53037-001: AC Energy Green Bond Project
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Social Compliance Audit Report Project Number: 53037-001 April 2021 Regional: AC Energy Green Bond Project (Subproject: GIGASOL3 Solar Farm Project) Prepared by GIGASOL3, Inc. for the Asian Development Bank. This social compliance audit report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. Social Due Diligence/Social Compliance Audit Report GIGASOL 3 SOLAR FARM PROJECT I. INTRODUCTION 1. Subproject/Investment Description 1. AC Energy Philippines (ACEN) is the owner and developer of Gigasol 3 Solar Farm Project through its subsidiary, Gigasol3, Inc. It is the listed energy platform of AC Energy and Infrastructure Corporation (“AC Energy”, formerly, AC Energy Inc.). AC Energy is a wholly owned subsidiary of Ayala Corporation, one of the largest and most diversified conglomerates in the Philippines, with business interests in real estate, banking, telecommunications, water, power, infrastructure, industrial technologies, healthcare, and education. The core business of AC Energy is power project development, renewable and thermal power generation, and wholesale and retail electricity supply. ACEN also has an interest in oil and gas exploration through its investment in ACE Enexor, Inc. AC Energy owns 81.6% of ACEN. 2. Gigasol 3 is one of the 14 energy projects of ACEN (Table 1). The project aims to supply electricity to the Luzon grid, where there is an expected short supply and at the same time use clean and renewable energy to ease the shortfall. The project was first conceptualized in 2017 after which the feasibility study was conducted between 2018 and 2019 (Table 2). The construction of the facilities began on 01 July 2020 and will be completed on 09 February 2021. Construction is 59.11% complete as of 20 October 2020. To manage and operate the project, ACEN created Gigasol3 Incorporated, a fully-owned subsidiary. Table 1 ACEN Energy Projects, Capacity and Location No Project Capacity Location (MW) 1 North Luzon Renewables 81 Pagudpud, Ilocos Norte 2 North Wind Power 52 Bangui, Ilocos Norte 3 Luzon Peaking Plants 178 Bacnotan, La Union 4 Palauig Solar (Gigasol) 60 Palauig, Zambales 5 Alaminos Solar 120 Alaminos, Laguna 6 South Luzon Terminal Energy 244 Calaca, Batangas Corporation (SLTEC) 7 Maibarara Geothermal Plant 32 Sto. Tomas Batangas 8 Ingrid Peaking 150 Pililla, Rizal 9 Power Barges 66 Iloilo City, Iloilo 10 Guimaras Wind 54 San Lorenzo, Guimaras 11 Islasol 80 La Carlota and Manapla, Negros Occidental 12 Sacasol 45 San Carlos, Negros Occidental 13 Montesol 18 Bais, Negros Oriental 14 Biopower Plants 63 La Carlota City, Negros Occidental Source: https://www.acenergy.com.ph/about/ Table 2 Selected Data on Gigasol 3 Solar Farm Project: September 2020 Subproject Name Gigasol3 Solar Farm Project Developer and Operator AC Energy Philippines (ACEN) Ownership of Developer and AC Energy (81.6%) Operator Year of Incorporation of AC 23 July 2019 Energy Philippines Year the Sub-project was First 2017 Conceptualized Inclusive Years of Conduct of 2018-2019 Feasibility Study Type of Agreements signed Solar Energy Operating Contract, 27 February 2020 with Government Agencies and Date of Signing Licenses obtained From the Municipal Endorsement Government and Date of Environmental Compliance Certificate (ECC) Issuance Barangay Endorsement Locational Clearance Zoning Certificate Building Permit - 30 June 2020 Bureau of Customs Certificate of Registration – 24 January 2020 Board of Investment Certificate of Registration – 10 July 2020 Tree Cutting Permit for Mango Trees – 10 October 2019 Tree Cutting Permit for Other Fruit Bearing Trees – 05 December 2019 Tree Cutting Permit for Planted Trees – 03 February 2020 Tree Cutting Permit for Naturally Grown Trees – 11 March 2020 Tree Cutting Permit for Narra – 24 February 2020 Estimated Project Cost (USD) 38,350,000 USD Inclusive Years of 2020-2021 Construction Corporate Name of Main ERS Energy Sdn. Bhd and JC Electrofields Power Systems Contractor Inc. Names of Sub-Contractors Sarmiento Group, YFK Engineering, Aguilar (MGA), Ariel Hernandez Dungo (AHD), Keon Construction, Frank Pamintuan (FRP), Impedance Engineering (IES), Albertous (AC), Etreme Solar (ES), Ulyses, Shield Construction, RSC Percentage of Completion as 59.11% of 20 October 2020 Commercial Operating Date 09 February 2021 Project Lifespan in Years 25 years Capacity 63 MWp DC Buyer of Electricity Produced Wholesale Electricity Spot Market (WESM) 3. The Engineering, Procurement and Construction (EPC) contractors are ERS Energy Sdn. Bhd and JC Electrofields Power Systems Inc which were granted the Notice to Proceed on 16 February 2020. The former is a company based in Kuala Lumpur, Malaysia while the latter is based in Velenzuela City, Philippines.1 The expected commercial operating date of the project is on February 9, 2021. It will have a production capacity of 63W p DC. The electricity generated from the power plant will be evacuated to the national grid by tap-in connect at Pole 208 of NGCP's 69kV Botolan-Candelaria Transmission Line that is located within the project site. The total construction cost is 38,350,000 USD. 2. Objectives and Scope of the Report. 4. This report contains the result of the social audit conducted on Gigasol3 Project on 21 September and 15 November 2020. It is prepared as part of the requirement of Asian Development Bank (ADB) which is considering financing the project. The financing will be through a private sector loan to ACEN. Through this report, ADB will determine whether ADB 2009 Safeguard Policy Statement (SPS) requirements and other ADB social policies are applicable. If these are applicable, the social audit determines the degree of compliance to the requirements and policies. In addition, the audit also confirms the project’s compliance with applicable national laws. Through the audit process and result, ADB will confirm the following: (i) that all key potential social impacts and risks of a project are identified; (ii) that effective measures to avoid, minimize, mitigate, or compensate for the adverse impacts are incorporated into the safeguard plans and project design; (iii) that the borrower/client understands ADB’s safeguard policy principles and requirements as laid out in Safeguard Requirements 1–4 and has the necessary commitment and capacity to manage social and environmental impacts and/or risks adequately; (iv) that the role of third parties is appropriately defined in the safeguard plans; and (v) that consultations with affected people are conducted in accordance with ADB's requirements (Paragraph 56). 5. If there are aspects of non-compliance, this report will recommend corrective measures. The conduct of social audit intends to fulfill the requirements of 2009 ADB Safeguard Policy Statement (SPS) on existing facilities which it defines as facilities and/or business activities that already exist or under construction. For these facilities, the requirement is as follows: The borrower/client will undertake an environment and/or social compliance audit, including on-site assessment, to identify past or present concerns related to impacts on the environment, involuntary resettlement, and Indigenous Peoples. The objectives of the compliance audit are to determine whether actions were in accordance with ADB’s safeguard principles and requirements for borrowers/clients, and the project’s compliance with applicable national laws and regulations, and to identify and plan appropriate measures to address outstanding compliance issues. Where noncompliance is identified, a corrective action plan agreed on by ADB and the borrower/client will be prepared. The plan will define necessary remedial actions, the budget for such actions, and the time frame for resolution of noncompliance (2009 ADB SPS Appendix 4 Paragraph 12). 3. Methodology 6. Primary and secondary information are used to prepare this report. The sources of primary information are on-site observation and interview with key stakeholders and project staff. Due to existing coronavirus disease (COVID 19) pandemic control measures, primary data collection was 1 https://www.ers.my/about-ers-energy/ and http://www.jcelectrofields.biz/AboutUs/CompanyProfile made virtually. The on-site observation was conducted through a video tour and review of still photographs which provide aerial and ground views of the site and vicinity. 7. To collect information from key stakeholders, a two-tier interview was conducted. This was done by preparing a set of guide questions beforehand and sending these to the interviewees so that they could review and prepare the answers. The project staff subsequently administered the guide questions to the interviewee as the first-tier interview between 30 September and 14 October 2020. The responses to the guide questions were sent to the social auditor who subsequently conducted the second-tier interview on 14-15 October 2020. The interview which was done online confirmed and clarified the interviewee’s responses to the guide questions and probed for more information. The list of interviewees is in Appendix 1 and the guide questions are in Appendix 2. 8. The interview of the project staff and