The World Bank Agus-Pulangi Hydropower Complex Rehabilitation Project (P173728) Public Disclosure Authorized

For Official Use Only

Public Disclosure Authorized Concept Environmental and Social Review Summary Concept Stage (ESRS Concept Stage)

Date Prepared/Updated: 07/08/2020 | Report No: ESRSC01478 Public Disclosure Public Public Disclosure Authorized Public Disclosure Authorized

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BASIC INFORMATION

A. Basic Project Data

Country Region Project ID Parent Project ID (if any)

Philippines EAST ASIA AND PACIFIC P173728

Project Name Agus-Pulangi Hydropower Complex Rehabilitation Project

Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date

Energy & Extractives Investment Project 7/1/2021 9/29/2021 Financing For Official Use Only Borrower(s) Implementing Agency(ies)

The Republic of the National Power Corporation, Philippines Power Sector Assets and Liabilities Management Corporation

Proposed Development Objective(s) To enhance the reliability of clean energy generation in Mindanao by rehabilitating the Agus-Pulangi Hydropower Complex. Public Disclosure Public Financing (in USD Million) Amount

Total Project Cost 300.00

B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No

C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] The Agus-Pulangi Hydropower Complex (APHC) is located on the island of Mindanao in the Philippines archipelago and it consists of seven run-of-river hydropower plants (HPP) with a total installed capacity of about 1,000 megawatts (MW). Six of the plants of the APHC are located on the Agus River. The seventh plant is the Pulangi IV Plant, the first of five plants envisaged on the Pulangi River. The HPPs technology is reaching the end of its operational life, getting highly inefficient, and the infrastructure presents deteriorating signs that pose significant safety risks. Out of the 1,000 MW of capacity installed, only 600-700 MW is available.

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The APHC Rehabilitation Project will be structured in the following two components:

Component 1. Rehabilitation of APHC power units and infrastructure The project component will finance the rehabilitation of some of the plants, based on their conditions, needs of Mindanao power system, and economic and financial viability. Since the six Agus HPPs are developed in a cascade, it is necessary to assess the priority, grouping and sequencing of rehabilitation. The rehabilitation will include generating and auxiliary equipment, control systems, civil structures and hydro-mechanical equipment and penstocks. Works will also be included to address key safety issues for the HPPs to meet international safety standards.

The scope of rehabilitation of each equipment/structure for each plant will depend on their conditions, and can broadly be described as:

For Official Use Only - Option 1 - Restoring rated capacity, extending their operational lives and ensuring safety mainly through repairs and replacing obsolete equipment;

- Option 2 - In addition to Option 1, additional measures to increase capacity and energy production through efficiency improvements.

- Option 3 would consider additional scope of rehabilitation if generation constraints, which could be caused by potential flooding of the midstream Balo-i Floodplains when upstream plants operate at full capacity, were removed through the envisaged development of dikes by the Department of Public Works and Highways (DPWH). The function of the dikes is to mitigate flooding caused by natural floods of a larger magnitude of river discharge compared to the Agus HPPs’ discharge. The envisaged DPWH flood mitigation project is not a component of the Project.

Public Disclosure Public Component 2. Capacity building and implementation support This component will finance the cost of technical consultancy to support the implementing agencies, National Power Corporation (NPC) and the Power Sector Assets and Liabilities Management Corporation (PSALM), in project management and implementation. Key consultancy contracts financed under this component will include the owner’s engineer to support NPC in the implementation of Component 1. Activities for capacity building and Technical Assistance (TA) will also be covered under this component and may include issues such as sustainable electricity pricing reform, power system planning, optimization of cascade operation, reinforced safety in HPP and to explore public-private partnership (PPP) investment opportunities in the sector. These potential TA activities will be considered during project preparation.

D. Environmental and Social Overview D.1. Detailed project location(s) and salient physical characteristics relevant to the E&S assessment [geographic, environmental, social] The APHC is located on the island of Mindanao, six plants on the Agus River composing the “Agus Cascade” and one on the Pulangi River (Pulangi IV HPP).

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Pulangi IV, commissioned in 1985 with 255 MW of installed capacity, is located near Maramag in Bukidnon Province. It has a reservoir with an original storage volume of 73 million cubic meters (MCM), but reduced to about 26 MCM due to sedimentation. At maximum plant discharge of 276 cubic meters per second (m3/s), the original reservoir capacity is only worth approximately three days of operation, and the current available storage capacity is worth one day only. The reservoir is called the Pulangi Lake or the Maramag Basin and has a surface area of about 1,100 hectares, but reduced due to sedimentation. The reservoir and dam is also the main water source for the province of Bukidnon, both for drinking water and for irrigation through the National Irrigation Administration (NIA).

The Agus River flows for 36.5 km from Lake Lanao to Iligan Bay. It cuts through the provinces of Lanao del Sur and Lanao del Norte. Settlements along the banks of the river include the City of Marawi, the Municipality of Linamon and the City of Iligan. It separates into two channels as it drains to Iligan Bay; one going over the Maria Cristina Falls while the other supplies the Tinago Falls. The river descends for about 700 meters between Lake Lanao and Iligan Bay. The river is relatively shallow and only 1.2 meter deep in some areas. The watershed spans about 200,000 hectares. It has For Official Use Only a discharge of about 60 m3/s and flows from a narrow depression off the northwestern rim of Lake Lanao and over a basalt rock formation.

The project area straddles three provinces: Lanao Del Norte and Bukidnon part of Mindanao administrative region and Lanao Del Sur part of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) and Lanao Del Norte. The economies are mainly based on agriculture (and fisheries in Lanao del Norte). Bukidnon Province is a major producer of rice and corn.

The majority of people in Lanao del Norte and Lanao del Sur belong to the Maranao tribe, one of the 13 ethno- linguistic tribes that comprise the Moro groups of BARMM practicing Islam. The majority of the population in Bukidnon are Christians with the Cebuano being the main ethnic group. About 25% of the population belong to different indigenous groups collectively referred to as Lumads, including the Bukidnon, Higaonon, Manobo, and

Public Disclosure Public Talaandig groups.

The project location has a complex social context that defines many of the social risks of the project, including: (i) complex land issues with disputes over land and access to natural resources, including historic disputes over the utilization of Lake Lanao and Agus River, (ii) conflict and violence with many armed elements operating in the area, including criminal and kidnap for ransom groups and revolutionary groups such as the New People's Army (NPA), the Moro National Liberation Front (MNLF), the Moro Islamic Liberation Front (MILF) and the Maute group (ISIS- affiliated), (iii) and presence of indigenous peoples in the Pulangi area with a history of resistance, supported by civil society organization (CSO) groups, against dam construction and other projects affecting the ecosystem of the Pulangi River. The plants were commissioned from 1969 (Agus VI) to 1994 (Agus II). With the end of the Marcos Regime’s Martial Law in 1984 and the country’s return to democracy in 1986, the Maranaos have started to raise social and environmental issues of the Agus power plants. Agus 1, the closest to the lake, was issued the Environmental Compliance Certificate (ECC) in 1992 with 23 conditions. The CSO who sits on the Agus Hydropower Complex Multi- Partite Monitoring Board—Save Lake Lanao Movement or SALLAM—has disagreed with the NPC over the implementation of these conditions, particularly on reforestation and irrigation. Potential legacy issues will be assessed as part of the ESIA. D. 2. Borrower’s Institutional Capacity The main implementing agency is the NPC. NPC has an Environmental Management Department (EMD) with a total of 29 staff (24 technical and 5 admin) and consisting of an Environmental Impact Assessment (EIA) and a Monitoring

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section. The EIA section is responsible for conducting the EIAs, including Social Impact Assessments. When needed, the NPC commissions consultants to assist in conducting the EIA. The Monitoring section conducts regular environmental sampling, environmental audit and also reviews the reports prepared by the Pollution Control Officers in each NPC-managed facility. Aside from the EMD, NPC also has a Watershed Management Department that is in- charge of land use permits, tree planting and watershed conservation activities. This unit is fully capable of ensuring that environmental and social risks of its projects are properly managed, based on requirements of the national environmental and social regulatory framework.

The NPC has not yet had any engagement with the World Bank. For this reason, NPC’s familiarity with World Bank Environmental and Social Framework (ESF) is limited. There is however good potential to strengthen and familiarize NPC’s environmental unit with the requirements of the ESF of the World Bank. Capacity will therefore be built through the ESIA to be undertaken for the project as a training plan will be developed as part of the project activities aimed at supporting NPC to meet ESF standards for environmental and social risk management. For Official Use Only Local Government Units (LGU) and LGU officials have low awareness about and capacity to implement World Bank’s ESF. The training plan may include LGU staff to the extent they will need to be involved during project implementation.

II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS

A. Environmental and Social Risk Classification (ESRC) Substantial

Environmental Risk Rating Substantial The Environmental Risk Rating is substantial under the pretext that Option 3 would be realized. If only option 1 / 2 materialize, the environmental risk is deemed moderate. The proposed risk ratings are based on the following Public Disclosure Public considerations: The project will finance rehabilitation activities of APHC, including civil and engineering works and their supervision. An ESIA will be carried out, financed by a grant from the European Commission. The ESIA will be governed by the ESF and will inform the options selection and alternatives study in the Feasibility Study (FS). The following risks have been identified at this point:

(i) Baseline sensitivity is considered moderate. The project area is located in a mix of natural forest areas and modified landscapes. The natural baseline conditions may have sensitive aspects in terms of presence of natural habitats, terrestrial and aquatic ecosystems, wetlands and natural resources, such as water for drinking and irrigation. There may be important ecosystem services to consider, both provisioning (e.g. water supply, fisheries) and regulating (flood mitigation by wetlands and flood-plains). However, the risk assessment needs to consider that all dams and appurtenant structures in the cascade have already been built, and that the bulk of adverse impacts occurred decades ago. It is important to note that the baseline conditions in the project area include existing dams and hydro-technical installations, which will not be significantly modified and the enhanced discharge capacity will not go beyond the original design. Land conversion, greenfield developments or habitat fragmentation will be neither directly nor indirectly impacted by this project.

(ii) Project impacts. The nature and magnitude of the potential ES risks and impacts due to project activities are deemed substantial at this stage, based on the assumption that option 3 would be realized, resulting in an increase of

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current discharge towards the originally designed discharge rates (for Agus 2 this would mean from currently 120m3/s to the design discharge of 210 m3/s). The rationale for a substantial rating is the potential changes to the operational regime of the cascade and its effects on river hydrology, which will be assessed in the ESIA. The realization of option 3 depends on the progress of an independently planned flood protection project managed by DPWH, specifically on the progress of dike construction within the implementation period of the Project. Even if option 3 is realized, the plant discharge is unlikely to increase beyond the original rated discharge. If this option is not selected for financing, a decrease of the risk rating to moderate should be considered, because if limited to option 1 and 2, all works (e.g. repair of and optimization of electro- and hydro-mechanical equipment) would take place within existing footprints and structures, and risks would be moderate to low.

(iii) Client capacity and engagement. Risks related to the capacity and commitment of the NPC to manage risks and impacts is moderate, given the adequate staffing and well established Environmental Department of the NPC. This department is very familiar with the Agus-Pulangi area and its inherent risks. Future impacts as a result of For Official Use Only implementing the FS and proposed design will be covered in the ESIA.

(iv) External risks are deemed moderate concerning environmental aspects, but substantial concerning social aspects given the conflict situation (see below). The city of Marawi, the epicenter of the conflict, is situated on the shore of Lake Lanao in the upstream area of the project site. However, APHC has been operating for several decades, suggesting its vulnerability to the current fragility, conflict and violence situation is manageable. The same assumption applies to sensitivity towards climate change, climate-driven extreme weather events, and seismic events. These will be assessed within the planned dam safety assessment and ESIA. Social Risk Rating Substantial The social risk rating for the project is considered substantial. While the expected project investments are expected to be relatively minor, mainly through rehabilitation or replacement of equipment, the project site is beset with complex social issues that may affect the outcomes of the project. The social risk rating will be reviewed again once Public Disclosure Public the FS has defined the scope of rehabilitation and ESIA has been drafted (including its assessment of legacy issues).

The project is located in a conflict-affected area with a complex socio-cultural context that requires careful analysis of the options and associated social risks, impacts and legacy issues. The three provinces are home to Muslim separatist and communist armed rebellion, and have persistently been among the poorest provinces of the country. Civilians have been heavily affected by the armed conflict, notably during the the wars against the MILF in the 2000s, the Marawi siege in 2017, and by cyclical displacements caused by vertical and horizontal conflicts. Recovery and rehabilitation efforts have been limited and the reconstruction of Marawi, with promised state-of-the-art infrastructure, has not been started. Displaced people continue to stay either in temporary shelters or with their relatives outside the city. Despite advancement in the political strand of their struggle and their engagement with the mainstream Filipino government, the Maranaos continue to maintain strong cultural and political structures and practices. Currently, the 16 royal houses co-exist with the local and regional structures of BARMM.

Indigenous peoples are present in the project area of the Pulangi IV HPP. Grievances over traditional rights and ancestral domains may arise. Some organizations oppose the construction of new dams in the area (particularly the proposed Pulangi V HPP slated for development by a private investor, which will potentially submerge 3,300 hectares of sloping lands in 22 barangays in Bukidnon and North Cotabato provinces, including what is believed to be the burial ground of Apo Mamalu, the revered ancestor of IPs in Mindanao) and have criticized existing dams as well.

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Consultation and project coordination with the multiple communities, political structures and organizations will be essential during project preparation and implementation. Other social risks that may arise include (i) occupational health and safety, labor management and Gender-Based Violence (GBV) issues, (ii) community health and safety, especially warning and emergency response systems for flood surges and dam failure scenarios, (iii) traffic safety, and (iv) managing security services for the project sites. The project is not expected to require land acquisition or involuntary resettlement, however, this will depend on the final design option chosen and will be assessed during project preparation as part of the ESIA.

B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered

B.1. General Assessment

For Official Use Only ESS1 Assessment and Management of Environmental and Social Risks and Impacts Overview of the relevance of the Standard for the Project: The Client has already produced comprehensive Terms of Refrence (ToR) to recruit consultancy support for the ESIA preparation. The ToR were reviewed and endorsed by the teams of WB and European Union (EU). The ToR provide extensive guidance on the conduct of an ESIA including direct, indirect, and cumulative environmental and social (E&S) impacts of each option. Specifically, the ESIA will cover the following aspects:

- Legacy issues: The existing environmental and social liabilities of the 7 plants need to be addressed. The ESIA ToR include environmental and social audits/due diligence assessment to identify environmental and social liabilities and potential legacy issues and propose mitigation/remedial measures for such issues.

- Analysis of alternatives: a comparison of each rehabilitation option on technical, economic, environmental and Public Disclosure Public social merits.

- Cumulative impacts: provisions for a cumulative assessment following IFC methodology, and criteria to define under which conditions a Cumulative Impact Assessment would be required if option 3 would be realized in combination with the independently planned flood protection project.

- A plan on how stakeholders would be engaged during future implementation of the eventual construction.

- An assessment of E&S risks and impacts in connection with changes to the operating regime of the cascade and individual dams, including potential impacts on drinking water and irrigation under an expanded capacity.

The ESIA will include E&S management plans for all engineering and civil works, including plans for community health and safety, traffic safety, Occupational Health and Safety (OHS), labor management, GBV/Sexual Exploitation and Abuse and grievance redress mechanism. For option 3, the ESMP will include provisions to minimize impacts resulting from the potential change in river hydrology.

Other safeguards requirements will be determined by the scope of the works defined by the FS. The bidding documents prepared under the TA need to include all relevant restrictions/specifications from ESIA and audits.

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The ESIA will include: (i) socio-economic baseline, (ii) stakeholder analysis, especially regarding the identification and consultation with vulnerable and indigenous communities, (iii) conflict analysis concerning how the chosen rehabilitation option may affect existing conflict. Social audits will be conducted for the respective dams to identify liabilities and legacy issues concerning land acquisition, relocation, access restrictions and indigenous peoples, including any agreements and benefit-sharing arrangements. The social analysis aspects of the ESIA will inform the preparation of plans addressing social risks, such as a Stakeholder Engagement Plan (SEP), Labor Management Procedures (LMP) and Indigenous Peoples Plan (IPP).

The Agus HPP cascade originates from Lake Lanao with Agus I HPP at the mouth of the lake followed by Agus II HPP. The next is Agus III HPP which has not been constructed yet. Between the Agus III HPP site and the existing Agus IV HPP is the low-lying area known as the ‘Balo-i Floodplains.’ DPWH is expected to build dikes along the Agus River in this area to prevent flooding from natural floods. For Official Use Only DPWH’s proposed flood protection project is not part of this Project and, based on information available now, is not considered an associated facility as it does not meet all three criteria under the ESF (ESS1, para 11), particularly the third criterion on whether the associated facility is necessary for the project to be viable and would not have been constructed, expanded or conducted if the project did not exist.

This criterion is not met for the following reasons: (i) Options 1 and 2 of the Bank-financed project are expected to be viable even without the dikes as these options do not entail increase in plant discharge; (ii) APHC plants require rehabilitation anyway to enhance their reliability and extend their operational life, regardless of constructing the dikes for flood protection purposes, and (iii) the proposed flood protection project is part of the overall basin flood protection program under the mandate of the DPWH.

Public Disclosure Public On point (iii) above, it may be noted that while the Project’s Option 3 is expected to be viable only with the implementation of the flood protection project, the opposite is not true – DPWH’s flood protection project is viable without the Project. This is because the purpose of the protection works is to contain periodic natural floods of much greater magnitudes. The magnitude of the natural floods ranges from 530 m3/s (10 year event) to 830 m3/s (100 year event), in contrast to the 210 m3/s rated discharge of Agus II HPP. Therefore, it is believed that the flood protection works would be built even if the Project did not exist. Nonetheless, further due diligence on the flood protection works will be conducted during Project preparation to confirm this understanding.

There may, however, be some opportunities for synergies between the flood protection project and the Agus HPPs rehabilitation works, by e.g. optimizing designs at the interfaces between the two projects. Therefore, the Bank’s team will coordinate closely with DPWH.

Component 2 of the project may include TA on issues such as sustainable electricity pricing reform, power system planning, optimization of cascade operation, reinforced safety in HPP and to explore PPP investment opportunities in the sector. These potential TA activities will be considered during project preparation. They will be assessed for potential downstream environmental and social risks and impacts and will be managed in accordance with ESS1 during project implementation.

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Areas where “Use of Borrower Framework” is being considered: The ESF will apply for all relevant environmental and social risks and impacts. The project will apply relevant national legislation as required, but will not rely on the Borrower’s framework.

ESS10 Stakeholder Engagement and Information Disclosure Stakeholder engagement will be important throughout project preparation and implementation. Key stakeholders include various government agencies at national and local levels, spreading across three provinces and the BARMM administration, local communities, including indigenous peoples and various ethnic Muslim groups in the area.

The ToR for the ESIA includes stakeholder engagement and public consultations as required by local EIA regulations and the ESF. The Client has prepared a simple Stakeholder Engagement Plan for the RETF for the Preparation of the Agus Pulangi Hydropower Complex for Rehabilitation (P169280) financing the FS. A more detailed SEP will be For Official Use Only prepared for the investment project prior to appraisal. It will include a communication and dissemination strategy that supports public dialogue throughout project implementation within the complex social, political and cultural structures that include indigenous peoples, internally displaced peoples, Moro ethnic groups, religious groups, women and other vulnerable groups, and the formal and informal leaderships and civil society organizations representing these multiple social groups. If required, the SEP will include provisions for free, prior and informed consent with affected indigenous communities (see ESS7 below).

Should physical distancing for COVID-19 still be in place during project preparation, the public consultations and stakeholder engagement of the ESIA and FS will be modified following guidance from WHO and the World Bank. If public authorities do not allow face-to-face consultations due to the COVID-19 Pandemic, then provisions will be in place in line with the World Bank’s Technical Note on “Public Consultations and Stakeholder Engagement in WB- supported operations when there are constraints on conducting public meetings.” Public Disclosure Public

B.2. Specific Risks and Impacts

A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions The standard is relevant and LMP will be prepared prior to appraisal. The type and number of workers are not known at this point, but is expected to include direct and contract workers. There may also be primary supply workers while it is not expected that the project will hire community workers (this not excluding contractors hiring staff from the local communities). Child and forced labor will not be allowed. The ESIA will assess labor needs and risks, including potential risks associated with the influx of labor, OHS, labor and camp management, security issues and the use of security personnel.

ESS3 Resource Efficiency and Pollution Prevention and Management The overall objective of the project is to increase the efficiency of the use of water resources for energy production. This will result in positive impacts on the overall management of the cascade, which will allow a more balanced water

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management, better flood control and is expected to decrease the frequency of reservoir (Lake Lanao) drawdown to minimum operational levels. Further increases in efficiency (more energy by m3 of water flowing through the cascade) are expected from the optimization of the cascade’s operational regime, and the removal of selected bottlenecks (e.g. the release capacity of Agus II at Balo-i Floodplain). Potential environmental (and social) impacts of an expanded operational regime will be assessed as part of the ESIA.

The project will not produce emissions of harmful or toxic substances and will not emit climate pollutants. On the contrary, it will contribute to climate change mitigation by increasing the energy output from the cascade and adding to climate-neutral energy in the energy mix.

Waste and pollution management are considered routine challenges in the expected scope of civil and engineering works. The ESMPs will contain provisions and guidance on waste minimization, sorting, reuse, recycling and/or proper disposal. The ESMPs will also provide guidance on avoiding water pollution from civil works and accidental For Official Use Only spills. The project is not situated in an area under water stress, and the expected works do not have high water demand. However, any potential reduction of river flows during rehabilitation works and their impacts on water availability and potential stress on water resources will be included into the ESIA.

The may be a risk of the presence of asbestos in some or all of the Agus and Pulangi HPPs. Historically, Asbestos was used in HPPs as insulation for generators and turbines and sprayed on piping and conduits. By the mid-20th century, it was still used in fire-retardant coatings, concrete, bricks, pipes, gaskets, pipe insulation, ceiling insulation, fireproof drywalls, flooring and roofing (in these cases mostly as asbestos-cement). Asbestos may also be present in generator brakes and control cables. If Asbestos is present, it will have to be dismantled, handled, contained and disposed with special care and as a separate waste type.

The following approach is envisioned: (i) during the FS, identify all elements and installations of the HPPs that may

Public Disclosure Public contain asbestos; (ii) perform sampling and investigations (almost all detection methodologies involve microscopic analysis, taking advantage of the typical fibrous structure and crystallographical characteristics of the mineral); sampling and analytical protocols will be developed as part of the ESIA; (iii) if the presence of asbestos is confirmed, an asbestos management plan will be produced, which would include: (a) detailed inventory of asbestos materials, with locations, quantities and types of compounds; (b) procedures for dismantling, handling, segregation, packaging and transport; (c) a special section on occupational health and safety of all personnel involved with asbestos processing; (iv) plan for safe disposal of asbestos; (v) community health and safety aspects (e.g. prevention of reuse of asbestos containing construction materials).

It should be noted that asbestos is not per se toxic; its health risk results from its highly carcinogenic properties when airborne fibers are inhaled and accumulate in the lungs. If asbestos is kept wet, or is fixated within a matrix of paint or cement, or disposed under airtight cover (e.g. on a waste deposit) it is chemically inert and quite harmless.

The ESIA will also screen for other potential hazardous materials, such as polychlorinated biphenyl (PCB)-containing oils in transformers, and – if relevant – develop procedures for safe dismantling, handling, transport and disposal.

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ESS4 Community Health and Safety The standard is relevant and the ESIA will assess related risks and impacts. Material effects during project implementation may include risks and impacts such as on water supply, ecosystem services (e.g. fish stocks), or safety, e.g. due to flow fluctuations, sudden water releases and dam failure. The ESIA will assess these risks and potential impacts. There may also be some construction related risks to local communities, including in relation to labor influx and traffic and road safety, however, civil works related impacts and the need for external labor is expected to be minor. The use of security forces may pose risks to local communities. GBV may occur in relation to labor and security personnel. This will be assessed as part of the ESIA and risk management measures will be developed to minimize and manage risks related to influx of labor and the use of security personnel, including concerning GBV risks.

The ESIA will also assess impacts related to alternatives proposed including for safety of existing dams, including analysis of the impacts to human life and livelihood, natural and built environment in the event of dam failure, and For Official Use Only emergency preparedness and response planning. An ESMP and a Community Health and Safety Plan commensurate to needs of the investment will be prepared, including emergency preparedness and response measures.

As noted under ESS1, the project would interface with the scheme of flood protection works planned by DPWH around the Baloi floodplains. The plans for regulating the floodplains envisage a much larger system of dikes and flood protection than needed for potential increases in the discharge of Agus II HPP, with the objective to protect from natural floods and not to achieve the full design discharge of the Agus II HPP. The Bank-financed project will consider these activities and broader flood protection in its emergency preparedness and response planning. The ESIA will assess the existing emergency preparedness and response plans and arrangements, and recommend measures to improve these. As needed, this may require an updated Emergency Preparedness and Response Plan. Public Disclosure Public ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement The standard is currently relevant, however, it is still to be determined whether the project will result in any land acquisition, restrictions on land use, or involuntary resettlement. This depends on the rehabilitation option chosen and any need for new, or upgrading of existing, access roads or transmission lines. Options 1 and 2 are not expected to require land acquisition and would also be unlikely for option 3, although this would need to be confirmed during project preparation. Access to project sites are already good and all plants are connected to existing transmission lines. It is therefore not expected that new or expanded access roads and transmission lines would be needed. If such impacts do occur, the social risks of the project may increase due to the complex social context around land acquisition, securing right of way and land disputes. There are existing watershed protection areas established in part to support long-term sustainability of the hydropower plants, some managed by NPC. Enhanced restrictions, any legacy issues or other social risks and impacts in regards to these will be assessed as part of the ESIA.

The ESIA will assess potential impacts and risks, including potential legacy issues concerning land acquisition, resettlement and access restrictions. If necessary, a Resettlement Plan or Resettlement Policy Framework and/or a Process Framework will be prepared prior to appraisal.

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ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources The moderate risks and impacts to natural habitats and biodiversity will be covered by the planned ESIA. During project implementation, direct impacts on natural habitats, terrestrial or aquatic ecosystems, fisheries or protected areas are highly unlikely. With the exception of option 3 there will be no expansion of the existing footprints of the cascade, no land take or conversion. If option 3 materializes, the ESIA will include an appropriate assessment of potential impacts on biodiversity in the area of the new dikes. For all options, the ESIA will assess potential risks and impacts of the operational changes to the cascade and individual dams. Due to the small dimensions and non- sensitive baseline these risks are likely moderate. There is a moderate risk that the influx of labor and the potential establishment of additional or improved road access could increase illegal hunting or logging and result in additional stress to wildlife. This could also affect ecosystem services to local communities relevant under ESS4. This will be assessed by the ESIA and incorporated into the ESMP.

For Official Use Only ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities Indigenous peoples are present in the area of the Pulangi hydro power plant. It is currently not known if there are indigenous communities in the Agus project areas, although preliminary screening indicates that there is a small number of IPs who have moved to the Marawi area for economic reasons. There are some indigenous communities in the Pulangi area with recognized ancestral domains which are subject to the provisions of the Indigenous Peoples Rights Act and free, prior and informed consent may be required under this law. The Maranaos do not self-identify as indigenous peoples and are not identified as such by others (including under the Indigenous Peoples Rights Act). While they have been historically marginalized in the Philippines, they became part of the majority ethnic groups in the region with the establishment of the Autonomous Region in Muslim Mindanao (ARMM), the predecessor to BARMM, starting in the late ‘80s. However, they have strong formal and informal traditional institutions that would need to be engaged through project preparation and implementation.

Public Disclosure Public Since the project will finance rehabilitation activities and is expected to have limited construction activities, it is not known at this time whether the project will have impacts that require free, prior and informed consent under the Bank's ESS7. This will also depend on the project's impacts on water flow and any changes to the reservoirs and watersheds that are used or under customary ownership by indigenous communities.

The presence of indigenous peoples in the project areas, potential risks and impact to indigenous peoples, requirements under national law and ESS7, and potential legacy issues will be assessed through the ESIA and the Bank's own due diligence during early project preparation.

The project's SEP will include special provisions for stakeholder engagement and consultations with indigenous peoples in the project area, including with their representative organizations and networks such as the Save Pulangi Alliance—a network of IP groups and local and national CSOs. It is expected that an indigenous peoples instrument, likely an Indigenous Peoples Plan, will be required prior to appraisal to avoid or mitigate adverse impacts and enhance project benefits to local indigenous communities; however, this will be assessed early in the project preparation process and once the rehabilitation option is chosen. If deemed required under IPRA and/or ESS7 the SEP and IPP will include provisions for free, prior and informed consent.

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ESS8 Cultural Heritage The standard is currently considered relevant although the extent to which the project will have impacts, if any, on cultural heritage is unknown at this point. This depends on the rehabilitation option chosen which will be assessed as part of the ESIA. If any impacts to cultural heritage sites, these may include burial grounds, mosques or areas of cultural, historic or religious value to local communities. The project is not expected to have material impacts on intangible cultural heritage.

If the project may affect cultural heritage sites, a Cultural Heritage Management Plan will be prepared as part of the ESIA. Chance finds procedure will be included in the ESIA and related instruments.

ESS9 Financial Intermediaries The project will not involve financial intermediaries. For Official Use Only

C. Legal Operational Policies that Apply

OP 7.50 Projects on International Waterways No

OP 7.60 Projects in Disputed Areas No

III. WORLD BANK ENVIRONMENTAL AND SOCIAL DUE DILIGENCE

A. Is a common approach being considered? No Public Disclosure Public Financing Partners A Common Approach is currently not considered. The EU is financing the preparation of the ESIA, but it is agreed that the ESIA and the project's environmental and social risk management will follow the World Bank's ESF. This is also expected should other financing partners chose to finance parts of the project.

B. Proposed Measures, Actions and Timing (Borrower’s commitments) Actions to be completed prior to Bank Board Approval: ESIA, including: ESMP, asbestos management plan (if needed), Dam Safety Plan, Community Health and Safety Plan and Cultural Heritage Management Plan (if needed). SEP, LMP and IPP (if needed, or similar instrument addressing ESS7 requirements). An ESS5 instrument is not expected, but to be confirmed. Environmental and Social Commitment Plan (ESCP).

Possible issues to be addressed in the Borrower Environmental and Social Commitment Plan (ESCP):

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It is expected that all environmental and social risk management plans will be prepared prior to Bank appraisal, and that the ESCP will focus on providing commitment around the implementation of these, including adequate resources and capacity building for managing E&S risks.

C. Timing Tentative target date for preparing the Appraisal Stage ESRS 05-Apr-2021

IV. CONTACT POINTS

World Bank Contact: Takafumi Kadono Title: Senior Energy Specialist

For Official Use Only Telephone No: 5720+13658 / 65-650-13658 Email: [email protected]

Contact: Maria Ayuso Olmedo Title: Energy Specialist

Telephone No: +1-202-458-2210 Email: [email protected]

Borrower/Client/Recipient Borrower: The Republic of the Philippines

Implementing Agency(ies) Implementing Agency: National Power Corporation

Implementing Agency: Power Sector Assets and Liabilities Management Corporation Public Disclosure Public

V. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects

VI. APPROVAL

Task Team Leader(s): Takafumi Kadono, Maria Ayuso Olmedo

Practice Manager (ENR/Social) Susan S. Shen Recommended on 05-Jul-2020 at 20:58:9 EDT

Safeguards Advisor ESSA Nina Chee (SAESSA) Cleared on 08-Jul-2020 at 09:53:37 EDT

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