts 201. A negative impact on indigenous people is not expected since there are no indigenous people around. The greatest risk during construction work is the risk of accidents and the impact on public safety. This risk should be mitigated by ensuring efficient and safe operation in accordance to international best practice and training. The construction phase will also affect the residents in areas 132 and 203 which are adjacent to the project location. Noise and possibly dust
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7 Poverty, Social, Gender and Resettlement
7.1 Land Acquisition and Resettlement 202. The preliminary assessment has shown that no involuntary resettlement is needed for this project; no residential houses or vegetation of any kind have to be removed. The port operates on several land sections, which are leased by the Government. Adjacent land, which is needed for the new proposed design is either customary land without lease or customary land under lease agreement, which will expire by 2017and 2020. The requested land areas are in Lots 206, 207, 208 and 131 Land lease of 203 for the extension of an administration block as described in the draft inception report (submitted on 01 December 2016), is not an option any more after consideration by NPA. The administration block will be built within the designed port development and an extension might be considered after the development of the port is finalized and in use. 203. Department of Lands, Records and Admin already provided the specialist with a list of registered landowners. According to the CEO, the Ag. Director of Lands Managementt.
7.1.1 Land Acquisition/Resettlement
204. Lots 204, 205, and 209, leased by the Government and are valid until 2020. Although the leases expire in 2020, NPA would like to renew all leases in this year. Lots 206 and 207 are under lease agreement with Ronphos till 31 March 2020, and for 131 understood that there is an old government lease in place. 205. The requested land area covers the land lots in Aiwo district 204, 205, 206, 207, 208, 209 and 131 in Denig district. These land lots are shown in Figure 7-1. 206. There is another residential area in 132 adjacent to 131 north, which is in Denig district, but called ‘Location’. It consists of landowners and ex-workers of the phosphate mine, who rent houses. These residents have to be included in the awareness of the project. During construction phase, people from Location will be impacted by noise and probably dust. The contractor should provide a plan of community liaison so as to minimize negative impacts on residents and positively involve them in upcoming activities e.g. engagement for unskilled labor. A certain percentage of women must be included. 207. The CEO of NPA, Anton Jimwereiy confirmed on 20 January 2017 that Ronphos holds leases for lots 206 and 207 till 31 March 2020. NPA has leases on sections 204, 205 and 209 till 31 March 2020. 208. After the meeting with landowners from 208 on 02 December 2016, the landowners did not object the possibility to come to an agreement with the government on a lease. Their general condition was that the government should consider recruiting family members for security purposes, which is already practiced by Canstruct, the current lease holder. This will give their families additional income. 209. The foreshore area is identified by the Lands Department as man- made land (5,963). A total of 16,830 m2 should be leased by NPA. 210. A total of 16,830 m2 should be leased by NPA.
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206 204
131 209 208
203 207 205
Figure 7-1: Project Footprint covering Lots 204, 205, 206, 207, 208, 209 and 131 in Denig district
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Table 20 : Descriptions of Design Land Areas Lot Advantages Disadvantages/Risks Activities Comments 208 Big area for container yards Now used by Canstruct, which will Initiate meetings with Meeting with landowners only and free movement of trucks finish by April 2017 representatives of landowners preliminary; Adjacent sections are leased Landowners ask additional and NPA Short introduction into the port by NPA (207 and 209) payment per container from said Meeting with stakeholders and development design and company environmental specialist upcoming project Landowners not easy to negotiate recommended Lease process will be followed with with meetings and NPA will not pay money/container consultations; initiate process Landowners expressed concern and continue in 2017 on environmental damages of their In a second landowner land in second meeting 8 Dec meeting from 8 Dec. 2016, 2016 and asked for separate landowners expressed their presentation wish to come into negotiation Time frame of land lease process with the government might delay project implementation Environmental concerns to be Landowners ask for additional addressed by consultants in ‘benefits’ for family members (e.g. meetings and presentations being recruited as security service within PPTA; for port) Under Nauruan land law, payment for land, which is not used for mining, is limited to one amount ( 8.50 Dollars/m2) 131 needed for turnaround point Customary landowners; old Meetings with landowners will Meeting with landowners are of trucks from wharf government lease expired; be initiated only preliminary; Movement of trucks with Negotiations should start as soon Responsible driver of process is Short introduction into the port containers as possible NPA development design and length of lease process might Start in 2016 if possible upcoming project delay project; Process continues in 2017 Landowners have chance to Landowners express concern on Meeting with stakeholders and contribute with questions on environment environmental specialist project and land; recommended the coming weeks to reduce concerns 206 Main area used for container Additional negotiations with Land negotiations between According to a member from + yard landowners for lease to NPA government/NPA and Law and Justice, a land lease 207 Leased to Ronphos landowners to start in 2017 agreement can be done in a Meeting with stakeholders and few weeks under Nauruan land environmental specialists law (depending on possible recommended issues being resolved)
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Table 21 : List of Landowners and Leases for Nauru Port Development Project District Portion No of M2 Status of Lease Activity No landowners Aiwo 204 122 2275 Old Government lease NPA seeks new lease till 31 March 2020 to be now updated (copy available) Aiwo 205 38 (same 2612 Old lease to be NPA seeks new lease landowners) confirmed (no copy now available) Aiwo 209 1949 Old Government lease NPA seeks new lease till March 2020 and now needs to be updated (copy available) Aiwo 206 111 778 Ronphos till 31 March NPA seeks new lease 2020 (no copy now available) Aiwo 207 68 4040 Ronphos till 31 March NPA seeks new lease 2020 (copy available) now Aiwo 208 53 3822 Canstruct until New lease, when old departure of Canstruct expires; this year (mid 2017) Negotiation with landowners for beneficial requests (recruitment for security) in a separate Memorandum of Understanding (MoU) Denig 131 34 1354 Old Government lease, NPA seeks new lease needs to be renewed now and updated Total to be 426 16,830 leased Foreshore 5963 area (131 to 205) Backfill 4959 Total land 27,743 mass
211. A second landowner and stakeholder meeting on 8 December 2016 showed some concerns on the port development design impacting environmental damage. Landowners asked for a separate meeting with the environmental and engineering specialists, where these concerns could be addressed. The Social and Gender Specialist brought this to the attention of the PPTA team to follow up. In general landowners and residents were interested and positive towards the proposed project, but had issues with the government procedures and attitudes, which they describe as political. Different topics were drawn in. Main issues (many of which are for separate Government consideration) were: Environmental damage, erosion, oil spill by vessels; how can this be minimized by the project and the government later? How can the project/government guarantee that their land will not be spoiled by truck traffic? What assessments have been done e.g. climate change and wave movement? Will neighboring residents be affected? How can the government guarantee reduction of consumer prices once cargo arrives more frequently into Nauru?
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Border control established for international ships and how does it affect the spread of transmittable diseases (Human Immunodeficiency Virus/ Acquired Immune Deficiency Syndrome (HIV/AIDS), Sexually Transmitted Diseases (STDs))? Landowners be represented as a member in the Board of NPA.
212. Residents from Location settlement were concerned that their children will not have the chance any more to go swimming once the port is developed. These concerns were addressed by explaining that there are other places for swimming and fishing further north of the affected houses and in walking distance. There are also two houses, which are directly at the border to the proposed port limit. Now, it is not planned to resettle any houses as the design of the port extension does not propose this. NPA will fence the area for safety purposes and to avoid accidents involving residents. Any further changes of port borders to the northern part must consider adjacent houses of Location settlement. A resettlement assessment before construction will be required if the design of the project is changed. 213. All concerns above could be addressed by the CEO, who will inform the government about main issues raised in that meeting.
7.1.2 Next steps
Continue consultations with other beneficiaries for awareness on the project, especially residents from 203 and Location. Awareness will be required prior to construction. This can be conducted by NPA as part of stakeholder consultation. Residents can be informed through information sheets, brochures or in public meetings. A question catalogue was prepared as output from the second landowner meeting; specialists from the respective areas have provided their answers and comments. This paper can be used by NPA for stakeholder consultations. A presentation to landowners and other stakeholders on environmental issues by specialists is highly recommended during the PPTA phase Government should start to initiate land lease processes.
7.2 Social and Poverty Assessment 214. The project benefits in general the whole population of Nauru through a developed wharf, safe offloading and on loading of cargo containers and reduction of time and payments. Additionally, working conditions for port workers will be much safer and accidents will decrease by trained work force on safe handling of equipment and the establishment of an occupational health and safety system by NPA. International cargo vessels will return more frequently to Nauru. The anticipated reduction of consumer prices will benefit all households, although this will occur at the end of the project and/or beyond. Education and health services will receive regular essential equipment, materials, and goods. The Social Safeguard Specialist screened through secondary data, which was retrieved from the latest household and population census (HIES) 2012/2013 and other reports published by United Nations Development Programme (UNDP) and the government of Nauru (2016). That latest census provides a very detailed analysis of income and expenditure, demographic, health and education data per district. To summarise, the HIES has revealed that the majority of consumer expenditure is associated with food and non-alcoholic beverages (43.4%). Transport is the next most significant group (14.5%), with eight other groups registering contributions of between 3.6–7.8 per cent. Only the groups of health and education recorded extremely low contributions (both at 0.1%) due to the government’s significant assistance in these areas. Government and state-owned
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enterprises dominate employment in Nauru, particularly the Nauru Phosphate Company (RonPhos). Per 2010 estimates by the Bureau of Statistics, 42% of all people in cash employment worked for the government, 40% for state-owned enterprises, and the remaining 18% for other sectors, including the private sector. Government is encouraging private sector development, particularly for small businesses. Regarding the education data the highest level of education completed, 72.5% of males and 69.1% of females 15 years and older did not have any educational qualification, and only 20.7% and 24.7% of males and females respectively had a secondary leavers certificate (see in detail Poverty, Social and Gender Assessment par. 2.2.; 2.3). This has a big impact of finding skilled and qualified staff for various positions during and after the implementation period of the project. 215. Capacity building is recommended for workers in the port area on transmittable diseases like STDs and HIV/AIDS and basic gender issues; and to workers of the contractor doing construction work (provided under construction supervision consultant contract). 216. The Summary of Poverty Reduction and Social Strategy (SPRSS) is included in the Poverty, Social and Gender Assessment provided in Appendix N.
7.3 Poverty 217. Poverty in Nauru is measured following a Food Poverty Line (FPL) and a Basic Needs Poverty Line (BNPL). 218. The BNPL is the estimate of the costs for non-food essential basic needs to achieve acceptable standard of living.11 Non - food essential basic needs include clothing, shelter, education, transport, communication, water, sanitation and health services. The HIES demonstrated that while the incidence of food poverty is zero, about 24 % of the population (16.8% of households) are below the basic needs poverty line. According to the report 7.9% of Nauru’s population or 6.2% of households is extremely vulnerable. Nauru has the worst poverty index out of all Pacific nations. 219. The proposed port development will reduce the time to unload or load cargo from weeks to days and greatly improve the safety of personnel and goods by trained personnel and use of proper handling facilities and storage in safe container yards. By reducing time for unloading cargo and improving turnaround time, more essential goods will arrive in the country contributing to health, educational and social conditions for the population. More fresh produce will contribute to a healthier diet, which is a major problem in the country. It is anticipated that more goods arriving the country will lead to a reduction of consumer prices, which will contribute to poverty reduction in the country. 220. During construction, more jobs will be created and contractors will be held responsible to recruit men and women from Nauru for unskilled labor.
7.4 Consultation, Participation, and Disclosure – Communication and Consultation Plan 221. Consultation meetings with landowners of leased and proposed leased portions for the port and adjacent communities were implemented on two different occasions. The response was positive and residents could express their views and concerns. See Appendix S. However, these were only two meetings with landowners and more awareness should be done. The specialist met with community leaders from Aiwo and Location settlement and it was recommended for further meetings with affected people from peripheral areas around Aiwo port, mainly with residents from lot 132 (Southern part of Location) and 203, a small peripheral area around the port 222. Noise, dust, and truck traffic during excavation work will have impact on vulnerable groups like children (section 132 specifically). These issues were addressed during meetings with landowners but also community leaders from Aiwo district and Location. It is advisable that NPA
11 Government of Nauru Statistics Office and UNDP Pacific Centre (2014). Nauru Hardship Report. Fiji.
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prepares awareness about the planned port development although it is still in its preliminary phase and the CEO of NPA has mentioned that implementation will not start before 2018. 223. NPA as the Project Management Unit will prepare a Communication Plan for the project together with specialists from the PIU. The Communication Plan will be based on methods used in similar projects and follow custom and tradition for communication requirements. Once the process for dialogue with stakeholders at different levels has been established, consultations will be undertaken to share information about the project, receive information from communities and beneficiaries, and discuss potential impacts and mitigation measures. Internally, NPA will ensure that communication of information about environmental and social management will be regularly delivered to personnel to ensure that they are sufficiently informed and are able to fulfil their responsibility in a manner compliant with the environmental, health and safety (EHS) regulations. Appropriate information and training will be provided to personnel depending on the level of their involvement in EHS activities and their respective responsibilities. All port personnel will be informed of the EHS policies, regulations, procedures and programs pertinent to their job. Trainings will be organized and periodic information may be developed to communicate information on progress made by the civil works contractor in environmental and social management. 224. Externally, stakeholders will be engaged to ensure that they are adequately informed about the contractor’s and NPA’s environmental and social performance. In addition, NPA will also prepare quarterly and annual environmental and social performance reports. NPA will also periodically prepare information bulletins to inform stakeholders and the public on environmental and social aspects. The extent of information to be communicated to specific external stakeholder groups (e.g. governmental bodies, monitoring agencies, etc.) and the communication methods will be defined by the management depending on the separate requirements of each stakeholder. The decision body about awareness and consultation will be the NPA Board of Managers and another level higher, the Project Steering Committee. 225. Primary and secondary stakeholders will be members of the Committee. Customary Landowners expressed their wish to be represented in the NPA Board of Governors. 226. NPA will consider whether to engage a community liaison person during construction phase. 227. The contractor for implementation of construction the port development should present a community liaison plan in their bidding document to address issues about noise, dust, employment of unskilled labor, gender inclusiveness and training of workers in HIV/AIDS.
7.5 Grievance Redress Mechanisms (GRM) 228. Discussions with NPA staff revealed that the greatest risks to port development are potential disputes over customary landownership and environmental damage. The grievance mechanism therefore should be able to effectively resolve these types of disputes. All other grievances related to construction work and core labour standards, when Nauruan nationals are involved, have to be dealt with by the contractor and the CEO’s office of NPA. 229. The NPA/PMU will establish a grievance redress mechanism to receive and address, in coordination with government authorities, project related concerns and to resolve land related and environmental disputes that may arise during project implementation. The PMU will inform affected persons about how they have access to the grievance redress mechanism. Other than disputes relating to land ownership rights and environmental issues, it is anticipated that all grievances related to benefits and other assistance will be resolved at the PMU level. 230. NPA will employ a Liaison/Public Relation Officer, who is responsible to deal with stakeholders’ issues and complaints and has to refer to authorities if issues cannot be solved. The position for this officer will be budgeted for 2017/18. Depending on the nature of the complaint the officer will resolve it by consultation or pass it on to the CEO’s office. All related land issues or
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grievances will be dealt through the CEO’s office of NPA and/or through the government and other legal systems. All environmental issues will be directed to the Ministry of Environment if issues cannot be resolved. 231. The CEO should respond to the complainant within 14 days, if the matter cannot be solved, then it will go up to the Board of Management, the last step then is the Cabinet (or Court).
7.6 Gender Assessment 232. Although the IPSA indicated no specific gender issues related to this project, a detailed country gender assessment and a Gender Action Plan (GAP) for this project were prepared on request by ADB. The GAP is in line with the outputs of the project as described in the Design Monitoring Framework. 233. The gender assessment has shown that Nauru undergoes various changes in gender roles. Traditionally, the country follows a matrilineal system, where women have major power and all born children belong to a mother group or clan. Land inheritance rights are passed on by women without seeking larger consent by the clan. Cash economy and the mining sector have impacted gender relations and balances as more men are working in the mining sector and are represented in public life. Life at the house is centred around the mother, but men are the driving force in decision making. 234. While Nauru is likely to meet the indicator for gender parity in education, may meet the target of the economic empowerment of women, it is still lacking gender equality in high-level decision- making. In 2013 the second ever woman was elected to a 19 members Parliament. 235. Most women work in clerical and professional occupations and men in occupations related to crafts, trades, plant and machine operation. There is nearly a non - existence of subsistence economy in Nauru, whereas in most Pacific countries women work in the garden, do fishing and market their products informally. Around 7.5% of female-headed households in Nauru were categorized as being extremely vulnerable (within 20% above BNPL), accounting for nearly 42% of households in this vulnerability group. Female headed households, therefore, are more vulnerable than male-headed households. 236. Like in other Pacific Island countries, it is difficult to reliably estimate the level of domestic violence in Nauru due to the high level of underreporting and sensitivity around the issue. According to the Women’s Affairs Department, the country’s small population size and the lack of privacy in the communities seem to have created peer pressure and stigma against reporting. The Nauru Family Health and Support Study implemented by Nauru Department of Home Affairs and DFAT and United Nations Population Fund (UNFPA) from 2014 analyzed that violence against women especially in the domestic space is a matter of concern. 237. In 2011, Nauru has acceded to the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). Since then its government made reviews of domestic legislation to identify its compliance with CEDAW. The Criminal Code is under review and through the National Sustainable Development Strategy (NSDS) 2005-2025 it is planned to implement CEDAW related programmes. NSDS includes the development goal of a just society that recognises and respects the rights of women and promotes equal opportunities with related milestones. The National Plan of Action for Women (1994) was revised in 2004 and a National Women’s Policy developed in 2014. 238. Women are generally expected to benefit from potential lower consumer prices and reliable supplies of essential goods such as medicine and fresh produce due to improved trade from efficient port operations. 239. The Gender Action Plan (GAP) has outlined specific activities and targets to ensure women’s benefits to the project. Key activities to provide economic gains to women include proposed
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recruitment for skilled and unskilled labour by the work contractors, recruitment for Project Management Unit staff and recruitment for Supervision Consultant. The proposed capacity building training and preference to women candidates by the National Port Authority are expected to improve women’s chances of getting promotion within NPA and engagement of potential women external candidates. Emphasis on equal pay and equal work opportunities and safety on the job will ensure an appropriate job environment in the port. Furthermore, provision for sanitation facilities for both men and women will cater to the specific gender needs. Training programs on HIV/AIDS and sexually transmitted diseases will address the low level of awareness among both men and women regarding these issues which have great impact on them. Women will continue to be involved in consultations and activities requiring stakeholder participation.
7.7 Summary and Recommendations The Poverty, Social and Gender Assessment (in Appendix N) and other required documents provide information about the socio - economic situation of beneficiaries and affected persons. There are no major social issues, which would require full attention in the implementation phase of the project. Consultation of stakeholders and disclosure strategies, grievance redress mechanisms are described to include affected people in a participatory way during the planning and implementation of civil works. NPA and the executing agency will play a major part to monitor safeguarding of landowners’ issues, the contractor’s compliance with requirements on HIV/AIDS awareness and other social issues and gender mainstreaming in all project activities. Monitoring safeguard reports should be prepared in the time frame, which is requested by ADB for this project. Monitoring on the indicators of the GAP is part of the project’s quarterly reports and done by the implementing agency.
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8 Financial Management Assessment
240. This assessment involved an evaluation of the financial management systems of NPA, the Implementing Agency, and Ministry of Finance (MoF), the Executing Agency. Financial risks, mitigation actions, project cost estimates and financing plan, funds flow, as well as due diligence on the financial management system of Nauru were all assessed. Data was collected for the preparation of the financial analyses, including detailed revenue and operating costs, macroeconomic data, tariffs, and other information. Costing of the project entailed alignment with technical studies including contingency provisions. 241. The assessment was conducted using the financial management assessment questionnaire (FMAQ) for both NPA and MoF. The preparation of Financial Management and Internal Control Risk Assessment (FMICRA) involved analyses of previous assessments conducted by ADB and other agencies, focusing on areas of the IA’s capacity for planning and budgeting (Capital Expenditure (Capex) and Operating Expenditure (Opex)), management and financial accounting (including cash flow, debtor control, balance sheet and profit and loss), reporting, auditing, internal controls, and information systems. 242. A risk assessment for both NPA and MoF was conducted. The analyses are summarized in Table 22 and Table 23.
Table 22 Risk Assessment and Management Plan Risk Description Risk and Impact Likelihood Mitigation Measures or Risk Management Plan Inherent Risk Country Specific- High Likely The Nauru Public Since the Accounts Committee will submission of conduct further review to government financial verify the audit findings statements for and recommendations. FY1995/1996, GoN Audit office is currently has not been able to auditing the account and submit any other the coverage and financial accounts to standards utilized in this Audit. In 2014, the audit will be provided once FY2013/14 annual the report is being accounts were submitted to Parliament. submitted and it is now with Audit. Treasury is now working on completing the FY2014/15 and 15/16 accounts for submission and this is a major improvement from the last PEFA assessment. (From Development partners 2016 PEFA Self- are in dialogue with the Assessment). government. Grants have been provided by the Financial reports Australian Government to include approved improve the FMIS. There budget estimates, has been a gradual rollout cash flow budget, of the various modules commitments, (AP, AR, Bank Rec, Asset transfers and running Management, Payroll and balances. The weekly HR) of the Financial reports are timely,
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Risk Description Risk and Impact Likelihood Mitigation Measures or Risk Management Plan comprehensive, management information accurate and useful system (FMIS). for key decision EA is a central level makers at line Government institution. It agencies. has experience in ADB- funded project and has adequate and experienced staff in financial management of ADB- funded projects. MOF accounting policies and procedures is based on generally accepted accounting principles and standards, but not on internationally accepted accounting standards. FMIS and procurement manuals are available to all staff. MOF uses an automated FMIS system; however, current and capital budgets are not reported separately. Entity Specific- High FMIS will be installed The roles of the during first year project Entity as a whole, the implementation to be Project Management funded by GoN and/or Unit for the ADB- development partners. The assisted project, and FMIS for NPA will be the design and aligned to ongoing FMIS supervision development at country consultants are not specific level. A port- clearly delineated. specific software is proposed to be provided Entity financial currently available for the management needs to Pacific region. reflect port-specific Alternatively, a consultant financial accounting will be provided to prepare an accounting manual, and disseminate this to relevant staff including handholding in the initial implementation. Strict policy to be in place to ensure proper recording, reporting and analysis of financial transactions for management review. IA has no FMIS in place, suited to port operations. NPA currently relies on the FMIS of MOF as well as a software purchased by the Finance Manager for its financial reporting. No proper and adequate financial recording and reporting is in place, needed for effective
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Risk Description Risk and Impact Likelihood Mitigation Measures or Risk Management Plan decision making (e.g. no details on revenue sources, capital expenditures are lumped with recurrent expenditures/budgets). Overall Inherent Risk Substantial Project Risk 1. Implementing High Likely Entity systems is rudimentary; a new FMIS is proposed to be funded by GoN as well as development partners; this will be undertaken prior to grant effectiveness; the FMIS will be based on generally accepted accounting principles (GAAP) and standards. 2. Funds Flow flows Low Likely are highly centralized the IA, aligned to existing at MOF for revenue GoN FMIS and expenditure transactions 3. Staffing High Likely manager is not a finance manager to be qualified accountant; hired prior to grant there are no additional effectiveness, including finance and national accounting staff to accounting staff to undertake the internal audit undertake proper and other accounting financial accounting in functions NPA 4. Accounting policies and High Likely procedures project assets will be Due to weak control introduced as a condition over fixed assets, for grant award. there is risk of loss of project assets, leading verification plan will be to risks for project developed prior to grant completion and award, with provision for operation periodic counts including reconciliations.
Agency (IA) does not in fixed asset management maintain original (including reporting and supporting monitoring) documents, and does not have a document continue to strengthen retention policy. awareness of the importance of asset management and internal control over fixed assets across the IA 5. Internal Audit High Likely
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Risk Description Risk and Impact Likelihood Mitigation Measures or Risk Management Plan No internal audit exists in the be developed under the IA new FMIS to be developed during first project year implementation; this will be conducted by the accounting staff proposed to be hired as auditor. 6. External Audit High Likely
pursue external audit for all state-owned enterprises (SOEs); however, central government audits are a Moderate Likely priority will be audited by an independent external auditor on a semi-annual basis. The audit will be done in accordance with the Nauru government’s accounting and auditing system and will comply with the requirements of ADB. Audited project financial system (APFS) and entity-level audited financial statements (AFS) will be prepared by the IA 7. Reporting and FMIS to be developed Monitoring High Likely during grant Financial reporting implementation (see weakness – risks of proposed FMIS in item 8 not accurately below) providing information on port transactions standard operating procedure will be Internal control introduced whereby the weakness – standard reconciliation of project procedures are not in funds is to be performed by place someone other than the person maintaining the financial records.
8. Information High Likely Systems nformation plan to No adequate prepared and implemented information prior to grant effectiveness systems is e IA proposes to use regularly prepared accounting system and reported software for financial reporting for the Project. There is an ongoing Pacific Maritime Transport Alliance project whereby accounting software for port operations in the
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Risk Description Risk and Impact Likelihood Mitigation Measures or Risk Management Plan Pacific has been implemented by several, with others also looking at the system and shared platform and development. It is proposed that Nauru becomes part of this program. 9. Overall Project High Likely Risk Overall Substantial (Combined) Risk
243. Based on the risk analysis, mitigation measures have been proposed as follows: Table 23 Time-bound Action Plans Mitigation Actions Responsibility Timeframe EA, IA, development computerized financial partners, provider of FMIS effectiveness accounting system in the IA
and procedures manual developed in order to guide staff activities and ensure staff accountability Introduce inventory accounting, Implementing agency control over issue and month of grant effectiveness. utilization, physical verification First and second year – with and reconciliation. 100% help of project 2 additional staff to be recruited implementation consultants. and trained. Third year onwards by staff. IA and ADB procedure for recording and implemented at project level as safe custody of original a condition for year 2 supporting documents including disbursement. safe storage, and retention period, access control, etc. continued until satisfactory resolution is achieved. persuade the management to adopt a similar policy for the maintained for all project enterprise. outputs financed by ADB in Ministry of Finance financial system, and to be audited by an independent auditor or Government Auditor as agreed between ADB and GoN
EA, IA and ADB structure will be prepared; the PMU, EA and IA specific terms of reference will implementation structure will be developed for PMU staff and be drawn, including detailed the design and supervision terms of reference consultants
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Mitigation Actions Responsibility Timeframe
EA/IA and the ADB to ensure that ADB guidelines are followed
segregated and rotated, where ter every 2 years feasible
coordination at all levels to be put in place to discuss the (annually) portfolio performance of the grant
accounting systems and appropriate security measures over backup data to be put in place Appointment of qualified IA and ADB expatriate staff, with accounting implementation, qualified staff background and experience in will be in place in the IA port operations; recruitment of two additional local accounting will be undertaken in Year 3 of staff (one accountant and one project implementation cashier) EA and IA accounts and underlying submitted to ADB within 6 working papers prepared on a months after the end of the timely basis in preparation for year the annual financial statement -annual, and audit annual progress reports on -annual and project implementation and annual entity level financial operation prepared statements prepared on timely EA, IA and ADB basis in preparation for the covenants monitored annual financial audit
8.1 Summary and Recommendations 244. The FMA concluded that the overall financial management inherent risk is “high” and the project risk rating is deemed ‘high”. Hence, the assessment concluded the combined financial management risk for the project as ‘substantial’, despite the EA’s current use of FMIS and effective budgetary control systems as well as experience in managing and implementing projects financed by ADB and other international funding institutions. The risk for the IA was deemed ‘High’ due to lack of adequate financial management systems (financial recording, reporting, auditing), as well as the lack of experience in managing and implementing foreign-funded projects. The overall financial management risk was concluded to be ‘substantial’. Nevertheless, the project is deemed worthwhile and feasible, since Nauru has no efficient port in place. 245. The recommended mitigation measures that are under way or proposed include: (i) technical assistance (TA) should be provided for the institutional strengthening of NPA, including the development and implementation of a financial management information system (FMIS) for port operations/management, an asset management and maintenance plan, and support to improve NPA’s accounting systems; (ii) TA to undertake a tariff study and reform for the ports; (iii) the inclusion in the construction supervision (CS) team of a financial management specialist to provide project accounting and financial reporting support; and (iv) training in ADB procedures will be required in procurement, disbursement, and project management. 246. The Financial Management Assessment is provided in Appendix P.
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9 Procurement
247. An assessment of procurement capacity included; a) assessment of procurement capabilities of the Ministry of Finance (MoF) and NPA, b) assessment of project procurement risk, a market survey to identify potential bidders for the civil works and their capacities, and development of the procurement strategy to attract competent bidders, c) search for an e-procurement service provider suitable for Nauru and ADB for a possible use for bidding of the civil works and other contracts under the project, d) recommendation on packaging of works, goods and services, procurement procedures, and advertisement methods with justifications, e) preparation of a procurement plan, master bidding documents and provision of training to the government staff on procurement
9.1 Procurement Responsibility in Nauru 248. Since 2014, the Government has been using an International Procurement Agent (IPA) to undertake all government departmental procurement. The original Procurement Agent (JV of Charles Kendall and Project Procure) was terminated in June 2015 due to poor performance. The GoN, in order not to impact on Government supply, entered into a direct arrangement with Pacifix, based in Brisbane, to act as the interim IPA and also as GoN’s financial intermediary in Australia. This company was set up by a former employee of Charles Kendall. This engagement is not a formalized arrangement and no contract has been signed between the parties; only a verbal agreement is in place. 249. In order to support this IPA, the Government established a small Central Procurement Unit (CPU) which operates under, and reports through the Ministry of Finance and Sustainable Development. The CPU is responsible to oversee all Government Procurement in Nauru, and forward procurement orders onto Pacifix to fulfil. All Government Ministries and Government Departments and Authorities have to submit a Procurement Proposal to the CPU for approval. If the procurement proposed is of a “minor nature” (<$ 3,000), the CPU will approve the Ministry / Department to proceed, if they have procurement capability, otherwise the CPU will undertake the necessary process. Any procurement exceeding “minor value” ($ 3,000) will be initiated by the IPA, with support from the CPU. It should be noted that the Ministry of Transport does not have its own procurement capability and relies on the CPU to manage any procurement on its behalf. CPU prepares and registers all necessary Procurement Vouchers (PV’s) and forwards them to Pacifix who then source quotes, and select the preferred suppliers. For PV’s greater than $10,000, the IPA is supposed to prepare bidding documents and call competitive tenders, but information given suggests that this is not happening and that Pacifix is not following the correct process, perhaps because they do not have the skills, understanding of international procurement and capacity to do so. 250. It has also been noted that RonPhos has in the past assisted the GoN in procurement, most recently assisting the Nauru Ports Authority for procurement, under Japanese aid funding, of mooring systems and new workboats for un-loading ships. 251. Procurement for Donor funded Projects are not handled through the GoN IPA. They have been in the past, handled directly by the Donor appointed Consultants, using the relevant Donor Procurement Guidelines. In general, therefore the team within the CPU gain little opportunity to participate in any significant procurement activities. They are mainly used as clerical support to
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prepare and register PV’s, check available budgets and receive and process quotations/purchase recommendations for the IPA. It can be concluded that GON “Lack the procedures for planning and capital expenditure (CAPEX) procurement planning”. They also do not have the experience or perhaps it is the commitment to monitor what Pacifix is doing, and evaluate what benefits if any are being delivered through outsourcing procurement. It should be noted that the procurement that has recently been undertaken by the past IPA’s is of a minor nature and does not involve bidding of major project Implementation or consultancy services. 252. At the moment, unlike in some of the other Pacific Islands in the Region, ADB is not providing Technical Assistance to support the strengthening of the CPU. This is leaving any relevant technical assistance in procurement to Department of Foreign Affairs and Trade, Australia (DFAT). An opportunity to provide some assistance may be considered during the procurement activities for this Project. 253. At the moment, the CPU has only 4 officers assigned through Treasury, but only 2 of the officers are allocated full time to procurement activities. Neither of the officers have relevant procurement qualifications, nor significant relevant experience beyond completing the current administration tasks that are assigned, which support the Government Agencies and act as a post box for the current IPA. The main constraints in doing the project procurement through the CPU is the lack of experience in procurement of civil works for such a large project as this, and the lack of resources available within the CPU, and also within the key Nauru Government Departments responsible for Infrastructure. To overcome these deficiencies, International Donors, both bilateral and multilateral, such as DFAT and World Bank undertake major Infrastructure Procurement in accordance to their own procurement Guidelines using their own appointed Consultants to tender for any goods and services required for their Programs. 254. DFAT has committed funds to assist with the development of appropriate Procurement Guidelines and to conduct bidding for the appointment of a new full time GoN International Procurement Agent with staff based in Nauru. If this progresses, hopefully some capacity building directed to the CPU will form part of the assigned tasks. The new Procurement Agent’s role will cover all GoN Procurement needs, but not directly major donor funded project needs, unless specifically requested. The previously appointed IPA’s have never played a role in the procurement of construction services for major infrastructure Projects, and this is not expected to change in the immediate future. As indicated above the consultants appointed by Donor Agencies have undertaken responsibility for such procurement. 255. One aspect studied in detail by the Procurement Specialist has been Technical Evaluation of bids, and the capability (in regard to technical matters) to adequately evaluate technical bids relating to major civil works infrastructure projects. Staff from the CPU do not have engineering/technical skills, and there are also no staff within the NPA with the required experience. The NPA cadre consist of port operational people, not engineers and construction experts, and hence will generally not be suitable to undertake technical bid evaluation of projects like the port development being considered. It will be necessary to find suitable people to induct into a Technical Evaluation Committee (3–4 people).
9.2 Procurement Risk Assessment 256. The assessment of risks associated with the overall project procurement activities relating to the Nauru Port Development has involved assessment of processes, Government staff, past practices etc. In the bidding process, the key function is ensuring that appointed key contractors, both required to support the data gathering for design, and for construction, have the capacity and knowledge to effectively undertake the work, have appropriate logistic skills to understand mobilization constraints, can appropriately provide, or have sufficient capital to acquire, plant to undertake the work and also can deliver a capable and experienced management team. Any team
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involved in the bidding process must have relevant skills to correctly evaluate these skills as presented in bid documents. 257. A detailed Project Risk Assessment was conducted, following the existing ADB Guideline for Project Risk assessment and is summarized as follows.
9.2.1 Project Procurement Risk Assessment Process
258. ADB’s Project Administration Instructions require an assessment of the capacity of the executing agency (EA) and the implementing agency (IA), if any, to procure the goods, works and consulting services as part of the project preparation process. The purpose of the project procurement risk assessment (PRA) was to determine the overall procurement risk, and establish appropriate review and supervision processes (including thresholds) and other measures to mitigate these risks. 259. The project procurement risk follows on from the country and sector / agency procurement risk assessments, but in this case these had not been carried out. The Risk assessment is also affected by the characteristics of the proposed project. For example, although large, a project with a single contract may have less risk than a smaller project with multiple implementing agencies, multiple geographic locations and a large number of low value contracting packages. The framework guiding procurement risk assessment at the country, sector and project level is based on the cascading approach adopted under ADB’s Governance framework. 260. Risk assessment is a subjective exercise. It requires knowledge of good procurement practices, but also country context and sector specific conditions. The purpose of the risk assessment is to identify situations or events which could hamper the effective implementation of the ADB financed project.
9.2.2 Planning the assessment
261. As stated above, no recent Country Assessment had been carried out, and therefore no background to assist with better understanding the systemic issues that could impact project performance. 262. The project procurement risk assessment involved, but was not limited to: (i) the review of GON procurement process, and sector/agency procurement experience and capacity to support; (ii) an assessment of past project procurement arrangements and EA capacity; (iii) a narrative assessment of procurement systems including strengths and potential weaknesses; (iv) risk assessment and preparation of a risk management plan; and (iv) initial draft of the project’s procurement plans. 263. There are no creditable GoN Procurement Guidelines and accordingly DFAT has engaged an International Procurement Specialist to develop appropriate guidelines which will then be used to seek submissions from relavant companies to be engaged as the Government’s Procurement Agent. The current incumbent Pacifix has only been appointed as an Interim Procurement Agent (IPA). 264. Due to a lack of resources, no direct past involvement in major procurement events and the compulsory outsourcing of procurement (albeit of a minor nature), the Procurement Risk for the Nauru Port Development has been rated as high. 265. The primary source of information was interviews conducted with Government staff, development partners and other stakeholders using the ADB Procurement Risk Assessment Questionnaire. Direct discussions with DFAT’s Procurement Specialist also provided valuable insight to current Government procurement activities.
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266. The results were analyzed and form the basis for completing the proposed project procurement arrangements. The full Project Procurement Risk Assessment Report was prepared as a stand- alone Project Procurement Risk Assessment and Management Plan (P-RAMP) which is provided in Appendix Q.
9.3 Procurement strategy
9.3.1 Identify potential bidders for civil works
267. The consultant carried out an initial market survey to identify potential bidders for the civil works. This drew upon a similar task recently carried out for Tuvalu Outer Island Maritime Infrastructure Project (OIMIP). It included construction companies with maritime experience either based in the region, or who have recent work experience in the Pacific Islands region. Whilst this project is considerably larger than the OIMIP in Tuvalu, it was reasonable to assume that the same companies with be interested in bidding for the Nauru Port Development Project. At this stage, only email and telephone communications have taken place, but the response has been favorable and greater interest in Nauru is being shown, simply because of the size and likely value of the Project. 268. Information to hand suggests the number of International Contractors with recent experience in Nauru is limited. CANSTRUCT (from Brisbane) has been involved with building projects such as regional processing centers, hospital refurbishment, schools, community centers, etc. and Barclay Engineering from Perth has refurbished the power station and provided heavy foundations for new generators. Graig Construction are currently contracted to DFAT for construction of an Education facility. 269. Table 24 provides details of Contractors identified as having some interest and relevant experience and capacity to bid for the proposed Contract.
Table 24: Details of Potential International Bidders Company Name Base Location Relevant Experience in the Relevant Experience in Nauru Sector CANSTRUCT Queensland, AU Building Construction Current presence in Nauru, mainly building projects. Completing work in March/April 2017, and will demobilize. Barclay Engineering Perth Concrete and steel structures, Concrete and steel works civil works Hall Contracting Queensland, AU Dredging, breakwaters, marine Recent work in Tuvalu construction McConnell Dowell Auckland, NZ Marine structures, civil works Worked throughout the Pacific Constructors Hawkins Infrastructure New Zealand Civil and Marine PNG, Vanuatu Cruz Holdings Fiji/Solomon Islands Barges/Support ships, Funafuti Beach Replenishment Channel Excavation Pacific Marine and Civil Fiji Civil and Marine, Barges, Tugs Supported Channel Excavation Solutions in Tuvalu under NZ Aid Program, Jetties and dredging in Cook Islands, Wharfs and Coastal Bridges Fiji Downer (New Zealand) New Zealand Civil & Marine Works, piling, Bids for PNG and Vanuatu, work Ltd in Samoa, Fiji Waterworks Group Australia Maritime and Bridge Australia (Smithbridge has (now incorporates Construction offices in Guam, PNG, New Smithbridge) Caledonia and NZ)
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China Harbour PNG Civil & Marine Works, piling, Completed Lae Tidal Basin in Engineering Company dredging PNG and have continued Ltd Bidding in PNG and Vanuatu (maybe a problem with Tiawan Diplomatic recognition in Nauru (Bid Prices High) China Civil Engineering PNG Civil & Marine Works, piling, Has recently bid for some port Construction dredging works in the region. Corporation/CRRC Harbour and Channel Engineering Bureau JV Golding Australia Civil, Maritime and Mining Bid work in JV in Vanuatu (ADB) Construction. and PNG Graig Construction New Zealand Civil Building works Building works for DFAT in Nauru Waterway Brisbane Marine Civil Const. Constructions Maritime Constructions Western Australia Marine Civil Const. Brady Marine & Civil Pty Ltd Brisbane Marine Civil Const York Civil Brisbane, Australia Marine Civil Const
Toa Construction Japan Port Marine works JICA Port Project Vanuatu Takehiko Hirose Japan Building Construction
270. Dialogue will be maintained with these contractors to ascertain their continued interest. 271. The local construction industry is very limited, and it is expected that any role local companies could play would be limited (through provision of plant, skilled tradepersons, and local labor).
9.3.2 Local Capacity Development
272. Despite the above findings, there may be some strengths and abilities in Nauru that can be built upon. The Consultant will make all reasonable effort to create awareness of available job opportunities. International Contractors will be encouraged to recruit local ‘contractors’ and skilled labor and advertise ‘Notice for New Positions’ through the use of flyers placed at strategic positions around the Island. 273. Contractors will be encouraged to commit to local capacity development and use every opportunity to develop the workforce of Nauru in construction skills that will provide a valuable community resource. For the core team of construction workers, training needs to be undertaken via daily mentoring by site supervisors and trade professionals.
9.3.3 E-Procurement
274. E-procurement was studied as a possible method for facilitating bidding. However, Neither the GON (Department of Finance), nor its IPA, has any experience with e-Procurement. It was suggested that e-procurement would be restricted by the unreliability of the Nauru Government Internet services, but experience of the Consultant suggested that these Services were reasonably reliable, so would not be an impediment for the small scale of procurement the GON/IPA are undertaking. 275. Investigation of e-Procurement revealed that the Nauru Utilities Corporation (NUC) were using e-Procurement based on a Portal supplied and maintained by Tenderlink, out of New Zealand.
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NUC is using this to procure services to Construct a New Power Distribution Control Building, and a brief review of the documentation prepared putting this out to bidding via the e-Procurement Portal was well prepared. This procurement however, under the GON arrangements, was required to be carried out by IPA, but it is really NUC that is facilitating this Tender by guiding the IPA, who have no experience with e-Procurement, through the process. 276. Given our review of the NUC e-Procurement Portal and procurement that NUC has undertaken, the Procurement Specialist is reasonably confident that the system could be developed into a useful procurement tool for the smaller scale procurement of the standard government goods procurement, but this current use is in its infancy, and results of the current procurement for NUC Project are yet to be delivered. To progress this to a level that it can be used for the procurement of a major infrastructure project such as the Nauru Port Redevelopment would require the new IPA that is to be engaged under DFAT assistance to have substantial e-Procurement experience and allocate the resources to adequately train national staff assigned to an expanded CPU. This could be sometime in the future, so to risk using e-Procurement for such a high value and critical project like the Ports Redevelopment as a potential training exercise, is not recommended. The potential risks of doing so, do not provide sufficient measureable benefits over using conventional ADB Procurement processes. 277. Whilst the Consultant recommends that the use of e-Procurement by the Government should be further investigated, particularly after the appointment of a new IPA (experience in e-Procurement should be a prerequisite to appointment), a conventional issue and subsequent receipt of hard copy Bid Documents and evaluation should be followed for this Project.
278. As discussed above, the CPU and the NPA do not have the resources or experience to undertake this experience, and based on past experience neither have the previous IPA’s engaged by the Government. It is also not possible to predict whether a future IPA appointed to assist the Government in Procurement will have such experience. Therefore it is further recommended that the process that has previously been used for procurement of donor funded projects, that of having the appointed Consultants manage the procurement process under the donor’s own procurement guidelines, be adopted. They are the team that understand fully all elements of the Project, and are well versed in the required procurement needs and process. 279. This would be carried out in-country, so that the status is fully known at any one time, and training of relevant government staff from the CPU and NPA, to allow them to participate in the procurement would be an important part of the process. A team drawn from the NPA and other relevant technical Government Departments, and from MOF (Treasury’s CPU) would be formed to participate as the Tender Evaluation Team under the guidance and direction of the International Procurement Specialist. This is important as it is the government that has to own the procurement recommendations and sign the Contract with the approved Contractor. 280. A pre-requisite to proceeding with the procurement process would be that either the Project Design Consultant is still in place to manage the bidding process, or that the Supervision Consultant (if different) has been appointed to undertake this task.
9.3.4 Contract Packaging
281. The general thought is that the Project would be implemented under one large contract, covering the excavation of the channel and the ship berth, the concrete wharf, and the land side buildings and hard stand areas, mainly because the working area is not large, and it may be difficult to split the works for 2 different Contractors to be working on site at the same time. However, if required to stage the works due to budget constraints, it would be possible to do the marine works
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(Channel and berth excavation, and wharf structure), first, and then the Buildings and other landside works as a second contract. 282. Given the very high mobilization costs, particularly if a Contractor was to mobilize from Australia or New Zealand, packaging options would favor one Contract Package for the approved work. This would avoid the duplication of large mobilization etc. It is considered important to ensure the contract package(s) is of a size large enough to attract sufficient bidders with the appropriate resources and experience to successfully undertake the works on time. Given the current cost estimate for the project, this is not a problem. 283. The consideration of package size to suit local contractors will not be relevant, although some mechanism within the Contract to support the development of domestic private construction sector should be considered. Certainly it is expected that some labor (skilled or non-skilled) would be available on a contract basis to the main international Contractor. Employment of such people in the Project should be encouraged, with the aim of targeting long term maintenance needs.
9.4 Draft Bid Documents 284. As recommended, procurement should be carried out following ADB Procurement Guidelines. Draft bid documents for international competitive bidding will be prepared based on ADB Standard Bidding Documents (SBD) for Large Works (Post Q), December 2016. 285. The documents will commence with the development of a detailed scope of works to support the Request for Proposals (RFP), and the Invitation to Bid, to be posted by ADB. 286. As there will be limited companies in the region with the capabilities / resources to undertake a project of this nature (given the isolated locations and logistical constraints), a prequalification stage is not considered necessary or appropriate, post technical qualification will be followed. Bidding for the Tuvalu Outer Island Marine Infrastructure Project, also funded by ADB is expected to be called in February 2017, and this will give a good indication of the level of Contractor interest in bidding for port projects in the Region. It is expected that given the larger scope of works for the Nauru Port, it will attract a greater number of competent bidders. 287. The invitation to bid advertising the Project will be widely circulated, to ensure appropriate Contractors are encouraged to participate. This will be listed on ADB Project Procurement, various trade Offices in the region, and also directly distributed to likely interested bidders that have been identified during our market survey. 288. The Bidding will follow ADB practice of a one stage, single envelop system, with a combined Technical and Price Bid. Whilst the detailed price assessment will only be carried out after Technical Qualification has been confirmed, this one envelope system will speed up the evaluation process and generally has been shown to ensure a more competitive market response, and hence a lower contract cost. It is critical however not to let the immediate sighting of the alternate prices influence the process of conducting a thorough technical assessment of capability and track record of successful completion of projects.
9.5 Project Procurement Risk Assessment Summary 289. A Project Procurement Risk Assessment (PPRA) was carried out in accordance to ADB Guidelines. Based on the assessment conducted it was determined that there exists both strengths and weaknesses in the GoN Procurement Process, but currently the weaknesses outway the strengths, but there is nothing that would put the project procurement for the project at unacceptable risk, but it would require ADB and their Consultant to take the management role of the Procurement process.
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9.5.1 Strengths
The CPU has been playing a role in registering and tracking procurement (albeit on a very minor scale) utilizing FMIS. DFAT has commissioned an independent Procurement Specialist to prepare new procurement Guidelines for GoN. This task will hopefully focus attention of the current inadequacies of procurement in Nauru. It is expected that the work initiated by DFAT relating to the new Procurement Guidelines will also include recommendations to provide capacity development to the CPU. This should be of benefit to this procurement, but the CPU will need to add (not less than 2) additional staff who can be involved in capacity building. The PDA Consultant’s Procurement Specialist will be in place and assigned to take a leading role in the preparation of Bidding Documents for the Project, and manage the full procurement process , in accordance with ADB Procurement Guidelines
9.5.2 Weakness
Continued use of IPA for Government Procurement without proper contract and procedures being in place. Also, it is reported that there is a complete lack of transparency. Current IPA has no practical experience in the procurement for large scale capital works projects. No functional GoN Procurement Guidelines Lack of national staff within government with procurement experience.
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10 Climate Change and Disaster Risk
10.1 Policy Context 290. The Government of the Republic of Nauru has articulated within the National Sustainable Development Strategy (NSDS) 2005-2025 (2009 update) the vision for development as “A future where individual, community, business and government partnerships contribute to a sustainable quality of life for all Nauruans”, or more simply, “Partnerships for quality of life.” 291. The Transport sector goal is to “improve transport infrastructure and provide reliable and affordable public transport service.” The list of specific strategies includes “Refurbish and develop port infrastructure for vessel handling”. The project contributes directly to the achievement of this strategy, and also indirectly supports a range of other strategies by providing more reliable, efficient and cost-effective freight handling, thereby improving the reliability of other services (aviation, water supply, etc.), improving Government revenue, and promoting economic development. 292. The Republic of Nauru Framework for Climate Change Adaptation and Disaster Risk Reduction (RONAdapt) represents the Government of Nauru’s response to the risks to sustainable development posed by climate change and disasters. It identifies priorities relating to climate change adaptation and disaster risk reduction, and provides a general framework for longer term planning and programming of relevant activities. 293. As the NSDS highlights, Nauru struggles with the challenge of ensuring sustainable social and economic development. A scarcity of arable land and fresh water resources, geographic isolation, dependence on imports for meeting basic food and energy needs, environmental degradation and the emergence of chronic health problems all make achieving sustainable development a difficult task, and at the same time create vulnerability to other stresses, such as those brought on by climate change and disasters. Against this background, climate variability and climate change have the potential to make Nauru’s efforts to secure sustainable development even more challenging. 294. The priorities outlined in RONAdapt contribute to the achievement of the NSDS by increasing Nauru’s resilience to climate change and disasters by targeting Water security; Energy security; Food security; a healthy environment; a healthy people; and Productive and secure land resources as goals. 295. Infrastructure is important as it can play an important role in improving economic productivity and/or reducing community vulnerability, and thus in making Nauru more resilient. Priority actions of the RONAdapt framework under the Infrastructure and Coastal Protection Sector include: Reduce coastal risks to key infrastructure; and Reduce flooding occurrence and intensity. 296. It is recognized in the RONAdapt framework that infrastructure needs to be designed and managed with future conditions in mind; it needs to be “climate –proofed.” Accordingly, a key design principle that underlies this project is to develop a port for Nauru which not only has improved resilience to present day coastal hazards, but also for future climate conditions. 297. The Government has developed a National Plan to support the Disaster Risk Management Policy. It is intended to assist the process of effectively managing hazards and risks in Nauru. The National Disaster Risk Management Plan (RoN, 2008) provides the overarching framework to support national disaster risk reduction and disaster management planning for the mitigation of, preparedness for, response to and recovery from the impact of hazards that have the potential to become national disasters.
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298. The Plan notes that disaster risk management is a process designed to motivate societies at risk to engage in the conscious management of risk as an ongoing process to strengthen resilience and reduce vulnerability to hazards. 299. The hazards listed below have been identified as having the potential to create national emergencies or disasters in Nauru: Economic Decline/Civil Unrest – High Public Health Crisis – High Fire (Structure and Non-Structure) – High Tsunami – High Transport Accidents (Air, Sea and Land) – High Fuel Storage Accident – High Environmental Degradation – High Animal Disease – High Lifeline Failure (Power, Water & Communications) – High Oil Spill (land and sea) – High Pollution (larid and sea) – High Drought – Medium Storm Surge – Medium Terrorist Attack – Low. 300. The Plan outlines the roles and responsibilities of lead and support agencies in Nauru in terms of disaster management (including preparedness, response and recovery). It is of relevance to the project with respect to the role of the new port in reducing disaster risk, but also in that the port will be exposed to risk of disaster.
10.2 Vulnerability 301. Following an initial screening of hazards and potential impacts, a vulnerability assessment was carried out for the area of interest. Some of Nauru’s vulnerability against climate change-related hazards have been identified as : The workforce being impacted by increased temperature/ heat waves which may slow down freight handling times Flooding of port land and/or buildings due to increased intensity and frequency of extreme rainfall events (even though the onshore facilities is thought to be currently unaffected by flooding, it may experience nuisance drainage issues or more severe flooding than the present day) Sea level rise/waves which may result in corrosion to structures is currently an issue. Increase in height of splash zone under sea level rise conditions will increase vulnerability. Rise of sea level or waves will result in no change over existing level of vulnerability for the existing port, although increased water depths under sea level rise may improve access for ships to the proposed port. Wave overtopping and/or storm surge over the wharf and breakwater in the proposed design and shoreline. This may cause increased forces on structures to due increased sea levels.
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302. A vulnerability and Risk Assessment is discussed in detail in Section 4 of the Climate Risk & Vulnerability Assessment (CRVA) Report presented in Appendix R. The MetOcean Design Criteria Report is provided in Appendix S.
10.3 Climate influencing factors 303. The meteorological and oceanographic climate in Nauru is driven by strong intra- and inter- annual cycles. The South Pacific Convergence Zone (SPCZ) and the El Niño-Southern Oscillation (ENSO) are discussed in detail in Section 3 of the Climate Risk & Vulnerability Assessment (CRVA) Report. Nauru experiences two main seasons, the wet season from November to October Nauru has consistent monthly average temperatures throughout the year which are strongly tied to the surrounding ocean temperature. The wet season usually starts in November and continues to April of the next year, while drier conditions occur from May to October. 304. Inter-annual variability is strongly influenced by the ENSO. Compared to normal (neutral) years, Nauru experiences wetter, warmer conditions during El Niño years, and drier, cooler conditions during La Niña. In some years Nauru’s climate can be affected by the West Pacific Monsoon. This occurs when the persistent monsoon westerly winds reach as far east as western Kiribati.
10.4 Approach to climate change assessment 305. A qualitative risk assessment was conducted to assess the likelihood of hazards. For the climate risk and vulnerability assessment, likelihoods have been assigned based on consideration of both the historical occurrence, and the level of confidence associated with the climate change projections, for the key hazards. 306. Based on the climate change projections for Nauru (Section 4.3) and the vulnerability assessment (Section 5) of Appendix R ‘Climate Risk & Vulnerability Assessment’ report, the assessment identified the following high risks: The increased incidence of high temperatures in future negatively impacts on the workforce, reducing efficiency by increasing cargo handling times; Due to higher water levels under sea level rise, adverse wave conditions prevent the transfer of cargo between ship and shore, and increase the potential for damage to cargo. There is also an increased safety risk for port workers; Increased wave overtopping of the wharf and/or breakwater under sea level rise conditions reduces the efficiency (or prevents) the transfer of cargo between ship and shore, and results in increased incidence of loss or damage of cargo. There is also an increased safety risk for personnel working on the wharf or breakwater; Increased wave run-up and/or overtopping of the shoreline under sea level rise conditions reduces the efficiency (or prevents) shore-based activities at the port (e.g. transport of cargo/containers within the port), and results in increased incidence of loss or damage of cargo. There is also an increased safety risk for personnel working at the port; and Due to higher water levels under sea level rise, there is an increased risk of wave damage to the wharf or breakwater. The findings from the risk assessment are shown in the table below.
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Table 25 : Risk Assessment Findings Risk Category Hazard Risk Statement L C R
Existing (Present Day) Risk to Proposed Port
Temperature / heat High temperatures negatively impact on the workforce, reducing L2 C2 M wave efficiency by increasing cargo handling times. Heavy rainfall causes flooding of port land and/or buildings, reducing Extreme rainfall efficiency and increasing handling times. The flooding may also result in L3 C2 L events damage to cargo, and can represent a risk to workplace safety. Waves and seaspray corrode structures, resulting in the need for regular L1 C2 M maintenance. Waves / mean sea level Adverse wave conditions prevent the transfer of cargo between ship and shore, and increase the potential for damage to cargo. There is also an L2 C2 M increased safety risk for port workers. Overtopping of the wharf and/or breakwater reduces the efficiency (or prevents) the transfer of cargo between ship and shore, and results in L2 C2 M increased incidence of loss or damage of cargo. There is also an increased safety risk for personnel working on the wharf or breakwater. Wave run-up and/or overtopping of the shoreline reduces the efficiency (or prevents) shore-based activities at the port (e.g. transport of cargo/containers within the port), and results in increased incidence of L2 C2 M loss or damage of cargo. There is also an increased safety risk for Wave overtopping / personnel working at the port. storm surge Where wave overtopping results in inundation of the port lands there is a reduction in efficiency (or prevents) shore-based activities at the port (e.g. transport of cargo/containers within the port), and results in increased L3 C2 M incidence of loss or damage of cargo. There is also an increased safety risk for personnel working at the port. Wave overtopping causes damage to shore-based infrastructure, which may result in inability to (or less efficient) transfer of cargo between ship L3 C3 M and shore. Tsunami A tsunami results in inundation of the port, resulting in damage to (Note: Also a future structures and buildings, damage to cargo/containers, and risk to workers L5 C5 M risk). on the site.
Future (Climate Change) Risk to Proposed Port
Increased temperatures / High temperatures negatively impact on the workforce, reducing L1 C3 H incidence of heat efficiency by increasing cargo handling times. waves Increased intensity & Heavy rainfall causes flooding of port land and/or buildings, reducing frequency of extreme efficiency and increasing handling times. The flooding may also result in L2 C2 M rainfall events damage to cargo, and can represent a risk to workplace safety. Higher water levels and seaspray corrode structures, resulting in the L1 C2 M need for regular maintenance. Due to higher water levels under sea level rise, adverse wave conditions prevent the transfer of cargo between ship and shore, and increase the Sea level rise / waves L1 C3 H potential for damage to cargo. There is also an increased safety risk for port workers. Due to higher water levels under sea level rise, there is an increased risk L2 C3 M of wave damage to the wharf or breakwater. Increased wave overtopping of the wharf and/or breakwater reduces the efficiency (or prevents) the transfer of cargo between ship and shore, and Wave overtopping results in increased incidence of loss or damage of cargo. There is also L1 C3 H &/or storm surge an increased safety risk for personnel working on the wharf or breakwater.
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Risk Category Hazard Risk Statement L C R Increased wave run-up and/or overtopping of the shoreline reduces the efficiency (or prevents) shore-based activities at the port (e.g. transport of cargo/containers within the port), and results in increased incidence of L1 C3 H loss or damage of cargo. There is also an increased safety risk for personnel working at the port. Where increased wave overtopping results in inundation of the port lands there is a reduction in efficiency (or prevents) shore-based activities at the port (e.g. transport of cargo/containers within the port), and results in L2 C3 M increased incidence of loss or damage of cargo. There is also an increased safety risk for personnel working at the port. Due to higher water levels under sea level rise, there is an increased risk L2 C4 H of wave damage to the wharf or breakwater. Increased wave overtopping causes damage to shore-based infrastructure, which may result in inability to (or less efficient) transfer of L3 C2 L cargo between ship and shore.
307. The risk assessment was re-evaluated following adoption of the adaptation measures in order to assess their effectiveness in reducing risk and optimizing the project. This is shown in the table below.
Table 26 : Assessment of Residual Risk following Application of Adaptation Measures
Inherent Residual Risk Risk Statement Risk Treatment Risk L C R High temperatures negatively impact Option A: Develop a policy that includes on the workforce, reducing efficiency H measures to reduce the health risk to L1 C2 M by increasing cargo handling times. port workers during heat waves. Option B: Adopt a deck level for the Due to higher water levels under sea wharf that takes into account both level rise, adverse wave conditions design water level and sea level rise. L3 C3 M prevent the transfer of cargo between This would require higher piles for the ship and shore, and increase the H wharf. potential for damage to cargo. There Option C: Adopt crest level for the is also an increased safety risk for breakwater that take into account both L3 C3 M port workers. the design wave criteria and sea level rise. Increased wave overtopping of the wharf and/or breakwater reduces the Option B – see above. L3 C3 M efficiency (or prevents) the transfer of cargo between ship and shore, and H results in increased incidence of loss or damage of cargo. There is also an increased safety risk for personnel Option C – see above. L3 C3 M working on the wharf or breakwater. Option D: Adopt crest level for the Increased wave run-up and/or foreshore structure(s) that takes into L3 C2 L overtopping of the shoreline reduces account both the design wave criteria the efficiency (or prevents) shore- and sea level rise. based activities at the port (e.g. transport of cargo/containers within H Option E: Increase the ground level of the port), and results in increased the port land above the wave run-up L3 C1 L incidence of loss or damage of cargo. and/or storm surge level. There is also an increased safety risk Option F: Increase the floor levels of for personnel working at the port. L3 C2 L the buildings proposed for the new port.
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Inherent Residual Risk Risk Statement Risk Treatment Risk L C R Option G: Design a more robust wharf structure. This may involve use of Due to higher water levels under sea deeper piles, thicker/more L2 C2 M level rise, there is an increased risk of reinforcement, and a thicker concrete H wave damage to the wharf or slab for the deck. breakwater. Option H: Design a more robust breakwater structure. This would L2 C2 M involve using larger armor units.
308. The climate change and disaster risk assessment identified high temperatures; sea level rise; increase in average annual rainfall; increase in the intensity and frequency of extreme rainfall events; and wave climate as the key climate-related hazards for this project. Key vulnerabilities were identified as the effects from; damage to infrastructure, cargo or containers due to wave attacks/flooding difficulty for ships accessing the port under adverse weather conditions (e.g. extreme wave conditions) inefficiencies in operations due to adverse weather conditions that may lead to flooding, ocean inundation, or wave overtopping of the port land the need to ensure port personnel are provided with a safe working environment 309. In order to mitigate the climate-related risks for the project, mitigation measures were identified to reduce vulnerability and to improve the resilience of the port. The following design options that will climate-proof the port were assessed; Selection of appropriate design criteria for the deck level of the wharf and breakwater crest level that take in account existing and future wave climate and sea level rise; Adoption of measures to prevent ocean inundation and catchment flooding of the port land, such as providing a shoreline revetment, filling of the port land and/or suitable floor levels for buildings; and Adoption of a more robust design for the wharf and breakwater to ensure the structures are able to withstand the wave forces under sea level rise conditions. 310. The Climate Risk & Vulnerability Assessment (CRVA) Report and MetOcean Design Criteria Report are provided in Appendix R and Appendix S. 311.
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11 Port Reform
11.1 Overview 312. This report details the consultations completed, findings and recommendations for Port Reform in Nauru. These elements are considered critical irrespective of the development of a new Port facility at Aiwo in Nauru, but are also vital for ensuring sustainability of the new development. The preparation of this report is based on the scope to address both immediate and longer-term reform activities. In assessing the existing limitations and devising the long term reforms necessary for sustainability, risks have been considered and addressed through proposed arrangements.
11.2 Current Constraints and Opportunities 313. The Port is currently managed by the Nauru Port Authority, which is a statutory authority rather than a state-owned enterprise. The NPA proposes tariffs, which need to be approved by the Government of Nauru (GoN) before coming into effect. The Port, and Nauru in general, face many challenges. The Port provides an essential service that is necessary for the daily needs of the community. However, low population results in infrequent services and hence a challenge in the financial viability of the Port. Its current performance is constrained by limitations in the technical and managerial capacity of NPA staff, the general absence of formal management systems, including asset management, accounting and other financial systems, incomplete data on shipping volumes and other data that indicates the technical and financial performance of the Port, and poor maintenance practices. There is no evident commitment to a clear program for reform of tariffs, which currently generate less revenue than the total capital and operating cost of the Port. There is uncertainty about future demand given changes in the role of the Regional Processing Centre and other current and potential economic activities. 314. Notwithstanding these limitations, the NPA manages to perform to the extent of servicing vessels and moving freight through the Port, albeit in an inefficient manner. Other infrastructure needed to support the Port such as power, water and roads do not generally constrain its activities, though there is a need to upgrade a section of road that serves the Port. The Port has sufficient land to meet its current and anticipated needs, though access to the land is not secure. 315. The greatest threats to the Port are related to: (i) a lack of maintenance of its assets, which results in inefficient and sometimes poor service to customers; (ii) tariffs that do not reflect costs, neither relative to the cost of various services nor with regard to the total cost of providing infrastructure and services; (iii) poor accounting and financial management systems; (iv) limitations in the technical and managerial capacity of NPA staff; (v) the current inability to meet the needs of the International Ship and Port Facility Security Code; and (vi) low volumes of freight. 316. The proposed Project will address these matters, as set out in following paragraphs.
11.3 Development of Port Infrastructure 317. Proposed upgrading of the Port has been primarily designed around safe berthing operations, design vessel size and cargo handling limits or conditions. As part of the engineering assessments, particularly in relation to berth availability for cargo handling, it has been determined that as long as the vessel can be safely berthed at the wharf that cargo handling can be completed at close to 99% of the year. 318. Recommended infrastructure improvements include: (i) replace badly deteriorated Port buildings, being sized according to optimal maintenance and storage activities and staffing numbers; (ii) develop a gatehouse and facilities to meet staffing, customs and quarantine, security requirements for compliance with provisions of the International Ship and Port Security Code and
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longer term options for container x-ray and inspection as may be required in future; (iii) improve data communications to meet Port needs; and (iv) fencing, CCTV and guard services for improved safety and security. Separate to the Port project there is 320m of external road linking the Port to island’s ring road which requires upgrade / reconstruction. Septic and/or storage tanks are included in the design layout as there is no sewerage treatment system in Nauru. There is no need for additional investment in other support services such as power and water. The recommended investment will enable infrastructure requirements needed to comply with ISPS requirements. The total cost of this civil works investment is estimated at U$ 67,590,030 (mid-2017 prices including contingency and fee for consultants implementation). 319. Additional investment in equipment is also required, including: (i) 7 major items of equipment for handling containers (including spreaders, a stacker, forklift; tractor, trailer and crane); and (ii) a tug, which can most probably be secondhand. The cost of this investment is estimated at U$ 5,350,469 (mid-2017 prices). 320. The NPA does not currently have a formal asset management system, or even a formal asset register. It is essential that such systems be implemented so ensure that the proposed investments under the Project, and other current infrastructure also, are properly maintained and that their full potential value is secured.
11.4 Improving Financial Performance 321. A significant concern, and one shared by customers and locals alike, relates to tariff structure and the apparent disconnect with cargo throughputs, types and operational costs, and therefore transparency. In addition, current tariffs generate insufficient revenue, by a considerable margin, to cover operating (defined here to also include maintenance costs) and capital costs of the Port. It will be impractical to expect such full cost recovery to occur in the circumstances faced in Nauru. However, improved sustainability requires that sufficient revenue be generated to cover operating costs and at least the cost of plant and equipment. This would require the GoN, with the support of donors to undertake other, generally more major capital works that need be incurred on only an occasional basis. 322. Tariffs needed for each of three cost-recovery scenarios have been analyzed in the current review: (i) Scenario 1: Gross, all-in = total fixed overhead (operating lease fee included) + other fixed overhead (insurance only) + depreciation (infrastructure and equipment). The benefit of this tariff option is that Nauru will be able to fully recover its investments for both the port infrastructure and related equipment through collection of tariffs. For potential operating lease contractors, however, this may not be a viable option; (ii) Scenario 2: Net of infrastructure = gross all-in less depreciation of infrastructure only. Under this tariff option, equipment replacement only is assured and recovery of operating costs. This option would be attractive to potential Public Private Partnership (PPP) and the Nauru government as well; and (iii) Scenario 3: Net of all depreciation = gross all-in less depreciation of infrastructure and equipment (i.e. depreciation of project cost). This option would be the least attractive for the Nauru government, since only recovery of operating costs through tariffs is assured. 323. The tariff model was updated using finalized project cost estimates, which excluded the 20% profit margin originally planned to be included as guaranteed cost recovery. Costs of the mooring Operations & Maintenance (O&M) was likewise added as additional cost to the fixed overhead (which
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was projected to end on the 5th year). Likewise, sensitivity analyses were conducted assuming varying assumptions for the port revenues. Four sensitivity tests entailed: (i) increased fishing revenue by 50% (over earlier conservative estimates) at the start of the new port operations; (ii) increased fuel revenues by 30% (over earlier estimates) based on the new port’s opportunity to serve as a hub in the region; (iii) decreased cargo revenue in the light of recent trends in the macroeconomic situation in the country; and (iv) decreased concession fees (from $600k to $400k) to offset otherwise unsupportable tariff increases for basic food and goods imports. 324. Such analyses have been undertaken to address the macroeconomic situation in Nauru, as well as capture opportunities that can be further tapped, particularly in the fishing and fuel areas. The resulting financial ratios indicate that under all scenarios, the project remains to be viable, with sufficient returns on investment. However, due to sizable investment, the payback period ranges from 21 years to around 44 years at adverse conditions. The base scenario projections are deemed conservative, with significant revenue potential from transshipment of goods from fishing and fuel businesses. Cost containment is likewise an opportunity, with the port reform to provide the necessary capacity building and systems development to ensure NPA’s institutional sustainability. The tariff setting model indicates that aside from the implementation of the 2016 tariff of Nauru to be phased over 3 years from 2017, the tariffs need not be increased in the medium term12. . 325. A major issue for the Port is its current responsibility for the existing mooring system. It is recommended that responsibility for the system be transferred to Ronphos following construction of the new facility, as the only user of the system. This approach is supported by GoN advisers. The transfer will have the beneficial effect of simplifying management of the Port. Its effect is included in the financial forecasting undertaken in the current review. 326. The NPA needs to implement a financial management information system to properly record all financial transactions, to compare actual revenue and expenditures with budgeted amounts and to provide information to aid management decisions. It is recommended that the system should be compatible with that used by the Department of Finance of the GoN to aid data transfer and oversight. The proposed system includes an asset management component that allows this activity to be closely integrated with overall financial management.
11.5 Upgrading Safety and Security 327. The International Ship and Port Security Code (ISPS) establishes requirements for ports to meet if vessels are to sail between them and other ports adhering to the code. In April 2017 NPA was formally advised by the United States Coast Guard (USCG) that it had listed Nauru on its Port Security Advisory list, which places serious restrictions on vessels visiting Nauru. This listing therefore has the potential to impact upon trading arrangements. 328. Investments described above will address infrastructure requirements of the Code. It also proposed that unstuffing of containers be allowed within the Port terminal area where container
12 Upon completion of the ‘Draft Port Reform Report’, the tariff model was revised using finalized project cost estimates. The following were excluded: port handling equipment; 20% profit margin cost recovery; and O&M costs of the mooring system. The assessment completed as part of the ‘Draft Port Reform Report’ proposed port tariffs (increased by 71%, 39% and 18% for Scenarios 1, 2 and 3, respectively) which have been adjusted. Under the four sensitivity scenarios calculated, the resulting tariffs ranged from -1% to -3% for cargo/container levies, charges and tariffs. (Appendix J present details on the tariffs for the varying scenarios). Hence, revenues need not be raised, should volumes reach the levels that will cover the costs plus a reasonable concession payment to GON
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deliveries cannot be made offsite. To meet security and associated ISPS requirements, it is proposed that this activity could be done under supervision of the PFSO or other Maritime Security Guard, with appropriate vehicle inspections on and off site as well. Issues regarding ships personnel will be easily managed and controlled through passport control and access passes at the new port. Associated with landside access, penalties must be introduced and linked to the broader penal provisions within Nauru, for unauthorized incursions into the Port land area. Together with appropriate signage this will act as sufficient deterrent and be supplemented by security and systems.
11.6 Improving Institutional Performance and Capacity Building 329. A revised organization structure for the NPA is proposed. This responds to two key issues. Firstly, the current Port has more staff than is needed for the level of activity that occurs at it. It is estimated that the number of staff could be reduced from the current 86 to around 60, with some complementary changes to management arrangements to improve accountability. The second issue is the need for an organization that can deliver improved outcomes in the short term and lead a process to secure a longer term sustainable operation of the Port. Means to achieve the latter are discussed in following paragraphs. 330. In the medium term, there is potential to engage the private sector to operate the Port. This should reduce operating costs and introduce a more entrepreneurial approach to operation of the Port. Five possible approaches have been considered: (i) public sector reform; (ii) management service contract; (iii) operating lease; (iv) a concession; and (v) privatization. Initial assessment indicates that an operating lease arrangement is likely to be best suited to conditions, with due consideration given to matters such as the limited scale of the Port, the capacity to manage a contract with the private sector, the ability to secure only partial cost-recovery for the Port from user charges, the appropriate transfer of risk to the private sector and measures to incentivize the contractor to perform to the highest possible level. 331. There is, however, considerable uncertainty about the present and potential performance of the Port given the constraints described earlier. This uncertainty makes it difficult, if not impossible, at the present time to attract the high level of private sector interest that is needed to secure private sector involvement at the lowest possible price and with the best performance outcomes for the GoN. The recommendations in this report to establish sound financial accounts and other such data and systems that indicate the technical and financial performance of the Port will address these limitations. There is also a need for a clear commitment from the GoN for reform of tariffs. With these matters in place, future NPA management can, within the duration of the Project, lead a process to review, refine and implement a scheme to engage the private sector in the operation of the Port. 332. The desired improvements in the operation of the Port will depend on the actions of a few key executives in the organization. Insufficient capacity will persist as a more generally due to the limited number of skilled staff availability in the local market. Therefore, significant attention has been placed on the provision of short term specialist recruitment as well as training schemes, including in- house and specialized training, to make sustainable improvements. The need for this support is based on the assessment of current capacity, with due consideration for planned reform and performance targets associated with significant commitment of donor funds, and the objective for improved financial outcomes. 333. The focus of recommended management support is specifically where there are key leadership and change management actions associated with improving efficiency and performance. They include NPA management roles as well as project related roles, and involves both long and short inputs in areas such as project management for introducing financial systems, legal drafting for proposed regulatory reform and actions to secure private sector participation in the port. The bulk of the roles proposed require more significant commitment of time to ensure that change is implemented before and during the Project, and that immediately following the development,
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processes are optimized and opportunities realized. Specific positions that it is recommended by financed by the Project are: Chief Executive Officer and Operations Management (each for 48 months), financial Manager and Human Resource Manager (each for 36 months), Maritime Officer (24 months), and Maritime Legal Specialist and a Project Manager for the Financial Management and Asset Management Systems (each for 6 months). Terms of Reference for these positions have been prepared. 334. Training programs to address deficiencies in technical skills have also been proposed. It is recommended that training be provided in 16 skill areas (e.g. mooring, safety, use of ship cranes, forklift and other equipment, stevedoring, etc.) with around 900 person-days of training over the course of the Project.
11.7 Reform Activities and Timeline 335. The estimated total cost of the reform for five years amounts to $11.81 million, with staffing and capital investment being the largest components and with two-thirds of the expenditure scheduled for 2019/20 (see Table 27). An implementation program is presented in Figure 2.
Table 27 – Summary of the Cost of Reform Activities (A$ million, mid-2017 prices) Year Staff Training Materials & Capital Total Expenses Expenditure Year 1 (July 2017-June 2018) 1.187 0.115 0.354 0.086 1.742 Year 2 (July 2018–June 2019) 1.050 0.051 0.060 0.000 1.161 Year 3 (July 2019–June 2020) 0.935 0.045 0.020 7.032 8.032 Year 4 (July 2020–June 2021) 0.675 0.000 0.050 0.000 0.725 Year 5 (July 2021–June 2022) 0.150 0.000 0.000 0.000 0.150 Total 3.997 0.211 0.484 7.119 11.810
336. Appendix T provides further details of port reform activities in the ‘Final Port Reform Report’.
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Figure 2 – Implementation Program
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12 Monitoring and Evaluation
337. The Design and Monitoring Framework (DMF), a core link between project design, implementation and evaluation, provides the basis for the Project Performance Management System of the ADB. It briefly describes the design summary (hierarchy of objectives) of a project including the performance indicators, targets and baseline, data sources and reporting mechanisms, and assumptions and risks. The DMF for the ensuing project was developed using results of past studies such as those of the ADB, JICA and PRIF. More important are results of the technical, financial, social and gender, economic, environment, governance and climate change assessments under this study. Based on these and results of consultations with the CEO and Board Chairman of the NPA and with other specialists, a preliminary design summary is presented below. 338. The impact of the ensuing NPDP is improved resilience and socioeconomic conditions of the people of Nauru as food security is enhanced. The outcome is improved efficiency in the operation and management of Nauru Port. The measurements envisaged at are: a. Decrease in port closure days from baseline [90 days per year in 2016] to 10 days by 2020; b. increase in container vessel call from baseline (less than 2 per quarter in 2016), to at least 2 by 2020; c. by 2020, reduction of 15% in freight cost from USD5,300 per dry goods TEU and USD7,600 per reefer container in 2016; and d. reduction in vessel time at port from 14-21 days in 2016 to 2-3 days by 2020. 339. Three outputs are being considered to achieve the outcomes, and these are presented below. a) Output 1 (priority climate-resilient port infrastructure constructed). Existing port structures (sheds, offices of Customs and Harbor Master) will be demolished. Additional physical structures being considered are those under Design Option 2A (wharf with breakwater). (a) 160-m wharf; (b) climate-proofed access from wharf to shore; and (c) around 2,400 sq. m- port building. The container storage yard will be improved. HIV/AIDS prevention and awareness activities as well as port safety activities will be conducted prior to and during civil works. Activities to comply with social safeguard policies will be conducted. An operation and management plan will be prepared. Output 2 (sustained and effective port maintenance). Port reform legislation as well as tariff regulations through a cost recovery scheme will be implemented for sustained port maintenance. Equipment for port maintenance will be procured. A financial management information system to properly track costs and revenues will be established. Key officials and senior and junior officers of the NPA will be trained on technical/engineering aspects as well as on areas that would be identified based on an organizational assessment of NPA. Activities under this second output will be carried out in conjunction with the proposed CDTA (depending on port reform activities). Output 3 (efficient and effective port management) will cover activities such as: staffing of approved organizational structure; training for management and technical staff of NPA; preparation and funding of O&M Plan; establishment and operationalization of a suitable port business process.
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340. Baseline data for most of the indicators are available. Additional baseline data on the socioeconomic condition of target beneficiaries are available from the 2012-2013 Household Income and Expenditure Survey of the Bureau of Statistics of the Ministry of Finance. The processing of raw survey data provided by the Bureau is near completion. Baseline data will be updated once the final estimates from the Bureau become available. 341. A draft Design and Monitoring Framework (DMF) is provided in Appendix U and the ‘Contribution to the ADB Results Framework’ document can be found in Appendix V.
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13 Conclusions and Recommendations
13.1 Conclusions
342. A number of concept options were identified for assessment during the concept stage of the project. Cost estimates were prepared for these concept options in order to progress with economic analysis. The economic analysis of the options were carried out in comparison to a Do Nothing Base Case (scenario in which maintenance of the existing mooring system was allowed to lapse). Based on the assessment adopted and the costs associated with the Do Nothing Base Case to maintain port operational viability, economic returns from the project were seen to significantly outweigh the associated costs; all options were identified as potentially economically viable. 343. Engineering assessments were undertaken, including metocean, wave analysis and ship simulation, to further assess differing design configurations. The result of these assessments was clear advantages associated with berthing and departure of vessels from a berth cut into the reef at an angle to coincide with the dominant swell direction. Further analysis of mooring arrangements and operability criteria confirmed that this alignment provided greater availability, and therefore ability to meet present and future shipping demand. On the basis of this configuration being confirmed by GoN, detailed design and cost estimation were progressed, against which final economic and financial feasibility were assessed. 344. The results from the financial analysis concluded the financial viability of the project. The environmental assessment concluded that there were no identifiable environmental significant impacts and no critical important terrestrial or marine habitats impacts. All impacts were identified as site specific, irreversible yet could be minimized through appropriate mitigation measures. Due diligence on social safeguards and resettlement identified no involuntary resettlement of persons or their properties. The procurement risk assessment identified that there exists both strengths and weaknesses in the GoN Procurement Process; but nothing that would put the project procurement for the project at unacceptable risk provided that appropriate ADB Procurement Guidelines were followed, and that the Consultant’s International Procurement Specialist was available to take management responsibility of the Procurement process. 345. There are significant capacity issues in relation to port staffing and management. Interim management support has been identified during the port construction and shortly thereafter in order to maximize returns and efficiency measures, after which an operating lease is proposed. Interim capacity is provided in relation to CEO, Operations Manager, HR Manager, Finance Manager, Maritime Legal Specialist and Maritime Officer roles. Significant training and / or re-skilling is proposed in order to reduce the workforce yet reward members of the Port team, as well as readying the workforce for future operations and equipment, and associated maintenance activities toward sustainable management. 346. Tariff assessment concluded that forecasts, particularly in relation to fishing throughput resulted in not requiring further raise in tariffs, whilst providing interim maintenance funding and longer term concession (lease) payment from the private operator to the Government. Effective payback period, assuming conservative forecasts, remains 20-40 years and it would be unrealistic in terms of port charges to seek to improve this payback period. 347. A range of equipment is necessary to the port in order to achieve the cargo efficiencies identified, and to ensure port capacity for other vessels.
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13.2 Recommendations
13.2.1 Financial Analysis
348. The following financial covenants to the grant agreement are recommended for the project: Implement accounting and operating systems to capture correct revenues – not just automated systems but business processes and rules/regulations as well Implement 2016 tariff in phases as follows: 30% in 2017/18, 30% in 2018/19, and 40% in 2019/20. Implement tariff reforms through adjustments to meet the recovery of costs13. Cost efficiency – review cost structure, streamline and remove unnecessary spending. The NPA shall prepare regular audited project financial statements (APFS) and audited entity financial statements (AFS), plus other opinions, and submitted annually by an external auditor acceptable to ADB. ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 14 days of the date of their receipt by posting them on ADB’s website. NPA shall install computerized financial management systems based on the new port operations, based on international best practice, Ministry of Finance (MOF) system and Pacific Ports system. NPA shall hire qualified accounting and finance staff to perform the necessary financial management function. Financial performance indicators shall be reported on a reqular basis, including profitability ratios, i.e.gross profit margin (GPM), operating margin (OM), return on assets (ROA) , return on equity (ROE), return on sales (ROS) and return on investment (ROI). 13.2.2 Environmental Assessment
349. It is recommended that the Environmental Management Plan (EMP) is followed in order to avoid, reduce and mitigate the environmental impacts during the design, construction and operational phases of the project.
13.2.3 Poverty, Social, Gender and Resettlement
350. The Poverty, Social and Gender Assessment identified key issues of which not all can be fully addressed by the project. Recommendations under the assessment are listed below: During construction contractors will be held responsible to recruit men and women from Nauru for unskilled labor.. Short term job opportunities may include simple admin works, heavy lifting, cleaners, traffic control and hospitality. A tailor designed training program for NPA staff will initiate skills in the maritime sector the following years. The Gender Action Plan (GAP) has outlined specific activities and targets to ensure women’s benefits to the project. Key activities to provide economic gains to women include proposed recruitment for skilled and unskilled labor by the work contractors, and recruitment for Project Management Unit staff .
13 This is proposed to be implemented initially, but with further review and inter-relationship between expenses and cargo types, as well as agreed profit margins etc, thereafter has been undertaken. The tariff study needs to be implemented to ensure the viability of the proposed project.
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Training programs on HIV/AIDS and sexually transmitted diseases will address the low level of awareness among both men and women regarding these issues which have great impact on them. Women will continue to be involved in consultations and activities requiring stakeholder participation.
13.2.4 Financial Management
351. The recommended mitigation measures that are under way or proposed are: technical assistance (TA) should be provided for the institutional strengthening of NPA, including the development and implementation of a financial management information system (FMIS) for port operations/management, an asset management and maintenance plan, and support to improve NPA’s accounting systems; the inclusion in the PIU of a financial management specialist to provide project accounting and financial reporting support; and training in ADB procedures will be required in procurement, disbursement, and project management.
13.2.5 Procurement
352. It is recommended for the Consultant’s International Procurement Specialist to take management responsibility of the Procurement process.
13.2.6 Port Reform
353. It was identified that port reform will be critical irrespective of the development of a new Port facility in Nauru. Recommendations raise significant attention on mentoring, training schemes, in house and specialised training and succession in order to provide initial improvements to NPA capacity. 354. Adopt a tariff structure net of infrastructure = gross all-in less depreciation of infrastructure only. Under this tariff option, equipment replacement only is assured and recovery of operating costs. This option would be attractive to potential Public Private Partnership (PPP) and the Nauru government as well. 355. Unstuffing of containers be allowed within the Port terminal area where container deliveries cannot be made offsite. It is proposed that this activity could be done in line with ISPS allowances, under supervision of the PFSO or other Maritime Security Guard, with appropriate vehicle inspections on and off site as well. 356. Introduction of broader penal provisions within Nauru for ISPS purposes, for unauthorized incursions into the Port land area. Together with appropriate signage this will act as sufficient deterrent and be supplemented by security and systems. 357. Provision within the port landside area / terminal space for a container washing together with an inspection process by Customs and Quarantine for all ‘exports’ prior to being allowed in to the terminal. 358. Provision of a logistics service, making use of newly acquired port equipment. 359. Work with Vital to determine transshipment/regional supply opportunities for fuels. Similarly, maintain close working relationship with Fisheries to ensure transshipment and bunkering opportunities are capitalized on.
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360. A staged approach for management wherein the management support approach is adopted in the short term, with a view to pursuing an operating lease approach in the medium term (though still within the term of the Port Development Project). 361. Implement a new organizational structure inclusive of commercial and regulatory elements, with staffing allocated as recommended. 362. Implement detailed training for new / existing staff and continue roll-out up to and including new equipment provision. 363. Following commissioning of the new port facility, and prior to the 5 year period of active use of the existing moorings being expended, transfer operation and associated responsibility of the moorings to Ronphos as the sole beneficiary for that interim period. 364. Institutional arrangements implemented including provision for private sector engagement and payment structure, respective roles for the GoN and the operator/contractor in the setting of and approval of tariffs, verification processes, efficiency measures or plans, guarantees that the contractor should provide to the GoN and those that the GoN should provide to the contractor, equipment replacement and facility maintenance arrangements, Service Level Agreements (SLAs) etc. Typical performance criteria to be considered in the SLA and related breach for which performance / security can be claimed are: Average turnaround time for different types of vessels. Accidents / damage / lost time injuries. Average waiting time. Gross berth productivity. Berth occupancy rate/level. Working time overtime at berth. Dwell time (Cargo). Ship productivity indicator. Tons per gang hour. TEUs per crane-hour. Tons / ship / day. 365. Governance arrangements implemented including removal of unnecessary burden or Government interaction, so long as operations maintain commerciality and deliver on agreed obligations, Investment and/or financial delegations and responsibilities in line with operation, acknowledgement of authority related to externally recruited / funded specialist roles in management and operation of the NPA, Preparation and audit of accounts to International Standards, nominated training under reform requirements and timelines, and legislative authority for NPA to negotiate and enter into future concession / lease arrangement.
13.2.7 Climate Change and Disaster Risk Assessment
Selection of appropriate design criteria for the deck level of the wharf and breakwater crest level that take in account existing and future wave climate and sea level rise; Adoption of measures to prevent ocean inundation and catchment flooding of the port land, such as providing a shoreline revetment, filling of the port land and/or suitable floor levels for buildings; and
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Adoption of a more robust design for the wharf and breakwater to ensure the structures are able to withstand the wave forces under sea level rise conditions.
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