Proposed Loan Rantau Dedap Geothermal Power Project (Phase 2)
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Environmental and Social Due Diligence (ESDD) Project Number: 50330-001 March 2018 Proposed Loan Rantau Dedap Geothermal Power Project (Phase 2) (Republic of Indonesia) Prepared by Mott MacDonald for PT Supreme Energy Rantau Dedap (PT SERD) This environmental and social due diligence 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. Your attention is directed to the “Terms of Use” section of this website. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic are 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. Rantau Dedap Geothermal Power Project Environmental and Social Due Diligence 9 March 2018 Mizuho Bank, Ltd. Mott MacDonald 1 Grange Road #07-01 Orchard Building 239693 Singapore T +65 6293 1900 F +65 6293 1911 mottmac.com Mizuho Bank, Ltd. Japan Rantau Dedap Geothermal 379968 03 C Power Rantau Project Dedap Geothermal ESDD Mott MacDonald Environmental and Social Due Diligence 9 March 2018 Mott MacDonald Singapore Pte Limited is a subsidiary of Mott MacDonald International Limited. Registration no. Mizuho Bank, Ltd. 197302421K Mott MacDonald | Rantau Dedap Geothermal Power Project Environmental and Social Due Diligence Issue and Revision Record Revision Date Originator Checker Approver Description A 23 B Lim M O’Brien K Haymon Draft issue August T Nugent T Streather 2017 I Bray C Mihai B 10 B Lim S Arora K Haymon Final issue January T Nugent C Mihai 2018 I Bray C 9 March B Lim K Haymon K Haymon Final issue – updates as per 2018 lenders comments Document reference: 379968 | 03 | C Information class: Standard This report has been prepared solely for use by the party which commissioned it (the ‘Client’) in connection with the captioned project. It should not be used for any other purpose. No person other than the Client or any party who has expressly agreed terms of reliance with us (the ‘Recipient(s)’) may rely on the content, information or any views expressed in the report. We accept no duty of care, responsibility or liability to any other recipient of this document. This report is confidential and contains proprietary intellectual property. No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by us to any party other than the Client or any Recipient(s), as to the accuracy or completeness of the information contained in this report. For the avoidance of doubt this report does not in any way purport to include any legal, insurance or financial advice or opinion. We disclaim all and any liability whether arising in tort or contract or otherwise which it might otherwise have to any party other than the Client or the Recipient(s), in respect of this report, or any information attributed to it. We accept no responsibility for any error or omission in the report which is due to an error or omission in data, information or statements supplied to us by other parties including the client (‘Data’). We have not independently verified such Data and have assumed it to be accurate, complete, reliable and current as of the date of such information. Forecasts presented in this document were prepared using Data and the report is dependent or based on Data. Inevitably, some of the assumptions used to develop the forecasts will not be realised and unanticipated events and circumstances may occur. Consequently Mott MacDonald does not guarantee or warrant the conclusions contained in the report as there are likely to be differences between the forecasts and the actual results and those differences may be material. While we consider that the information and opinions given in this report are sound all parties must rely on their own skill and judgement when making use of it. Under no circumstances may this report or any extract or summary thereof be used in connection with any public or private securities offering including any related memorandum or prospectus for any securities offering or stock exchange listing or announcement. 379968 | 03 | C | 9 March 2018 Rantau Dedap Geothermal ESDD Mott MacDonald | Rantau Dedap Geothermal Power Project Environmental and Social Due Diligence Contents Executive summary 1 1 Introduction 4 1.1 Overview 4 1.2 Definition of terms 4 1.3 Objectives 4 1.4 Project scope for the ESDD 5 1.5 Project description 5 1.5.1 Project status 5 1.5.2 Project location 6 1.5.3 Project participants 8 1.5.4 Project components and status 9 2 Approach 15 2.1 Overview 15 2.2 Approach 15 2.2.1 Compliance framework 15 2.2.2 Risk ranking 16 2.2.3 Review overview 17 2.2.4 Stakeholder engagement 18 3 Environmental and social compliance review 21 3.1 Overview 21 3.2 National requirements 21 3.3 Equator Principles III and IFC Sustainability Framework 25 3.4 IFC Performance Standards 2012 and IFC EHS Guidelines 28 3.5 JBIC and NEXI 66 3.6 ADB Safeguard Requirements 100 3.6.1 ADB Project Categorisation 100 3.6.2 ADB compliance review 102 4 Action plan 130 4.1 Overview 130 4.2 Environmental and social action plan 130 Appendices 139 A. Permitting status 140 379968 | 03 | C | 9 March 2018 Rantau Dedap Geothermal ESDD Mott MacDonald | Rantau Dedap Geothermal Power Project Environmental and Social Due Diligence B. Organisational chart 144 C. Land acquisition overview 147 C.1 Overview 147 C.2 2011 to 2014 SERD led land acquisition 147 C.3 2014 to 2017 SERD led land acquisition 147 C.4 PLN led land acquisition 149 C.5 Final IPPKH permit 151 C.6 Final HGB Certificate 152 C.7 Involuntary Resettlement Categorisation Checklist 153 D. Initial Indigenous Peoples Screening 155 D.1 Overview 155 D.2 Initial assessment of January 2017 Indigenous Peoples Screening and Categorisation Outcomes 155 E. 2017 Indigenous Peoples Screening Assessment 161 379968 | 03 | C | 9 March 2018 Rantau Dedap Geothermal ESDD Mott MacDonald | Rantau Dedap Geothermal Power Project 1 Environmental and Social Due Diligence Executive summary An environmental and social due diligence (ESDD) has been undertaken on the Rantau Dedap geothermal power project (“the Project”), which is located in South Sumatra Province, Indonesia. The Project is being developed by PT. Supreme Energy Rantau Dedap (SERD) (“the Sponsors”); the Sponsors are seeking finance from commercial banks, with Mizuho Bank, Ltd. (Mizuho) as the mandated lead arranger (MLA). International development banks and financial organisations, including the Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI), are also financing the Project and are collectively referred to as “the Lenders”. The environmental and social standards of the Equator Principles, International Finance Corporation (IFC), ADB, NEXI and JBIC have been used to inform this report and are collectively termed the ‘compliance framework’. Considering environmental and social performance of the Project against this compliance framework, a risk ranking of low, medium or high has been applied to each issue identified as presenting a compliance gap. Actions to reduce issues rated ‘high risk’ and ‘medium risk’ have been included in an environmental and social action plan (ESAP) within this report (see Section 4.2). The Project has developed an environmental and social impact assessment (ESIA) and an environmental impact assessment (AMDAL) for local compliance. These documents were reviewed and supplemented by a site visit to verify initial assumptions. A summary of the issues considered of ‘medium’ or ‘high’ risk is provided below. High risk – likelihood and impacts could have a material impact on the Project or its compliance status, actions are to be undertaken to manage risks prior to financial close ● Biodiversity – egMitigation measures to avoid and minimise adverse impacts on critical habitat trigger species have been identified in the Critical Habitat Assessment (CHA)/BAP. However, no targeted off-setting or monitoring measures were described in detail. The biodiversity offset strategy states that further information will be included as part of the biodiversity offset management plan (BOMP). Medium risk – may result in non-conformance with the Project’s compliance framework, and remedial actions with appropriate timescales are to be identified ● Associated Facilities – the environmental and social assessment relating to the transmission line developed by PT Perusahaan Listrik Negara (PLN), should be provided for review, when available. – SERD is to commit to positively influencing environmental and social outcomes, to the extent feasible, relating to on the development of the transmission line - in particular, for the 36 towers within SERD’s designated Geothermal Working Area (Wilayah Kerja Pertambangan – WKP) – A detailed assessment of the land acquisition processes and risks for the transmission line has been undertaken as part of this ESDD and a separate social compliance audit report. While the regulatory framework being used by PLN will not result in a negotiated settlement outcome (due to the expropriation powers readily available to it), Mott MacDonald considers the processes it intends to use and the regulatory provisions will ensure that for acquisition outside of protection forest areas core concepts such as replacement value will be adhered to and is a solid basis for achieving outcomes consistent with the Applicable Standards. It is recommended that monitoring of this 379968 | 03 | C | 9 March 2018 Rantau Dedap Geothermal ESDD Mott MacDonald | Rantau Dedap Geothermal Power Project 2 Environmental and Social Due Diligence process occur so SERD and Lenders have visibility of any cases that result in expropriation. Within the protection forest areas Mott MacDonald has noted that the regulatory framework used may result in some minor uncompensated livelihood impacts.