Document Produced Under Technical Assistance

Project Number: 46927-012 Technical Assistance Number: 8117 13 November 2017

Philippines: The Procter & Gamble Company Waste to Worth Project

Final Report (Cabuyao City, Laguna) Part 1 of 2

Prepared by AECOM Asia Co. Ltd. for the Asian Development Bank.

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

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.

Asian Development Bank / The Procter and Gamble Company

TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1)

Final Report (Cabuyao City)

November 2017

Name Signature

Prepared & Checked: Delton Ng

Reviewed & Approved: Matthew Ko

Version: Final Date: 13 November 2017

Disclaimer

This report is prepared for the Asian Development Bank and The Procter and Gamble Company and is given for its sole benefit in relation to and pursuant to TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) and may not be disclosed to, quoted to or relied upon by any person other than the Asian Development Bank and The Procter and Gamble Company without AECOM’s prior written consent. No person (other than the Asian Development Bank and The Procter and Gamble Company) into whose possession a copy of this report comes may rely on this report without AECOM’s express written consent and the Asian Development Bank and The Procter and Gamble Company may not rely on it for any purpose other than as described above.

AECOM Asia Co. Ltd. 1501-1510, 15/F, Grand Central Plaza, Tower 1, 138 Shatin Rural Committee Road, Shatin, NT, Hong Kong Tel: (852) 3922 9000 Fax: (852) 3922 9797 www.aecom.com

TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

TABLE OF CONTENTS

ABBREVIATIONS ...... 1 1. INTRODUCTION ...... 3 1.1 PROJECT BACKGROUND AND OBJECTIVE...... 3 1.2 DISCLAIMERS ...... 3 1.3 REPORT STRUCTURE ...... 5 2. SITE REVIEW ASSESSMENT ...... 6 2.1 SITE REVIEW BACKGROUND ...... 6 2.2 SITE RATINGS AND RECOMMENDATIONS ...... 11 3. MATERIAL SUPPLY ASSESSMENT AND LAND USE ASSESSMENT (TASK 1) ...... 15 3.1 PROJECT BACKGROUND ...... 15 3.2 ZONING / LAND USE PLANNING OF THE SELECTED SITE ...... 15 3.3 COLLECTION SYSTEM ...... 16 3.4 THE CLIENTS OF S.B. HAIN ENTERPRISES & GENERAL SERVICES INC...... 17 3.5 MATERIAL SUPPLY / CONTRACTS AND ASSOCIATED COSTS AND FEES ...... 17 3.6 BACKGROUND INFORMATION OF THE LGU CLIENTS ...... 17 3.7 PREVIOUS CLIENTS OF SBH ...... 22 3.8 WASTE PROJECTION OF SAMPLING DATA ...... 23 3.9 ESTIMATION OF SOLID WASTE COLLECTED FOR MATERIAL SUPPLY ...... 23 3.10 RECYCLABLE MARKET & INDUSTRY TREND ...... 25 3.11 THE COMPETITIVE LANDSCAPE ...... 26 3.12 JVA BETWEEN SURE GLOBAL AND SBH ...... 27 3.13 POLITICAL, ENVIRONMENTAL & REGULATORY CONSIDERATIONS ...... 28 3.14 ROLE OF THE LOCAL GOVERNMENT IN THE WASTE AND ENERGY SECTORS ...... 30 4. TECHNOLOGY AND PROCESS ENGINEERING REVIEW (TASKS 2 & 3) ...... 36 4.1 COMPONENTS OF THE PROPOSED MERF ...... 36 4.2 APPROACH OF THE TECHNOLOGY AND PROCESS ENGINEERING REVIEW...... 38 4.3 UNDERSTANDING & INTEGRATING THE TECHNOLOGY APPROACHES ...... 39 4.4 SEPARATION & CLEANING PROCESS ...... 42 4.5 BIO-TREATMENT PROCESS ...... 44 4.6 THERMAL TREATMENT PROCESS – GASIFICATION SYSTEM ...... 47 4.7 CONCLUSIONS AND RECOMMENDATIONS FOR TECHNOLOGY AND PROCESS ENGINEERING REVIEW 54 5. FINANCIAL ANALYSIS AND ECONOMIC ANALYSIS (TASK 6) ...... 56 5.1 FINANCIAL ANALYSIS ...... 56 5.2 ECONOMIC ANALYSIS ...... 64 6. TRAFFIC IMPACT STUDY (TASK 5) ...... 69 6.1 DESCRIPTION OF THE HOST CITY ...... 69 6.2 DESCRIPTION OF THE PROPOSED DEVELOPMENT ...... 69 6.3 OBJECTIVES AND SCOPE OF THE STUDY ...... 70 6.4 METHODOLOGY...... 70 6.5 DESCRIPTION OF IMPACT AREAS ...... 74 6.6 RESULTS OF THE TRAFFIC COUNT SURVEY ...... 78 6.7 TRAFFIC IMPACT ANALYSIS ...... 92 6.8 ESTIMATION OF TRAFFIC GENERATION ATTRIBUTED TO THE PROJECT ...... 94 6.9 RECOMMENDATIONS ...... 94 7. ENGINEERING GEOLOGICAL AND GEOTECHNICAL ASSESSMENT (TASK 6) ...... 96 7.1 GEOLOGY AND SEISMICITY ...... 96 7.2 PROJECT AREA GEOLOGY ...... 103 7.3 GEOTECHNICAL CONSIDERATIONS ...... 107

AECOM Asia Co. Ltd. i November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

7.4 GEOLOGICAL HAZARD ASSESSMENT ...... 107 7.5 CONCLUSION AND RECOMMENDATION ...... 109 8. ENVIRONMENTAL AND SOCIAL ANALYSIS (TASK 7) ...... 111 8.1 STAKEHOLDER ENGAGEMENT EXERCISE ...... 111 8.2 INITIAL ENVIRONMENTAL EXAMINATION, SOCIAL IMPACT ASSESSMENT AND RESETTLEMENT SAFEGUARD ASSESSMENT ...... 111 9. REGULATORY REVIEW (TASK 8) ...... 121 9.1 IDENTIFICATION OF VARIOUS IMPLEMENTATION OPTIONS FOR THE PROJECT STRUCTURE ...... 121 9.2 IDENTIFICATION OF REGULATORY ISSUES TO THE PROJECT STRUCTURE ...... 123 9.3 IDENTIFICATION OF THE CONSENTS, APPROVALS, PERMITS AND LICENSES REQUIRED FOR THE PROJECT ...... 124 10. IMPLEMENTATION PLAN (TASK 9) ...... 126 11. CONCLUSION AND RECOMMENDATIONS ...... 128 11.1 SITE SELECTION ...... 128 11.2 MATERIAL SUPPLY MARKET AND LAND USE...... 129 11.3 TECHNOLOGY AND PROCESS ENGINEERING ...... 129 11.4 FINANCIAL; AND ECONOMIC ANALYSIS ...... 131 11.5 TRAFFIC IMPACTS AND OPTIMIZATION OF WASTE COLLECTION LOGISTICS ...... 132 11.6 ENGINEERING GEOLOGICAL AND GEOHAZARD FOR THE SELECTED SITE ...... 133 11.7 ENVIRONMENTAL AND SOCIAL IMPACTS ...... 134 11.8 REGULATORY REVIEW ...... 136 11.9 IMPLEMENTATION PLAN ...... 138

List of Tables

Table 2.1 Potential Sites in Cabuyao City Table 2.2 Specific Site Selection Ranking Table Table 2.3 Indication of Scores for Site Selection Table 2.4 Overall Scoring and Comparison Table 2.5 Site Ranking Table 3.1 List of LGUs Outsourcing Garbage Collection and Hauling Services to S.B. Hain Enterprises & General Services Inc. (as of October 2017) Table 3.2 Major Clients of SBH as of February 2015 Table 3.3 Per Capita Collection Estimation Table 3.4 Waste Estimation of Binan Table 3.5 Waste Estimation of Cabuyao Table 3.6 Waste Estimation of Lipa Table 3.7 Waste Estimation of Indang Table 3.8 Waste Estimation of Muntinlupa Table 3.9 Waste Estimation of Calamba Table 3.10 Summary of Waste Collection Amount of waste from SBH Clients in 2015 (MT/day) Table 3.11 Roles and Responsibilities of National Agencies and Corporation in the Power and Energy Sector Table 4.1 Major Onsite Components of the Proposed MERF Table 5.1 Estimated Project Cost (In current prices) Table 5.2 Estimated Plant Capacity, MSW Feedstock Input Table 5.3 Gross Generation and Net Electrical Output Table 5.4 Operating and Maintenance Expenses: Parameters and Assumptions Table 5.5 Summary of Operating and Maintenance Costs (in million pesos, current prices) Table 5.6 Indicative Terms of the Loan Table 5.7 Financial Highlights (in million pesos, current prices) Table 5.8 Summary of Results of the Financial Analysis Table 5.9 Calculation of Weighted Average Cost of Capital Table 5.10 Sensitivity Analysis – Project Cost Table 5.11 Sensitivity Analysis – Project Delay

AECOM Asia Co. Ltd. ii November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.12 Sensitivity Analysis – Electricity Tariff Table 5.13 Sensitivity Analysis – Municipal Solid Waste Table 5.14 Estimated Project Cost (In constant 2017 prices) Table 5.15 Schedule of Operating and Maintenance Costs (In thousand pesos, constant 2015 prices) Table 5.16 Summary of Economic Costs and Benefits (in million pesos, constant 2017 prices) Table 5.17 Summary of Economic Costs and Benefits (in million pesos, constant 2015 prices) Table 5.18 Results of Economic Evaluation Table 5.19 Results of Sensitivity Analyses Table 6.1 Survey Points and Assigned posts Table 6.2 Level of Service Rating Scale Table 6.3 Total Number of Vehicles passing through the Survey Points (Roads) during the Multiple Peak-Hour Period of Observation Table 7.1 Peak Ground Accelerations Table 7.2 Peak Ground Acceleration in g Table 10.1 Initial Project Implementation Plan

List of Figures Figure 2.1 Photo Log of the Potenciano-Philsteel Site Figure 2.2 Photo Log of the Gatchalian Site Figure 2.3 Photo Log of Cabuyao Transfer Station Figure 3.1 Selected Location of the Proposed MERF Figure 3.2 Relationship Illustration between SURE Global, SBH and Cabuyao City LGU Figure 3.3 The Institutional Framework for Renewable Energy in the Philippines Figure 4.1 Simplified Process Flow Diagram of the Proposed MERF Figure 4.2 Indicative Layout of the Proposed MERF in Cabuyao City Figure 6.1 Location of the Proposed Development and Its Vicinity Figure 6.2 TIA Methodology Figure 6.3 Survey Point 1 at the intersection of Banlic-Mamatid Road and Manila South Road Figure 6.4 Survey Point 2 at Pulong Diezmo Road Intersection with Manila South Road Figure 6.5 Survey Point 3 at Barangay Sala Figure 6.6 Road Network along Access Points going to the Proposed Development Figure 6.7 Location of Major Access Points as Impact Areas Figure 6.8 Manila South Road at the Intersection with Banlic-Mamatid Road Figure 6.9 Location of Pulo-Diezmo Road Figure 6.10 Pulo-Diezmo Road Viewed from the Western Side of Manila South Road Figure 6.11 Manila South Road intersection with Pulong Diezmo Road, Viewed from the Northbound Lane. Figure 6.12 Manila South Road at Barangay Sala, Viewed from the Southbound Lane. Figure 6.13 Traffic Flow at the Intersection of Banlic-Mamatid – MSR Intersection Figure 6.14 Banlic-Mamatid-MSR Intersection Figure 6.15 Average Percentage Composition of Vehicles along Manila South Road during the Peak- Hour Periods Observed at the Banlic-Mamatid-MSR Intersection on Jan 9, 2017 Figure 6.16 Average Percentage Composition of Vehicles during the Peak-Hour Periods along Banlic-Mamatid Road on Jan 9, 2017 Figure 6.17 Traffic Flow at the Pulo-Diezmo-MSR Intersection Figure 6.18 Average Percentage Composition of Vehicles during the Peak-Hour Period at the Pulo- Diezmo Road – MSR Intersection on Jan 9, 2017 Figure 6.19 Average Percentage Composition of Vehicles Passing Through Pulo-Diezmo at the Intersection of Pulo-Diezmo Road - MSR during the Peak-Hour Period on Jan 9, 2017 Figure 6.20 Survey Point 3 along Manila South Road at Barangay Sala Figure 6.21 Average Percentage Composition of Vehicles during the Peak-Hour Period along Manila South Road in Barangay Sala on Jan 9, 2017 Figure 6.22 Average Percentage Composition of Vehicles along Banlic-Mamatid Road-MSR Road Intersection on Jan 11, 2017 Figure 6.23 Average Percentage Composition of Vehicles along Banlic-Mamatid Road during the Peak-Hour Periods on Jan 11, 2017 Figure 6.24 Average Percentage Composition of Vehicles during the Peak-Hour Period at Pulo- Diezmo-MSR Intersection on Jan 11, 2017

AECOM Asia Co. Ltd. iii November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.25 Average Percentage Composition of Vehicles during the Peak-Hour Period along Pulo- Diezmo Road on Jan 11, 2017 Figure 6.26 Average Percentage Composition of Vehicles along Manila South Road in Barangay Sala Figure 6.27 Average Percentage Composition of Vehicles along Banlic-Mamatid-MSR Intersection on Jan 13, 2017 Figure 6.28 Average Percentage Composition of Vehicles along Banlic-Mamatid Road on January 13, 2017 Figure 6.29 Average Percentage Composition of Vehicles during the Peak-Hour Period along Manila South Road at Purlo-Diezmo-MSR Intersection on Jan 13, 2017 Figure 6.30 Percentage Composition of Vehicles along Manila South Road in Barangay Sala on Jan 13, 2017 Figure 7.1 Major Tectonic Plates Figure 7.2 Major Structural Factures of the Philippines Figure 7.3 Distribution of Active Faults & Trenches in the Philippines Figure 7.4 Regional Geological Map of Central and Southern Luzon Figure 7.5 Project Area Geological Map Figure 7.6 Pliocine to Quaternary Geologic Map After Phivolcs Figure 9.1 Relationship Illustration between SURE Global, SBH and Cabuyao City LGU

List of Annexes Annex A Initial Waste-to-Energy Technology Comparison Annex B Results of Financial Analyses Annex C Results of Economic Analyses Annex D Summary of Traffic Impact Study Annex E Traffic Volume Count for Monday 9 January 2017 Annex F Traffic Volume Count for Wednesday 11 January 2017 Annex G Traffic Volume Count for Friday 13 January 2017 Annex H Memorandum on Cooperation Options Annex I Communications with the Department of Energy Annex J Permits and Approvals for the Material and Energy Recovery Facilities

AECOM Asia Co. Ltd. iv November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

ABBREVIATIONS

AD Anaerobic Digestion ADB Asian Development Bank BIR Bureau of Internal Revenue BOI Board of Investments BOT Build-Operate-Transfer C/N Ratio Carbon to Nitrogen Ratio CBA Cost-Benefit Analysis CDC Clark Development Corporation CDM Clean Development Mechanism CENRO City Environment and Natural Resources Office COD Chemical Oxygen Demand CSEZ Clark Special Economic Zone DB Technologies DB Technologies BV DENR Department of Environment and Natural Resources DOE Department of Energy DOST Department of Science and Technology E&S Environmental and Social EBITDA Earnings before Interest, Taxes, and Depreciation ECC Environmental Compliance Certificate EGGAR Engineering Geological and Geohazard Assessment Report EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EIS Environmental Impact Statement EMP Environmental Management Plans ERC Energy Regulatory Commission ESLF Engineering Sanitary Landfill EVF East Valley Fault FGD Focus Group Discussion FIRR Financial Internal Rate of Return FIT Feed-In Tariff GSSR Geological Site Scoping Report HRT Hydraulic Retention Time HUC Highly Urbanized City ICM ICM Inc. IEE Initial Environmental Examination IP Indigenous People IRA Internal Revenue Allocation IRR Implementing Rules and Regulations ITDI Industrial Technology Development Institute IWS Informal Waste Sectors KII Key Informant Interview LGC Local Government Code LGUs Local Government Units MCE Maximum Creditable Earthquakes MERF Material and Energy Recovery Facilities MGB Mines and Geosciences Bureau MOA Memorandum of Agreement MPDC Municipal Planning and Development Coordinator MRF Material Recovery Facilities MSW Municipal Solid Waste MW Megawatt MWH Megawatt Hour NCIP National Commission on Indigenous Peoples NGCP National Grid Corporation of the Philippines NLEX North Luzon Expressway NSCP National Structure Code of the Philippines NSWMC National Solid Waste Management Commission

AECOM Asia Co. Ltd. 1 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

O&M Operational & Maintenance OLR Organic Loading Rate P&G The Procter and Gamble Company PCCP Polystyrene Packaging Council of the Philippines PENDRO Provincial Environment and Natural Resources Officers PFS Philippine Fault System PGA Peak Ground Accelerations PHIVOLCS Philippine Volcanology and Seismology PPP Public-Private Partnership PPTA Project Preparatory Technical Assistance RA Republic Act RDF Refuse Derived Fuel RE Renewable Energy RRP Report and Recommendation to President SEC Security and Exchange Commission SPV Special Purpose Vehicle SV Switching Value SWAPP Solid Waste Management Association of the Philippines TA Technical Assistance TPD Tons per Day TrS Transfer Station TS Total Solids VAT Value Added Tax VS Volatile Solids WACC Weighted Average Cost of Capital WACS Waste Assessment Characterization Study WTE Waste to Energy WVF West Valley Fault WVFS West Valley Fault System

AECOM Asia Co. Ltd. 2 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

1. INTRODUCTION

1.1 Project Background and Objective

The Procter & Gamble Company Waste to Worth Project (the “Project”) aims to develop an integrated municipal solid waste (MSW) management plan and Waste-to-Energy (WTE) facilities in developing markets that will address the growing challenges in the disposal of MSW and concurrently promote the mitigation of environmental and social (E&S) impacts of current waste management practice in the Philippines. In particular, the Project will not merely propose an improved management and new treatment facilities for MSW, but it also aims to create value from MSW and operate on a profitable and scalable business model. This is a Project Preparatory Technical Assistance (PPTA) for the Project that is funded by the Asian Development Bank (hereinafter “ADB”) with sponsored funding from Procter & Gamble Company (hereinafter “P&G”) in determining the feasibility of constructing two Material and Energy Recovery Facilities (MERFs) in the Philippines, including the development of a detailed Implementation Plan for the Project. SURE Global W2Wi (hereinafter “SURE Global”), a joint venture partnership between W2Worth Innovations, LLC, Solutions Using Renewable Energy Inc. and JUM Global, Inc., will be the owner / operator of the MERF.

P&G recognizes the significance of developing proper waste management system to improve the livelihood of the affected communities. Their commitment to the development of improved MSW management in an emerging market has been demonstrated in the initiation for this Waste to Worth Project and its Long Term Sustainability Vision and 2020 Goals, which include its vision of powering their plants with 100% renewable energy and having zero consumer or manufacturing waste going to landfills. This Project will serve as a pilot project for P&G’s MERF developments in the Philippines, and will include two sites, i.e. Cabuyao City in the Pampanga Province and Cabuyao City in the Laguna Province. P&G has chosen the Philippines as the pilot sites due to its enabling environment with proactive involvement of national and local organization in strengthening the waste management sector and its supportive legal basis, as observed in the nation’s legislation in solid waste management. This enabling environment as observed in the Philippines will not only accommodate the smooth implementation of the Project, but also enable the replication of the two pilots.

This PPTA will therefore play an important role in providing findings on optimal technologies integration, preliminary designs and measures to address the deficit in waste management. The recommendations of this PPTA and the success of the Project will serve as key factors to further incentivize P&G and other investors in replicating, or even scale up, similar MERFs elsewhere in the Philippines or in countries where P&G has operations.

In February 2014, AECOM Asia Co. Ltd. (hereinafter “AECOM” or “the Consultant”) was commissioned by ADB and P&G to undertake this PPTA and was anticipated to be completed in 2016.

In particular to this Final Report (the “Report”), all of the activities conducted since the project inception phase up until January 2017 are presented in this report, including Material Supply Market and Land Use Assessment (Task 1), Technology & Processing Engineering Review (Task 2 & 3), Financial and Economic Analysis (Task 4), Traffic Impact Study (Task 5), Site Selection assessment (Task 6), Engineering Geological and Geohazard Assessment (Task 6), Environmental and Social Analysis (Task 7), Regulatory Review (Task 8), and Implementation Plan (Task 9). The methodology in conducting the assessments as well as the results and findings of the respective assessments are both presented in this report.

1.2 Disclaimers

The Report, including all supporting data and notes, was prepared or collected by AECOM for the sole use of ADB and P&G for the specific purpose of “P&G Waste to Worth Project”. Its content is confidential.

AECOM has used its reasonable endeavours to ensure that the Report is based on information that was current as of the date of the Report. AECOM’s findings represent its reasonable

AECOM Asia Co. Ltd. 3 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

judgments within the time and budget context of its commission and utilizing the information available to it at the time.

AECOM has relied on information provided by SURE Global, relevant government departments, equipment suppliers, and collected during field surveys and meetings to produce this Report. Unless and except to the extent that AECOM indicated in the Report, all findings, comments, and recommendations of AECOM are provided on the basis that the data, analyses, plans and other information provided to AECOM are reliable, accurate, complete and adequate. AECOM has not verified the adequacy, accuracy, and/or completeness of the data or information provided by SURE Global, relevant government departments, equipment suppliers, and collected during field surveys and meetings (unless specifically noted otherwise) and neither AECOM nor any of their officers, agents or employees shall have any responsibility or liability whatsoever for negligence or failure to exercise reasonable skill and care in connection with such data and information utilized by AECOM in the Report. No responsibility is assumed for inaccuracies in reporting by SURE Global, relevant government departments and equipment suppliers including, without limitation, by the agents of SURE Global, relevant government departments and equipment suppliers, officers, employees or representatives or for inaccuracies in any other data source whether provided in writing or orally used in preparing or presenting the Report.

The Report is provided to ADB and P&G for their sole benefit in relation to the Project and shall not be relied upon by any other person. Any disclosure and/or use of such information and documentation by any third party shall be solely at the risk of such third party and without legal recourse against AECOM, its parent, affiliated or subsidiary companies, or the officers, directors, agents, employees of any of the foregoing, in respect of all claims arising out of the Assignment, whether under the law of contract, tort (including negligence), breach of statutory duty or otherwise. Possession of the Report does not carry with it the right to commercially reproduce, publish, sell, hire, lend, redistribute, abstract, excerpt or summarize the Report or to use the name of AECOM in any manner without first obtaining the prior written consent of AECOM.

Neither AECOM nor its parent corporation, or its affiliates (a) makes any warranty, expressed or implied, with respect to the use of any information or methods disclosed in the Report or (b) assumes any liability with respect to the use of any information or methods disclosed in the Report.

Subject to AECOM’s obligations to the Client under the contract:

. any other recipient of this Report, by their acceptance or use of this Report, releases AECOM, its parent corporation and its and their affiliates from any liability for direct, indirect, consequential or special loss or damage whether arising in contract, warranty, express or implied, tort or otherwise, and irrespective of fault, negligence and strict liability.

. AECOM undertakes no duty to, nor accepts any responsibility to, any other party who may use or rely upon this Report unless otherwise agreed to by AECOM in writing (including, without limitation, in the form of a reliance letter) herein or in a separate document.

. any other party who is entitled to use this Report may do so only on the Report in its entirety and not on any excerpt or summary. Entitlement to use this Report is conditional upon the entitled party accepting full responsibility and not holding AECOM liable in any way for any impacts on the opinions provided arising from factors that are beyond the control of AECOM, including but not limited to, changes in technology, site variations, regulatory provisions or the owner’s policy affecting the operation of the company.

This Report may contain remarks about and observations on legal documents such as contracts, licenses, permits and authorities. AECOM can make remarks and observations of a non-legal nature about the contents of those documents. However, AECOM cannot express and shall not be taken as in any way expressing any opinion of conclusion about the legal status, validity, enforceability, effect, completeness or effectness of the legal documents.

AECOM Asia Co. Ltd. 4 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

No section or element of this Report may be removed, reproduced, electronically stored or transmitted in any form by parties other than those for whom the Report has been prepared without the written permission of AECOM. All sections in this document must be viewed in the context of the entire Report including, without limitation, any assumptions made and disclaimers provided. No section in this Report may be excised from the body of the Report without AECOM’s prior written consent.

It shall be noted that AECOM is not a licensed financial advisor. No information contained in this Report shall be regarded as investment advice, recommendation or endorsement. This document or any part thereof does not constitute an offer or an invitation to invest. AECOM shall not be responsible for loss or damages resulting from the content or general information provided in this section by AECOM, its employees, agents or sub-consultants. The Client shall consult its own registered financial / investment adviser.

1.3 Report Structure

This report summarizes the project progress and activities conducted throughout the Project. Section 1 of this report serves to provide project background and a brief introduction of this PPTA. Section 2 to Section 10 of this report summarizes the results and findings of respective project tasks and technical assessments. Section 11 concludes the findings of the Project. The sections of this report are organized as below:

 Section 1: Introduction  Section 2: Site Selection Assessment  Section 3: Material Supply Market Assessment (Task 1)  Section 4: Technology and Process Engineering Review (Tasks 2 & 3)  Section 5: Financial and Economic Analysis (Task 4)  Section 6: Traffic Impact Study (Task 5)  Section 7: Engineering Geological and Geohazard Assessment for the Selected Site (Task 6)  Section 8: Environmental and Social Analysis (Task 7)  Section 9: Regulatory Review (Task 8)  Section 10: Implementation Plan (Task 9)  Section 11: Conclusion and Recommendations

AECOM Asia Co. Ltd. 5 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

2. SITE REVIEW ASSESSMENT

2.1 Site Review Background

This Project will require a site to develop the MERF in Cabuyao City. A high-level site selection exercise has been conducted to assist the consulting team in reviewing the existing data and information needed in selecting a suitable site for the development of a MERF in Cabuyao City. Table 2.1 below shows the sites which were shortlisted by SBH and we have assessed them in detail to select a suitable location for the MERF development.

Table 2.1 Potential Sites in Cabuyao City

Site Barangay Location Site 1: Niugan and Banaybany Adjacent Area of Cabuyao Transfer Station Site 2: Banay-banay Gatchalian Industrial Park Site 3: Pulo Potenciano- Philsteel Site or Ptenciano 1 (PO1) Site Site 4: Pulo Ranch or Potenciano 2 (PO2) Site

These sites were identified by SURE Global’s local MERF development partner in Cabuyao City, S.B. Hain Enterprises & General Services (SBH). Each site has been considered with respect to a range of criteria.

Assessment Criteria and Scoring System

The scoring system constitutes a two-tier categorization of site selection criteria. Table 2.2 below summarizes the key parameters and criteria considered in this scoring and ranking system. Criteria such as planning, environmental, engineering, and social concerns are taken into account.

Four Basic Criteria are sub-classified into 17 Detailed Criteria in the scoring system. Basic Criteria includes (i) Planning, (ii) Environment, (iii) Engineering, and (iv) Social. Each of them carries different level of importance and was assigned with different weightings to reflect their relative importance for the site selection. Therefore, a higher weighting would be assigned to those Basic Criteria considered as crucial factors and major contributors to the overall site selection process.

For Detailed Criteria, each and every one of them represents the area that could be of much concern for the development of MERFs. With each of the Detailed Criteria possibly a deciding factor in this site selection process, a weighting would also be assigned to reflect their relative importance under their affiliated Basic Criteria. Thus, the scores calculated were summed up to reflect the site that is desirable for the development of MERFs. The weighting of respective Basic/Detailed Criteria is specifically designed for this particular project taking the nature of the MERFs and solid waste management program in Cabuyao City into account.

AECOM Asia Co. Ltd. 6 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 2.2 Specific Site Selection Ranking Table

Scores Overall Basic Criteria Detailed Criteria Weighting (1 = least desirable; 5 = most desirable) Weighting Site 1 Site 2 Site 3 Site 4 Zoning / Land Use Planning 30% Planning Traffic Impact 30% 25% Concerns Opportunity Cost of Land 25% Land Ownership 15% Sub-total = 100% Air 20% Ecology (Habitats & Species) 20% Environment Visual Impact 10% 25% Impacts Noise 10% Surface Water 20% Groundwater 20% Sub-total = 100% Site Accessibility 15% Engineering Utilities1 15% 25% Feasibility Flood Hazards 30% Site Geotechnical Constraints2 40% Sub-total = 100% Community Resettlement 40% Social Issues 25% Socio-Economic Impact 20% Indigenous People 40% Sub-total = 100% Total =

1 Utilities include the provision of water, electricity, sewage and drainage discharge. 2 Site Constraints include site topography, seismic impact zone and site stability.

AECOM Asia Co. Ltd. 7 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Criteria and Corresponding Weighting

A high-level site selection exercise would be conducted by first setting up basic site selection criteria as follows:

A. Planning Concerns (25% of Overall Weighting)

Planning Concerns are considered as an important matter due to the scarcity of land, the booming economy and the growing population that has resulted in increasing demand of land for infrastructure developments in Cabuyao City. Therefore, detailed criteria associated with Planning Concerns that would be examined are zoning/land use planning, traffic impact, opportunity cost of land, and land ownership. Each of the criteria was assessed as follows:

1. Zoning/land use planning

The initial zoning and current land use planning of the shortlisted sites and their surrounding would be assessed under this criterion. Sites which are defined under Production Area of the CLUPZO would be granted with higher score due to their compatibility to the Comprehensive Development Planning in Cabuyao City. Sites which may cause fewer impacts to the surrounding land use would also be granted with higher scores.

2. Traffic Impact

Adverse impact on traffic conditions during the process of waste collection and transfer, which includes waste collection and delivery, would be evaluated. Sites with higher adaptability to the increased traffic flow caused by the operation of the MERF would receive a higher score.

3. Opportunity Cost of Land

The Opportunity Cost of Land is the estimated value of the next best alternative forgone by developing MERF. This has implied that the higher the benefits and estimated potential value for alternative use of the site, the higher the potential value forgone by developing MERF. Thus, a lower score would be given.

4. Land Ownership

Land ownership determines the immediate availability and the right of usage of sites throughout a particular period of time. Sites with scattered government and / or private land ownership would involve higher cost, lengthier time and more complicated legal processes to claim their sole possession, and thus a lower score would be given. Also, land ownership impacts such as private lots that may be affected by land resumption and / or clearance, re-housing and compensation for the affected residents, creation of relevant easement and the involvement of other permanent / temporary rights would be considered. Sites that could cause larger impact to the private land lots would receive a lower score.

B. Environmental Impacts (25% of Overall Weighting)

Environmental Impact to the existing and surrounding areas should always be taken into consideration during the planning stage of a waste treatment facility. It is an important criterion for the selection of site(s) for the MERF development mainly due to the possibility of negative impact to the natural habitat and resources, as well as to the human settlement in areas nearby the site(s). In order to address such concerns, Air, Ecology, Visual and Landscape, Noise, Surface Water, and Groundwater were the detailed criteria that were assessed.

Assessment and scores would be incorporated based on the site’s adaptability, robustness and sensitivity to the potential environmental impacts caused by the

AECOM Asia Co. Ltd. 8 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

development of MERF. Sites with higher score would imply less impact to the environment.

1. Air

Possible emission of air pollutants and toxic substances (if any) from the facility as well as the odor generated during the operation of the MERF would be assessed. Both air pollutants and odor are regarded as highly sensitive issues to the surrounding human population. Sites that could acquire a more sizeable buffer zone to the surrounding human population and fewer impacts would be granted with a higher score.

2. Ecology

In this criterion, the impacts on terrestrial and river ecological habitats and species such as impacts on trees and aquatic organisms during the construction and operation phases were be assessed. In addition, any ecological impacts caused by the handling of dredged or excavated materials during the construction would also be considered. Sites located near natural landscapes, conservation areas and habitats with significant importance would receive a lower score. This criterion is of considerable importance because some of the potential sites are in close proximity to a river and / or creek where disturbance to riverine ecological system could possibly occur.

3. Visual Impact

In this criterion, assessment of visual impacts would be considered in the proposed sites when viewed from neighboring properties, main transport routes, and sensitive public vantage points. Furthermore, the nature of the local landscape and the possible integration of the constructed waste treatment facility into the local landscape would also be assessed. Both short and long distance views of the site and the effect of fence wall and other features, if applicable that may limit the views would also be assessed. Higher score would be granted to sites where the development of the waste treatment facilities could have fewer visual impacts and bring along unity and harmony to the surroundings.

4. Noise

The on- and off-site traffic movements particularly with the garbage trucks operated by haulers as well as facility during the construction and operation are considered as major sources of noise generation. These sources would cause negative impacts to the surrounding land uses, in particular to the sensitive receptors and wildlife. Sites located further away from sensitive receptors, such as schools, densely populated areas and residential developments, would be granted with a higher score.

5. Surface Water

The proximity of a proposed site to surface watercourses should also be considered in terms of environmental sensitivity. Water pollution from leachate, site runoffs and possible discharge to the surface water courses during the construction and operation phases would be causes of concern in this criterion. Adequate drainage treatment on site could effectively minimize the potential impacts placed on water quality in the surrounding area. Sites found in far proximity to natural rivers and reservoirs would be given a higher score while sites found in a close proximity to abstraction points for residential or industrial use would receive a lower score.

AECOM Asia Co. Ltd. 9 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

6. Groundwater

The site’s hydrogeological characteristics and possible groundwater abstractions would be assessed in this criterion. Sites with land underlain by permeable deposits, major aquifers or areas that if developed are likely to have significant impacts on the ground water quality would receive a lower score.

C. Engineering Feasibility (25% of Overall Weighting)

Engineering feasibility is another important siting criterion. It covers all the siting requirements in relations to the construction and operation of the MERF. Detailed criteria to be evaluated include Site Accessibility, Flood Hazards, Utilities, and Site Geological Constraints.

1. Site Accessibility

Site Accessibility is a key factor in this site selection process, especially when it comes to the consideration of providing site access infrastructures. As such, this detailed criterion is applied to examine and assess sites’ existing and proposed road’s character and width to accommodate the proposed facility development, type and amount of access roads, their proximity to nearby highways or major roads, as well as potential impacts on the local transportation network and the surrounding neighborhood, etc. Sites with good transportation network, infrastructure, road conditions and less impact to the surrounding neighborhood would receive a higher score.

2. Utilities

Utilities are crucial factors in Engineering Feasibility, as their availability could heavily affect the construction cost and programme as well as operation efficiency of the proposed MERF. The provisions of water, electricity, the provision of sewage network and treatment facilities, as well as provision of storm water drainage are the key concerns in terms of utilities supply. Sites with all the above-mentioned facilities readily available would be granted a higher score.

3. Flood Hazards

Since flooding may possibly have a severe impact on the construction and operation stage of the MERF, the susceptibility of the site to flooding was assessed in this criterion. Site that is in close proximity to active river channels and areas with high susceptibility to flooding would have a higher risk in the construction and operation of waste treatment facility, and thus, the site would receive a lower score.

4. Site Geotechnical Constraints

Site Geotechnical Constraints include site topography, seismic impact zone, and site stability. The geology and geotechnical impacts would be taken into account in the assessment of this criterion. The MERF should not be located in an area where underground configurations are unknown or complex, areas that are highly fractured or faulted, unstable ground, area with a karst or sink hole terrain, seismically active areas, and areas that are subject to mass movement, etc. Site with less desirable conditions for the construction and operation of the waste treatment facility in terms of the abovementioned factors, would be given a lower score. A higher score would be given to site with areas available for expansion.

D. Social Issues (25% of Overall Weighting)

In this criterion, potential social issues that may be raised from the construction and operation of the MERF development on each proposed site would be evaluated. This could serve to provide the potential impacts to the community and expected measures

AECOM Asia Co. Ltd. 10 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

to tackle the issues. Detailed criteria assessed include Community Resettlement, Socio- Economic Impact, and Indigenous People (IPs).

1. Land Acquisition and Community Resettlement

Land Acquisition and / or Community Resettlement would involve additional costs for the construction of the waste treatment facility. For instance, the additional cost may include compensation for the losses of the affected community, assisting the community in relocation and enhancement or restoration of the livelihoods of all displaced people. As such, the needs for land acquisition and community resettlement for a waste treatment facility would be assessed. A site with little cost for land acquisition and minimal impacts to the community and least possibility to resettlement would receive a higher score.

2. Socio-Economic Impact

The benefit and cost of the MERF would be evaluated in the criterion. A balance should be sought between advantages of the operation and construction of the MERF for solving the waste problems and the negative impact it imposes on the surrounding neighborhood as well as the cost of operation and maintenance. Sites with minimal impact to the surrounding neighborhood and maximal benefits in handling the waste issues would receive a higher score.

3. Indigenous People

The presence of indigenous people or community in the surrounding area of the three proposed sites would be assessed in this criterion. Additional efforts and resources would be needed to resettle the indigenous people. Therefore, the impacts on the livelihoods of indigenous people, possible compensation of losses to the community and the needs for resettlement would be assessed. Sites with fewer or no indigenous people would receive a higher score.

Scoring and Ranking System

A scoring and ranking system is developed to assess the three shortlisted sites. After different criteria have been assessed and evaluated for each site, a score of 1 to 5 would be given to each site according to the detailed criterion. By summing up all the weighted scores of detailed criteria, a higher score obtained would indicate a higher desirability of a site for MERF development. The indication of each score is listed in Table 2.3 below. The site that obtains the highest score would be recommended for MERF development.

Table 2.3 Indication of Scores for Site Selection

Score 1 2 3 4 5 Qualitative Moderately Moderately Undesirable Fair Desirable Indication Undesirable Desirable

2.2 Site Ratings and Recommendations

The site review assessment was conducted in December 2014, and the scores for all the sites are shown in the Table 2.4 and Table 2.5 below. The overall score of “Site 3: Potenciano- Philsteel or Potenciano 1 (PO1) Site” and “Site 4: Ranch or Potenciano 2 (PO2) Site” are the highest, followed by “Site 2: Gatchalian SME Industrial Park Site” and “Site 1: Cabuyao Transfer Station Site” respectively.

Since Site 3 (shown in Figure 2.1 below) and Site 4 are located on vacant land in the industrial zone, which also has better access to the major roads including AH26 and SLEX, it is considered to be more suitable with respect to planning concerns. In regards to the environmental impacts, Site 3 and Site 4 have also ranked the highest due to its location and lower residential density at the farther proximity to the site area, which results in lower impact

AECOM Asia Co. Ltd. 11 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

with respect to noise, visual, as well as air quality impacts. Site 3 and Site 4 has also received high scoring for social issues due to lower density of residential dwellings and commercial entities in the nearby area despite the good access to the key roads in Cabuyao City. It is anticipated that the acquisition of the sites would not require lengthy negotiations.

Figure 2.1 Photo Log of the Potenciano-Philsteel Site

Potential Boundary of Potenciano-Philsteel site Access Road to the Poteinciano-Philsteel Site Provided by SBH

Outlook of the Poteinciano-Philsteel Site Outlook of the Poteinciano-Philsteel Site

The Gatchalian Site or Site 2 (shown in Figure 2.2 below) is ranked the third for this site selection review despite its suitability for MERF development with respect to planning concerns and engineering feasibility, due to the fact that it is located within the high-density communities which consist of public facilities (including schools and barangay halls, etc.), residential dwellings as well as small business entities. Its location could lead to significant environmental and social impacts if it is selected for MERF development.

Figure 2.2 Photo Log of the Gatchalian Site

Pan-Philippines Highway (AH26) Outlook of Gatchalian Industrial Park Site

AECOM Asia Co. Ltd. 12 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Gatchalian Industrial Park Site and the Access Potential Boundary of Gatchalian Industrial Park Road site Provided by SBH

Adjacent Area of Cabuyao Transfer Station or Site 1 (shown in Figure 2.3 below) is found to be the least preferred site for MERF development at the time of site review assessment. The site is located in the area which has lower access from the national roads and expressway (i.e. SLEX), and it is also located within the “General Development” land use zoning. Although the site is already owned by SBH, which would reduce the efforts in land acquisition for further development, the site is located close to residential areas, which would lead to relatively higher environmental and social impacts. Moreover, the site is located next to an active water stream, which increases the risks of the site to flooding hazard. Furthermore, the site is currently a transfer station nearby a closed landfill, there may be potential land and groundwater contamination on site and landfill gas migration.

Figure 2.3 Photo Log of Cabuyao Transfer Station

Waste Pile at the TS Waste Pile at the TS

Waste Pickers Households at the TS Recyclables Sorting Area

AECOM Asia Co. Ltd. 13 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

However, as of July 2016, the new city administration of Cabuyao has made a promise to build a wide access road nearby Site 1. The City Planning and Development Coordinator has also confirmed that they would allow waste-to-energy businesses on Site 1 as long as all the requirements are met and relevant licenses are obtained. As a result, the accessibility and zoning issues mentioned above could be partially mitigated (if not entirely), and the score of Site 1 could potentially be improved. Together with the fact that Site 1 is a property of SBH, which reduces the efforts in land acquisition, SURE Global and SBH have, therefore, chosen to develop their MERF in Cabuyao on Site 1.

Table 2.4 Overall Scoring and Comparison

Site Planning Environmental Engineering Social Overall Concern Impacts Feasibility Issues Score Weighting 25% 25% 25% 25% 100% Site 1 2.40 2.70 1.75 4.20 11.05 Site 2 3.35 2.60 3.45 4.00 13.40 Site 3 4.15 3.20 3.45 4.40 15.20 Site 4 4.15 3.20 3.45 4.40 15.20 * Score was given based on the Site Review Report dated December 2014.

Table 2.5 Site Ranking

Ranking Site 1st Site 3 - Potenciano – Philsteel or Potenciano 1 (PO1) Site Site 4 – Ranch or Potenciano 2 (PO2) Site 2nd Site 2 – Gatchalian SME Industrial Park Site 3rd Site 1 – Cabuyao Transfer Station Site

AECOM Asia Co. Ltd. 14 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

3. MATERIAL SUPPLY ASSESSMENT AND LAND USE ASSESSMENT (TASK 1)

3.1 Project Background

Material supply market and land use assessment would be the key to evaluate the commercial viability of the Project. The Project is proposed to be located within SBH’s 30-ha private property in Cabuyao City in the Province of Laguna where the Transfer Station is also located. The proposed MERF is located approximately 61 m south of the existing Transfer Station.

Depending on the number of waste collection contracts that SBH can secure, the MERF proposed to be developed in the City of Cabuyao is expected to handle waste collected from nearby cities and provinces, including, but not limited to, cities in Batangas Province, Cavite Province and Laguna Province. More details can be found in Section 3.4.

3.2 Zoning / Land Use Planning of the Selected Site

Location of the selected site is shown in Figure 3.1 below. The initial zoning and current land use planning of the selected site and the surrounding were assessed. “Site 1 – Cabuyao Transfer Station” is the selected site for developing the MERF in the City of Cabuyao. It is located in the General Development Zone in Barangay Niugan and Barangay Banay-banay, and will occupy about 5.7 ha of the 30-ha private property owned by SBH, which is located approximately 61 m south of the existing Transfer Station. This SBH property used to be a landfill site owned by SBH but was converted into a transfer station (the landfill site was closed in 2006).

Figure 3.1 Selected Location of the Proposed MERF

Source: Google Maps, 2015

The project site may be directly accessed via the NIA Road. Two access roads connecting to the NIA road are proposed to be used for the Project. The first access road is an existing access road within the Gatchalian Industrial Park in Barangay Banay-Banay, which has an approximate width of 12.2 m. SBH has advised that negotiations are ongoing for the use of the Gatchalian access road for the Project. The Gatchalian Industrial Park access road has been built for industrial use and will therefore be able to sufficiently accommodate the dump trucks that will be used to deliver MSW to the project site.

The second access road is a new road planned to be constructed within the private property of International Container Terminal Services Inc. (ICTSI) in Barangay Niugan. The new ICTSI access road will be approximately 10 m wide. A SBH representative advised that ICTSI has donated this new road to the city, and the city will commence constructing the ICTSI road in 2018. The new ICTSI access road will be accessed via a residential area road approximately 230 m long in St. Francis VI Subdivision in Barangay Niugan. SBH advised that St. Francis Subdivision will donate this road to the city government later, so the city can repair and maintain

AECOM Asia Co. Ltd. 15 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

it. The ICTSI access road will mostly pass through agricultural lands, away from populated areas.

In the City of Cabuyao, there are seven types of land use zonings. They are:

i. Downtown Zone; ii. Urban Expansion Zone; iii. General Development Zone; iv. Industrial Zone; v. Agricultural Development Zone; vi. Environmental Conservation Zone; and vii. Port Development Zone.

The site is classified as “General Development” land use zoning for mixed uses for residential, commercial and institutional uses. It is surrounded by low to middle class housing and some informal settlements nearby. On the north and south portion are open fields, being minimally cultivated. On the east is a middle class housing subdivision, densely populated and situated just adjacent to the site. On the west are some informal settlements and open fields and more middle-class housing subdivision across the road.

According to the letter dated 13 July 2016, issued by the City Planning and Development Coordinator of Cabuyao City, SURE Global will be allowed to develop a MERF on this site (Site 1) provided that all requirements, license and necessary provisions are met.

3.3 Collection System

There are different types of solid waste collection system in different LGUs in the Philippines. The most common method used is the door-to-door collection method, wherein waste materials are collected in every house depending on the schedule (whether daily or weekly). Another method being used is the block or communal method, wherein the barangays3 utilize Material Recovery Facilities (MRFs) that are within or near the target collection area. In addition, some other LGUs use the curbside collection method, which is a method of collecting garbage dumped by residents (or non-residents) in certain places on the curb of the highway. Finally, a less commonly used method is the use of primary collection system, wherein, the LGU makes use of the informal waste pickers and are given authority to collect from hard to reach areas using their pushcarts and bring the collected garbage to a waiting Barangay or city trucks.

Collection is typically done by a LGU department such as the General Services office, Engineering Office, Environment and Sanitation Office of the Department of Public Services, which are mostly under the Office of the Mayor. Many LGUs, such as Cities or Highly Urbanizing Cities (HUCs) outsource waste collection to private solid waste contractors such as the SBH.

Implementation and enforcement of the waste segregation policy mandated by the RA 9003 (Ecological Solid Waste Management Act 2000) has been slow. However, there is currently a growing number of cities and municipalities that are enforcing this policy through their own respective local ordinances on waste segregation. Still, enforcement is limited and many of them still practice mixed waste collection. NSWMC (2015) reports that collection coverage in many LGUs may vary from 30% to more than 99%. LGUs are hard put in making collection systems efficient citing various reasons4 such as:

 Poor labour management and supervision;

 More workers in particular roles than needed;

 Inadequate or minimal cooperation from the citizenry with the collection schedules and methods;

 Inappropriate type and size of collection vehicles;

3 Barangays are the smallest political unit in the Philippines. 4 NSWMC 2015 Report.

AECOM Asia Co. Ltd. 16 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 Non-rational routes for collection service;

 Failure to optimize vehicle productivity by selecting the appropriate crew size and shift duration;

 Inadequate communal container capacity at the community collection points;

 Long vehicle downtimes due to poor equipment maintenance and repair;

 Long haulage time to final disposal sites coupled with lack of transfer stations; and

 Difficult driving conditions at disposal sites which cause vehicle and tire damage.

Since most LGUs find it hard to maintain solid waste collection equipment and crew, on top of their other responsibilities, they often resort to outsourcing of waste collection services to private solid waste collectors and haulers, which SBH is currently doing.

3.4 The Clients of S.B. Hain Enterprises & General Services Inc.

As of October 2017, SBH has contracts with 23 LGUs as shown in Table 3.1 below, with disposal facilities located in Batangas City, Bay, Cabuyao, General Mariano Alvarez (GMA), San Pablo, Silang, Santa Cruz and Trece Martires.

Table 3.1 List of LGUs Outsourcing Garbage Collection and Hauling Services to S.B. Hain Enterprises & General Services Inc. (as of October 2017)

Batangas Province Cavite Province Laguna Province . Lipa City . Alfonso . Alaminos . Liliw . Tanauan . Bacoor . Bay . Nagcarlan . GMA . Binan . Pagsanjan . General Trias . Cabuyao . Pila . Indang . Calamba . Rizal . Mendez . Calauan . Santa Cruz . Rosario . Famy . Silang

3.5 Material Supply / Contracts and Associated Costs and Fees

Based on the national averages given by the report of the National Solid Waste Management Commission (NSWMC) above, material supply from all the LGU clients of SBH will be computed to get an overview of the daily feedstock that can be gained by the collection of SBH from all their clients. The solid waste generation will be estimated based on the 2015 population census conducted by the Philippine Statistics Authority.

Contract costs have not been revealed here, due perhaps to the non-disclosure agreement of SBH with its clients and will be respected. Contracts are assumed to be renewed or re-tendered annually based on the Philippine government’s procurement law.

3.6 Background Information of the LGU Clients

Batangas Province

Lipa City, Batangas

Lipa City is a city in the Batangas Povince of Region IV-A, Southern Luzon, the Tagalog- speaking region in the country located 80 kilometers south of Metro Manila. It has a population growth rate of 2.46% and a population of 332,386 based on the 2015 census of the Philippine Statistics Authority.

Tanauan

The city of Tanauan is a second-class city in the Batangas Province. With the continuous expansion of Metro Manila, the city is now part of Manila's conurbation which reaches Lipa City

AECOM Asia Co. Ltd. 17 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

in its southernmost part, with an area of 107.16 km2. According to the 2015 census, it has a population of 173,366 inhabitants.

Cavite Province

Alfonso

Alfonso is a first-class municipality in the province of Cavite, Philippines. It lies in the south- western part of the province of Cavite, between 14°08’N and 120°51’E. According to the 2015 census, it has a population of 51,839. Alfonso has a total land area of 66.58 km2 and is bounded by Magallanes on the west, Batangas province on the south, Mendez and Tagaytay City on the east, General Aguinaldo on the north-west and Indang on the north-east.

Bacoor

Bacoor is a first-class urban component city which lies in the north east of Cavite province, between 14°27N and 120°57E. According to the 2015 census, it has a population of 600,609. Bacoor has a total area of 46.17 km2, and is bordered to the east by Las Piñas and Muntinlupa, to the south by Dasmariñas, to the west by Kawit and Imus, and to the north by Bacoor Bay an inlet of Manila Bay. Bacoor is separated from Las Piñas by the Zapote River and from Imus and Kawit by Bacoor River.

GMA

General Mariano Alvarez (GMZ) is an urban municipality located in the east of Cavite province, between 14°18’ N and 121°00’ E. According to the 2015 census, it has a population of 155,143. The municipality has a total area of 42.13 km2, and is bordered on the north by the Municipality of San Pedro, Laguna on the east by the Municipality of Carmona, on the west by the City of Dasmariñas and on the south by the Municipality of Silang.

Gen Trias City, Cavite

The City of General Trias is an inland city of the province of Cavite located 35 kilometers southwest of Manila. It straddles the northeastern part of the province. The City is surrounded by the municipalities of Rosario and Noveleta in the north, by Tanza and Trece Martires City in the west, by Amadeo in the south, Silang in the southeast, and the cities of Dasmarinas and Imus to the east. General Trias has a total land area of 81.46 km2.

On 19 August 2015, it was made a component city by virtue of Republic Act No. 10675. The bill came into full effect after majority of the city's residents voted yes to cityhood through a plebiscite. Thus, the City of General Trias became the seventh city in the province and the 145th in the country. It is politically subdivided into 33 barangays. The City of General Trias has been gradually undergoing industrialization since the turn of the 21st century. Several major industrial estates, such as Gateway Business Park, a world class business community in Javalera and the New Cavite Industrial City (NCIC) in Manggahan, have chosen General Trias to be their home base.

The Cavite Export Processing Zone (CEPZ) occupies about 0.60 square kilometers of land belonging to the City of General Trias. 110 factories operate in the CEPZ. The others are the Golden Gate Industrial Park (Phase I) in Buenavista II and Golden Gate Industrial Park (Phase II) in Panungyanan, while the rest are found at Barangay Manggahan, Barangay San Francisco and along Governor's Drive.

Housing development is also on the upsurge with 45 subdivisions in the area like Maravilla, Bel Aldea, Metrosouth, Tierra Nevada, Metropolis Greens, Eagle Ridge, Pasadena Heights I, Stanford City, Mary Cris Complex and Governor Hills to name a few.

Township projects are also rising across the City of General Trias.

AECOM Asia Co. Ltd. 18 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Indang

The Municipality of Indang (Yndang), province of Cavite became a first-class municipality in 2014. It is an upland town located in the center of the upland region. Historically, Indang was formally proclaimed into a town in 1655. It was formerly a part of Silang, Cavite for 70 years before formally being made into an independent town.

Indang is an inland municipality located in the south-central portion of Cavite Province. It is bounded on the East by the town of Amadeo, on the north by Trece Martirez City and Naic, while on the west aree the towns of Maragondon and Alfonso. Mendez and Tagaytay City for the southern border of Indang. It is 55 kilometers southwest of Metro Manila and is accessible by land via Tagaytay City.

The municipal government enforces the segregation policy mandated by RA 9003 and enforces a “no segregation, no collection policy in all areas service by the regular garbage collection. As of 2013, collection of segregated wastes is done in the 4 urban barangays of the Poblacion daily, seven days a week. In the rural areas, collection of residual wastes is done once a week. Exception was Barangay Bancod, where residual waste is collected on a monthly basis.

According to the report of the Municipal Environment and Natural Resources Officer, Indang has a technology to process biodegradable waste. The municipality has a Bioreactor Technology manufactured through the Department of Science and Technology (DOST) and Industrial Technology Development Institute (ITDI), wherein they process about 50% of biodegradable waste such as kitchen waste and market waste. These are processed into compost used as soil conditioners used in the municipal agri-demo farm. The rest of the compostable waste, such as yard waste are processed in compost pits.

Because of the waste treatment being done by Indang, the volume of residual waste has been quite reduced.

Mendez

Mendez is a forth class urban municipality located in the south west of the province of Cavite, between 14°07’ N and 120°54’E. According to the 2015 census, Mendez has a population of 31,529 people, in an area of 43.27km2. It is bounded to the north and east by Indang, to the south by Tagaytay, and to the west by Alfonso.

Rosario

Rosario is a first-class urban municipality located in the North of Rosario, between 14°25’ N and 120°51’E. The municipality has an area of 5.67 km2 and is bordered by Noveleta on the east, Manila Bay on the north, General Trias on the southeast and Tanza on the south-west. According to the 2015 census, Rosario has a population of 110,706.

Silang

Silang is a first-class municipality located in the South east of the Cavite Province, between 14°13’N and 120°58’ E. The municipality occupies an area of 209.43 km2 and is bordered by General Trias, Dasmariñas and General Mariano Alvarez (GMA) bound it on the north and on the west by Amadeo, Tagaytay on the south. According to the 2015 census, Silang has a population of 248,085.

Laguna Province

Alaminos

Alaminos is classified as a third-class municipality in the province of Laguna, Philippines. According to the latest census in 2015, it has a population of 47,859 and land area of 54.7 km2. Alaminos is situated at 78.1 km southeast of Manila, located at the northeast of Sto. Tomas in Batangas Province, south of Calauan and Bay, and west of San Pablo City

AECOM Asia Co. Ltd. 19 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Bay

Bay (pronounced as Ba-eh) is a second-class municipality in the province of Laguna. It one of the oldest towns in Laguna province, having been founded in the 16th century and was the province's first capital. Its original territory covered the areas that are now known as Los Baños, Calauan, Alaminos and San Pablo (in addition to its current territory). Bay has a total land area of 42.66 km2 (16.47 sq, mi) with a population density pf 1,500/km2. Bay is politically subdivided into 15 barangays.

Binan

Binan is the 16th largest municipality of the Province of Laguna, comprising 2.5% of the 175,973 hectare land area of the Province of Laguna. It is part of the first district of the province together with San Pedro and Santa Rosa. One of the lakeshore towns after San Pedro directly accessible from Metro Manila. It is a medium-sized town comprising 24 barangays. It lies within 121º5' latitude and 14º12' longitude about 40 km south of Manila. Biñan is bounded in the north by the town of San Pedro, on the south by Santa Rosa, and on the west by Carmona, Cavite. On the eastern and north horizons lies Laguna Lake.

About 9.13% of Binan’s total land area of 4.350 hectares is devoted to agriculture, which has been, in recent years gradually being converted into industrial development until the agricultural land dropped to a mere 367.60 hectares in 1998. A pattern resulting from conversion lf rice lands into industrial parks and sites for housing and commercial establishments.

Cabuyao

Officially known as the City of Cabuyao (Filipino: Lungsod ng Kabuyaw), this city is a first-class urbanized city in the province of Laguna, Philippines.

It is located about 43 kilometers southeast of Metro Manila and it is located at the western portion of Laguna. It is bounded on the west by the Cavite, on the north by Santa Rosa and on the south by Calamba. Cabuyao City is approximately 54 kilometers away from Santa Cruz, the provincial capital, and 9 kilometers from the city proper of Calamba City, the regional center of CALABARZON region.

In 2012, it became a Component City 5 by virtue of Republic Act No. 10163, after the majority of votes casted by the residents dated August 4, 2012.

Calamba

Calamba City, the hometown of the country’s national hero, Jose Rizal, is a first-class city in the Province of Laguna. It is located 54 kilometers south of Metro Manila and just about an hour by chartered by. Historical, this city was established as a town in 1770.

Calamba is bounded in the east by Laguna de Bay, in the north by Cabuyao, in the south by Los Baños and in the west by Sto. Tomas and Tanauan in Batangas. The city is a haven for industries, hence the influx of migrants. Considered as the heart of CALABARZON (Cavite, Laguna, Batangas, Rizal, Quezon) due to the numerous number of companies housed in its area, Calamba is the premier industrial hub outside of Metro Manila.

Calamba City became a component City by virtue of Republic Act 9024 signed into law by President Gloria Macapagal-Arroyo on March 5, 2001 and strengthened by a plebiscite held on April 21, 2001.

5 Cities which do not meet a minimum population of two hundred thousand (200,000) inhabitants, as certified by the National Statistics Office, and with the latest annual income of at least fifty million pesos (₱50,000,000) based on 1991 constant prices, as certified by the city treasurer are deemed part of the province in which they are geographically located. If a component city is located along the boundaries of two or more provinces, it shall be considered part of the province of which it used to be a municipality. Majority of the remaining cities are considered component cities.

AECOM Asia Co. Ltd. 20 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Calauan

Calauan lies between 14˚09’N and 121˚19’E. It has a land area of about 65.40 km2, and is a second-class municipality in the province of Laguna, Philippines. According to the 2015 census, it has a population of 80,453. It is anticipated that Calauan's population will rise in the near future as the town is being used as resettlement of informal settlers in Metro Manila through a project of the ABS-CBN Lingkod Kapamilya Foundation.

Famy

Famy is a fifth-class municipality in the province of Laguna, Philippines. It lies in the north- eastern part of the province of Laguna Province, between 14°26’N and 121°27’E. According to the 2015 census, it has a population of 16,587. Famy has a total land area of 8.54 km2, which is bounded by Real, Quezon, in the east, Santa Maria in the north, Mabitac and Santa Maria in the west, and Siniloan and Mabitac in the south.

Liliw

Liliw is a fourth-class municipality in the province of Laguna, Philippines. It lies between 14˚08’N and 121˚26’E. It is one of the highland towns forming the southern extremity of the province. Founded in 1571, the small town of Liliw is nestled at the foot of Mount Banahaw. Liliw has a total land area of 3,910 hectares (39.10 km2) It is bounded on the north-west by Sta. Cruz; north-east by Magdalena; on the east by Majayjay; on the west by Nagcarlan; and on the south by Dolores, Quezon.

Liliw is best known for its cold water spring resorts, native homemade sweets and a sizeable shoe industry that rivals that of Marikina City. Liliw is politically subdivided into 33 barangays. It is about 17 kilometers (11 mi) away from the capital city of Laguna, Santa Cruz.

Nagcarlan

Nagcarlan is a second-class municipality in the province of Laguna. It is about 16 kilometers (9.9 mi) northeast of San Pablo City, or 103 kilometers (64 mi) south of Manila. It is located between the coordinates 14˚07.93'N and 121˚24.93' E at 229.0 meters above sea-level. Nagcarlan has clean flowing rivers, gushing water falls, calm lakes and lush hills and mountains. It also offers historic Spanish colonial sites (notably the underground cemetery), restaurants with competitive and affordable dishes, resorts and vacation house and a plethora of welcoming people.

Pagsanjan

Pagsanjan is currently a tourist capital of Laguna Province, while also a former capital of Laguna Province. It is a second-class municipality in the province of Laguna, Philippines. According to the 2015 census, it has a population of 42,164. Pagsanjan has a land area of 26.4 km2 and is situated about 92 kilometres southeast of Manila.

Pagsanjan lies between 14°16’N and 121°27’E. It is bounded on the east by the Balubad Mountain; on the west by Santa Cruz; on the north by San Isidro Hill and Laguna de Bay; on the northeast by Lumban; on the southeast by Cavinti and Luisiana; on the south by Mount Banahaw; and on the southwest by Magdalena.

Pila

Pila is a third-class municipality in the province of Laguna. It has a total land area of 31.2 km². The town of Pila is the site for some well-preserved houses dating back to the Spanish period as well as the old Saint Anthony of Padua Parish Church, the first Antonine church in the Philippines.

Don Felizardo Rivera, who donated his lands to the church and municipal government, is the recognized founder of Pila. He is the ancestor of prominent families in Pila surnamed Rivera, Relova, Agra and Álava. Pila is politically subdivided into 17 barangays.

AECOM Asia Co. Ltd. 21 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Rizal

Rizal is a third-class municipality in the province of Laguna. It is a landlocked municipality located 25 kilometres (16 mi) from the provincial capital Santa Cruz. The town is bounded on the north by municipality of Calauan, on the east by Nagcarlan, on the west by San Pablo City, and on the south by Dolores, Quezon. This municipality was named after José Rizal, the country's national hero.

From San Pablo, the road is an uphill zigzag going to Rizal. It is one of the youngest towns in Laguna situated by the foothills of Mount San Cristobal, Mount Banahaw, and the Basilin Hill.

The people from this town have an old tradition of celebrating Christmas on January 6. There was also a legend St. Michael the Archangel apparitions in the town's biggest natural spring "Bukal ni San Miguel" during the Spanish era, making St. Michael the town's patron saint. Rizal is politically subdivided into 12 barangays.

Santa Cruz City

Santa Cruz is a 1st class urban municipality in the province of Laguna. It is also the capital town of the province of Laguna. The city is located along the banks of the Santa Cruz River which flows along the eastern part of the famous Laguna de Bay. The town is bounded by the town of Bay on the north, by Lumban and Pagsanjan towns in the east, Pagsanjan and Magdalena towns in the south, and Pila and Liliw towns in the west. It is approximately 87 kilometers from Manila via Calamba City and 105 kms via Pililla, in the province of Rizal. It is accessible by land from the nearby 28 municipalities and by water through Laguna de Bay from Manila and some Rizal towns.

Santa Cruz is considered as the service and commercial center on the eastern part of the province. The town is composed of 26 urban barangays. All barangays are being classified as urban. The 5 barangays are located in the Poblacion area and the other 21 classified urban barangays are outside the Poblacion.

Although relatively far from the immediate urbanizing influence of Metropolitan Manila, Santa Cruz continues to progress into an urban style municipality. It is now classified as a first-class municipality. Being the capital of the Province of Laguna, Santa Cruz is also the seat of the provincial government since 1885, giving the municipality an additional administrative function over the entire province. It also functions as the service center for transportation, commerce, health, education, and other social services for the predominantly rural northeastern municipalities of the province. Boosting the economy of the municipality are the incipient and fast-growing agribusiness industries such as livestock raising, horticulture and aquaculture.

It has land area of 3,860 hectares and located on an extremely flat terrain, where two-thirds are lower than 5 meter above mean sea level. The highest points—no more than 35 meters high— are on the southern border with the municipalities of Magdalena and Liliw.

3.7 Previous Clients of SBH

The client list of SBH has been evolving constantly overtime due to their short term 12-month waste collection contracts signed with the LGUs. For example, when comparing the client list (as of October 2017) with previous waste assessment and characterization study (WACS) conducted in the Package 2 of this PPTA (dated February 2015) and the client list presented in the Interim Report of this PPTA (as of July 2016), there are already some difference in the list of LGU clients. There were seven, 16 and 26 clients in February 2015, July 2016 and October 2017 respectively. Table 3.2Error! Reference source not found. shows the major client list of SBH using the Cabuyao Transfer Station (TrS) and Calamba Landfill (both operated by SBH) as of February 2015.

AECOM Asia Co. Ltd. 22 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 3.2 Major Clients of SBH as of February 2015

Client Location of Waste Disposal . Binan . 60% TrS; 40% LF . Cabuyao . 60% TrS; 40% LF . Lipa . 100% LF . Indang . 100% LF . Muntinlupa (Metro Manila) . 60% TrS; 40% LF . Calamba . 60% TrS; 40% LF . Tanauan (Batangas) . 100% LF Note: Calamba Landfill (LF) or Cabuyao Transfer Station (TrS).

3.8 Waste Projection of Sampling Data

Under Package 2 of this PPTA, a waste assessment and characterization study (WACS) and a density study were conducted in the Cabuyao City’s Transfer Station (TrS). In order to project waste quantities for the city, a reliable estimate on the weight of the waste collected and disposed of by the city is needed, since there were no weighbridges at the TrS.

Standard mathematical-based waste projection methodologies cannot be applied in the forecasting of waste quantities handled by the two SBH waste facilities. One of the major reasons is that neither the LGU clients nor SBH are bounded by any long-term contracts to deliver or accept waste. According to SBH, the duration for their waste management contracts is usually 12 calendar months and is renewable at the end of each year. Also, according to SBH, with the exception of Pilotage Trading and Construction Inc. (a SBH company) in San Pedro, Laguna Province, there are three major waste disposal facilities competing for waste supply in the region, including one each in San Pablo, Paete and Kalayaan, Laguna Province. There is another waste disposal facility in Batangas Province to compete with them for municipal waste contracts.

3.9 Estimation of Solid Waste Collected for Material Supply

As mentioned in the previous section, the prediction on waste supply projection for the City of Cabuyao is difficult due to the constantly changing client list of SBH each year.

The following sections will deal with the LGU clients of SBH in Package 2. Since there were no solid waste collection data provided by SBH, the waste amount data of the 7 LGUs in Table 3.3Error! Reference source not found. obtained in the Package 2 is used as the basis for the projection, while the population data of the LGUs is obtained from the 2015 population census conducted by the Philippine Statistics Authority.

The waste projection is calculated by population and per capita daily waste generation amount, where the per capita generation amount is calculated based on the average of individual city survey during the Package 2 study.

Table 3.3 Per Capita Collection Estimation

LGUs Population as of 2015 Per Capita Collection (MT/day) Calamba 454,486 0.52 Cabuyao 308,745 0.60 Binan 333,028 0.52 Muntinlupa 504,509 0.29 Lipa 332,386 0.11 Indang 65,599 0.27

AECOM Asia Co. Ltd. 23 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 3.4 Waste Estimation of Binan

Year Population Collection (MT/day) 2015 333,028 170.00 2016 342,653 179.03 2017 352,555 184.20 2018 362,744 189.53 2019 373,227 195.00 2020 384,014 200.64 2021 395,112 206.44 2022 406.530 212.40 2023 418,279 218.54 2024 430,367 224.86 2025 442,805 231.36

Table 3.5 Waste Estimation of Cabuyao

Year Population Collection (MT/day) 2015 308,745 184.00 2016 317,668 189.32 2017 326,848 194.79 2018 336,294 200.42 2019 346,013 206.21 2020 356,013 212.17 2021 366,302 218.30 2022 376,888 224.61 2023 387,780 231.10 2024 398,987 237.78 2025 410,517 244.65

Table 3.6 Waste Estimation of Lipa

Year Population Collection (MT/day) 2015 332,386 37.00 2016 340,563 37.91 2017 348,941 38.84 2018 357,524 39.80 2019 366,320 40.78 2020 375,331 41.78 2021 384,564 42.81 2022 394,024 43.86 2023 403,717 44.94 2024 413,649 46.05 2025 423,825 47.18

Table 3.7 Waste Estimation of Indang

Year Population Collection (MT/day) 2015 65,599 17.50 2016 68,131 18.18 2017 70,761 18.88 2018 73,492 19.61 2019 76,329 20.36 2020 79,275 21.15 2021 82,336 21.96 2022 85,514 22.81 2023 88,814 23.69 2024 92,243 24.61 2025 95,803 25.56

AECOM Asia Co. Ltd. 24 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 3.8 Waste Estimation of Muntinlupa

Year Population* Collection (MT/day) 2015 504,509 148.00 2016 514,044 150.80 2017 523,760 153.65 2018 533,659 156.55 2019 543,745 159.51 2020 554,022 162.52 2021 564,493 165.60 2022 575,162 168.73 2023 586,032 171.92 2024 597,108 175.16 2025 608,393 178.47 * The population projection was estimated using the average of 00-10 & 10-15’s growth rate in the 2015 census.

Table 3.9 Waste Estimation of Calamba

Year Population Collection (MT/day) 2015 454,486 234.50 2016 467,621 241.28 2017 481,135 248.25 2018 495,040 255.42 2019 509,346 262.81 2020 524,066 270.40 2021 539,212 278.22 2022 554,795 286.26 2023 570,829 294.53 2024 587,326 303.04 2025 604,299 311.80 * The population projection was estimated using the average of 00-10 & 10-15’s growth rate in the census. The data of the Batangas Province was used as there were no growth rates recorded in Tanauan.

Table 3.10 Summary of Waste Collection Amount of waste from SBH Clients in 2015 (MT/day)

LGUs Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Binan 174.00 179.03 184.20 189.53 195.00 200.64 206.44 212.40 218.54 224.86 231.36 Cabuyao 184.00 189.32 194.79 200.42 206.21 212.17 218.30 224.61 231.10 237.78 244.65 Lipa 37.00 37.91 38.84 39.80 40.78 41.78 42.81 43.86 44.94 46.05 47.18 Indang 17.50 18.18 18.88 19.61 20.36 21.15 21.96 22.81 23.69 24.61 25.56 Muntinlupa 148.00 150.80 153.65 156.55 159.51 162.52 165.60 168.73 171.92 175.16 178.47 Calamba 234.50 241.28 248.25 255.42 262.81 270.40 278.22 286.26 294.53 303.04 311.80 Total 795.00 816.51 838.61 861.32 884.67 908.66 933.32 958.67 984.72 1,011.50 1,039.02

Again, it should be noted that the prediction on waste supply projection for the City of Cabuyao would be difficult due to the constantly changing client list of SBH each year. However, based on our findings in Package 2 of the study, it is reasonable to say that the actual daily throughput is approximately between 767 tpd and 825 tpd for the two SBH waste facilities in 2015. Based on the projection in Table 3.3 to Table 3.10 above, assuming the LGU clients stays the same, the waste collected could potentially reach 1,000 tpd or more.

3.10 Recyclable Market & Industry Trend

With the current prohibitions on the use of polystyrene packaging by many LGUs in Metro Manila and surrounding areas, as well as prohibition of single use plastic shopping bags, other recyclable materials, which are still made basically from plastics are coming into the market.

The current dip in the prices of recyclable materials, especially plastic waste (e.g. Polyethylene terephthalate (PET) bottles) and other recyclable waste (e.g. aluminium cans and paper), has

AECOM Asia Co. Ltd. 25 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

the waste pickers resorting to hoarding their wares, waiting for the prices to go up. Meanwhile, they are hard up in catching up to their only means of livelihood.

An interview with a plastic recycling company owner revealed that this trend is due to the fact that the prices of crude oil in the world market has also gone down and seems to have remained in that level since 2015. Due to the fact that plastic is a by-product of petroleum, the lowering of prices of crude oil has also affected the plastic industry, especially the recyclers such that it has become less profitable to continue with the plastic recycling business especially because the government does not support nor provide the incentives to the recycling industry. Accordingly, out of the 20 plastic recyclers, only 7 have remained in the business of recycling plastic waste.

The recent prohibition against plastics in many LGUs, particularly sando bags and plastic cups has somehow led to the generation of more waste being disposed of at landfills rather than less. For example, fast food restaurants that are being affected by the prohibition of plastics have resorted to using paper cups, which are not recyclable and end up in the landfill instead of being recycled. Unlike plastic cups, which are recyclable, there are no economic values to paper cups other than being used as feedstock for RDF plants.

The downward market trend in the prices of recyclables has affected the base of the recycling chain, particularly the waste pickers.

There is no telling how this commoditization of solid waste to recover much of the recyclable material will impact the waste industry at this point unless another study is conducted regarding the enforcement of segregation policies as well as the flow of recyclable materials in the Philippines and Asia. One general trend is that as the population increases, waste generation would normally increases accordingly.

3.11 The Competitive Landscape

The Consultant has assessed the competitive landscape by profiling the existing entities which could be potentially competing for waste streams in the future such as current supplies to waste disposal facilities nearby the City of Cabuyao.

Based on the assessment above, it is understood that with the exception of Pilotage Trading and Construction Inc. (a SBH company) in San Pedro, Laguna Province, there are three other waste disposal facilities in San Pablo, Paete and Kalayaan, Laguna Province are currently competing for municipal solid waste collection contracts with SBH. There is also another waste disposal facility in Batangas Province competing with SBH for municipal solid waste collection contracts.

In addition, it has been reported in the news media that several nearby cities in Laguna Province and Metro Manila were also planning to develop WTE facilities or clustering to improve their waste management. These include, but not limited to:

 Global Green International Investments and Global Green Renewable Energy Inc. together with Philippine partner, Bacavalley Energy Inc., are planning to upgrade their existing methane trapment facility in San Pedro, Laguna Province, with WTE technologies, which will include an Anaerobic Digester for 400 tpd of food waste, and five modular Pyrolysis plants for 200 tpd of municipal solid waste.

 San Miguel Corporation is planning to propose to the government a $2-billion, 14-meter spillway project in Parañaque, Metro Manila, which will allow the waters of Laguna de Bay in the east of Metro Manila to flow directly to Manila Bay to alleviate flooding in Metro Manila during monsoon seasons. San Miguel Corporation proposed that this project would be built at no cost to the government. In return, they should be given the right to use the waste materials from Laguna de Bay for power generation. Laguna de Bay used to be 22 meters deep, but because of garbage and other waste materials being dumped into the lake, it only has a depth of about 3.5 meters now. Such WTE facility, if built, would be relatively close to the City of Cabuyao.

AECOM Asia Co. Ltd. 26 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 International Council for Local Environmental Initiatives (ICLEI) Southeast Asia Secretariat and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH’s Urban Nexus are advocating the clustering of solid waste management in the Philippines, and are eyeing Laguna Province to commence the pilot project. With Laguna Province’s 10-year Solid Waste Management (SWM) Plan considers clustering as a potential strategy using the four congressional districts as basis for cluster formation, Waste Management and Pollution Control Division of the Provincial Government of Laguna has expressed their support in the clustering approach. Also, the province is keen on exploring the feasibility of putting up a WTE facility.

All these projects could be potential competitors for waste supplies in the Laguna and Metro Manila area if they materialized in the future.

3.12 JVA between SURE Global and SBH

SURE Global has entered into a Joint Venture Agreement (the “JVA”) with S.B. Hain Enterprises & General Services Inc. (“SBH”) on 17 June 2016, for the purpose of developing and operating a Waste to Worth Facility in Barangay Niugan, Cabuyao, and Laguna.

The JVA shall provide for, among others:

1. An obligation by SBH to provide a suitable area at least 5 hectare of land owned by SBH and provide a rent-free lease agreement for its utilization for the duration of the Project (Section 3.1-a and 3.1-b). It is noted that the parties have not executed a lease agreement over the designated site, to date;

2. An obligation on the part of SBH to deliver a minimum amount of 500 tons per week which shall also be received, stored, separated, converted or otherwise processed in the MERF and serve as feedstock for the power generation facility (Section 3.1-c).

3. SBH shall receive a share of the revenues of the Facility based on the Commission Structure provided in the JVA and which is subject to review every year (Section 3.1- d);

4. SURE Global will develop and operate the Project (Section 3.2 a-e).

5. If necessary, SURE Global will form a special purpose company (the “SPC”), that shall serve as the corporate vehicle for the Project (Section 3.2-c). SURE Global has confirmed that the SPC has been incorporated in 2017. SBH does not own equity in said SPC.

6. The JVA does not provide for specific penalties or liquidated damages in case of failure of SBH to deliver the required volume of municipal solid waste. However, SURE Global can look for other suppliers if SBH is deficient (Section 3.2-f). In addition, the Commission Structure provides for less commission to SBH in such cases.

Considering that the MERF is intended to be a purely private endeavour with no participation from the Cabuyao City LGU, the participation or role of Cabuyao City would be limited to outsourcing the collection and hauling of municipal solid waste within Cabuyao City to SBH.

AECOM Asia Co. Ltd. 27 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 3.2 Relationship Illustration between SURE Global, SBH and Cabuyao City LGU

3.13 Political, Environmental & Regulatory Considerations

Relevant political, environmental and regulatory considerations in the Philippines in waste management and WTE development were identified which shown as below.

1. Republic Act No. 9003, Ecological Solid Waste Management Act 2000. The act contains the most comprehensive policy framework on solid waste management in the Philippines. It also clearly stipulates the establishment of an ecological solid waste management program, as well as the necessary institutional mechanisms and incentives. In addition, it also declares certain solid waste practices prohibited with corresponding penalties. This is the latest law on solid waste management, overriding all legal stipulations on SWM that came before it.

2. Department Administrative Order (DAO) 01-34, The Implementing Rules and Regulations (IRR) of RA 9003.

3. Republic Act No. 6969 (Toxic Substances and Hazardous and Nuclear Waste Act of 1990). The act calls for the regulation of and restriction on the import, manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that pose risk and/or injury to health and natural environment. It prohibits the entry, transport and disposal of hazardous and nuclear wastes into the Philippine territory. It also mandates to provide advanced studies and research on toxic chemicals.

4. Republic Act No. 7160 (Local Government Code (LGC) of 1991). The LGC has devolved certain powers and functions to the LGUs, including enforcement of laws and cleanliness and sanitation, solid waste management, and other environmental matters.

5. Republic Act No. 8749 (Clean Air Act of 1999). This law mandates all government agencies to adopt the integrated air quality framework as a blueprint for compliance. Among its salient provisions are the “polluters must pay” principle, and the prohibition of the use of the incineration method, which is defined as the burning of municipal, biomedical and hazardous waste or the process, which emits poisonous and toxic fumes. It further mandates LGUs to promote, encourage, and implement segregation, recycling and composting within their jurisdiction. It also requires the phasing out of incinerators by July 2003.

6. Republic Act No. 9275 (Clean Water Act of 2004). The act protects the Philippines’ water bodies from pollution from land-based sources (industries and commercial establishments, agriculture and community/household activities). It provides for a comprehensive and integrated strategy to prevent and minimize pollution through a multi-sectoral and participatory approach involving all the stakeholders.

AECOM Asia Co. Ltd. 28 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

7. Republic Act No. 9513 (Renewable Energy Act of 2008). The act promotes the development, utilization and commercialization of renewable energy and for other purposes. The Act declared the policy of the government to: i) accelerate the exploration and development of renewable resources i.e. solar, geothermal, ocean, wind, and biomass, including hybrid systems for energy self-reliance, reduction of dependence on fossil fuel and bring down cost of fuel; ii) increase utilization of renewable energy by institutionalizing national as well as local capabilities and provide both fiscal and non-fiscal incentives on the promotion of efficient and cost effective energy systems; iii) encourage the use of renewable energy technologies to reduce air pollution, to protect the environment and health; and iv) establish the necessary infrastructure to implement the provisions of the law. Section 30 of RA 9513 provides for the use of “waste to energy” technology subject to requirements of RA 9003 and RA 8749 (Clean Air Act). Specifically, waste to energy technology refers to “systems which convert biodegradable material such as but not limited to animal manure or agricultural waste, into useful energy processes such as: anaerobic digestion, fermentation, and gasification, among others, subject to the provisions of the Clean Air Act of 1999 and the Ecological Solid Waste Management Act of 2000”.

The Renewable Energy Act of 2008 also provides a series of incentives for renewable energy generation, including but not limited to: reduced corporate tax rate, VAT-free importation and energy transactions, tax rebates for equipment, accelerated depreciation, operating loss carryover, renewable portfolio standards, net metering and cash incentives for distributed energy. A feed-in-tariff for biomass and biogas is also in place, and subject to the following Guidelines:

"a. ERC Resolution No. 16 Series of 2010, or the "Resolution Adopting the Feed-in- Tariff Rules";

"b. ERC Resolution No. 15 Series of 2012, or the "Resolution Adopting Amendments to the Feed-in-Tariff Rules";

"c. ERC Resolution No. 24 Series of 2013, or the "Resolution Adopting the Guidelines for the Collection of the Feed-in-Tariff Allowance (FIT-ALL) and the Disbursement of the FIT-ALL Fund."

8. Presidential Decree 1586 - The Philippine Environmental Impact Statement (EIS). This provided the legal and procedural framework for conducting EIAs for projects that may potentially have significant environmental impacts. The DENR through the EMB is designated to be the implementing agency. The EIS System was designed to safeguard the Philippine environment and its natural resources in the midst of growing urbanization and industrialization in the country. This was revised through Administrative Order (DAO) 96-37 and revised the implementing rules and regulations. In 2000, the DENR issued DAO 2000-05 that highlight the importance of public participation and social acceptability in the environmental review process.

9. National Solid Waste Management Commission Resolution (NSWMC) Guidelines on Waste to Energy – The National Solid Waste Management Commission has issued NSWMC Resolution No. 669, Series of 2016, entitled “Adopting the Guidelines Governing the Establishment and Operation of Waste To Energy Technologies for Municipal Solid Wastes”, on 9 June 2016. According to Section 14, on Environmental Monitoring, it stipulates that a) Emissions from WtE facility must conform to the standards specified on Section 19 of RA 8749 or approved by DENR-EMB. Section 19 of RA 8749 further provides that “The Department shall, within 2 years from the effectivity of this Act, and every 2 years thereafter, review, or as the need therefore arises, revise and publish emission standards, to further improve the emission standards for stationary sources of air pollution. Such emission standards shall be based on mass rate of emission for all stationary source of air pollution based on internationally accepted standards, but not be limited to, nor be less stringent than such standards and with the standards set forth in this section. The standards, whichever is applicable, shall be the limit on the acceptable level of pollutants emitted from a stationary source for the protection of the public’s health and welfare.

AECOM Asia Co. Ltd. 29 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The purpose of the Guidelines is to set the registration and permitting requirements, standards and procedure for the establishment and operation of commercial scale waste-to-energy technologies using municipal solid wastes, including the following:6

a) Pre-operation phase

b) Waste delivery control

c) Quality control

d) Operational control

e) Pollution abatement

f) Environmental monitoring

g) Documentation and monitoring

h) Social safeguards

i) Decommissioning or Closure

A WTE facility must be registered with the Environmental Management Bureau (EMB) upon meeting the specified conditions, including notification by the host LGU to the NSWMC of the WTE facility that will be established within its jurisdiction by submitting an updated 10-year solid waste management plan.7

In its Resolution No. 220, Series of 2015 dated 25 November 2016, the NSWMC approved the 10-year SWM Plan (2016-2025) of Cabuyao City.

Under the Resolution, the LGU is required to submit an annual progress report on the strategies implemented and accomplishments to the National Solid Waste Management through its Secretariat.

It is noted that the Cabuyao City 10-year Plan was issued and approved by the LGU on 9 January 2017, and does not include provision for the SURE Global MRF Project.

Further inquries with the office of the City Environment and Natural Resources Office (CENRO) of Cabuyao City reveal that LGU has not yet filed a request for amendment and inclusion of the SURE Global MRF Project in its 10-year Plan.

An examination of relevant excerpts of the approved 10-year Plan also shows that the entity called R. C. Bella Waste Management and Disposal Services is in charge of garbage collection in Cabuyao City. The Consultant was advised that R. C. Bella is affiliated with and under the control of SBH.

In this regard, the City Planning and Development Coordinator of Cabuyao City issued a letter dated July 13, 2016, informing SURE Global that the City will allow a waste to energy business at the particular site subject to its compliance with necessary requirements and the corresponding licenses from the concerned agencies.

3.14 Role of the Local Government in the Waste and Energy Sectors

The local government plays as active role in solid waste management as it is their mandate stipulated in RA 9003 (Section 10):

6 Section 3, Guidelines Governing the Establishment and Operation of Waste-to-energy Technologies for Municipal Solid Wastes, 2016

7 Section 5, Ibid.

AECOM Asia Co. Ltd. 30 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 The local government units (LGUs) are primarily responsible for the implementation of the provisions stipulated in the Ecological Solid Waste Management Act within their respective jurisdictions;

 The barangays shall conduct waste segregation and collection of solid waste for biodegradable, compostable and reusable waste; and

 Municipality or city shall be responsible for the collection of recyclable waste and special waste (household hazardous wastes).

In the case of power generation, currently, local governments do not have any roles in this regard.

Role of the National Government

In regard to the construction of the MERF, it will mainly be a privately-run facility. SBH owns a property in Cabuyao City, the site of their transfer station. The City Planning and Development Office has already given a statement allowing the MERF to be built on the property, provided that it will adhere to the guidelines on emissions and other environmental considerations.

The national government agencies, such as the DENR, will be the approving body for the Environmental Compliance Certificate (ECC). The National Solid Waste Management Commission (NSWMC) and the Department of Energy (DOE) are agencies that provide guidelines regarding such a facility, i.e. NSWMC Resolution No. 669, Series of 2016 – “Adopting the Guidelines Governing the Establishment and Operation of Waste To Energy Technologies for Municipal Solid Wastes”.

In addition, the national government, through DOE, will be the approving body with regards to the energy side of the project. DENR will be in-charge of the requirements in the setting up of such a facility, such as the Environmental Impact Assessment (EIA), which is a requirement for the issuance of ECC. The Environmental Management Bureau (EMB), will be the monitoring agency, once the MERF starts operating. NSWMC will provide the guidelines for the establishment of a WtE Facility. Also, DOST, through the Industrial Technology Development Institute (IDTI), will be the one to test the technology.

The Role of the Department of Energy

DOE was created under Republic Act 7638, also known as the "Department of Energy Act of 1992", which has been entrusted the mandate to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the government relative to energy exploration, development, utilization, distribution and conservation. DOE implements energy policy of the state to ensure a continuous, adequate, and economic supply of energy with the end in view of ultimately achieving self-reliance in the country’s energy requirements through the integrated and intensive exploration, production, management, and development of the country’s indigenous energy resources, and through the judicious conservation, renewal and efficient utilization of energy to keep pace with the country’s growth and economic development and taking into consideration the active participation of the private sector in the various areas of energy resource development; and to rationalize, integrate, and coordinate the various programs of the Government towards self-sufficiency and enhanced productivity in power and energy without sacrificing ecological concerns. Figure 3.3 below shows the institutional framework on renewable energy with corresponding roles and responsibilities in Table 3.11.

AECOM Asia Co. Ltd. 31 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 3.3 The Institutional Framework for Renewable Energy in the Philippines

Table 3.11 Roles and Responsibilities of National Agencies and Corporation in the Power and Energy Sector

Agencies/Corporation Roles/Responsibility

Department of Energy  Prepares, integrates, coordinates, supervises and controls all plans, programs, projects and activities of the national government relative to energy exploration, development, utilization, distribution and conservation. Renewable energy  Formulate and implement policies, plans and programs related to the Management Bureau accelerated development, transformation, utilization and commercialization of renewable energy resources including emerging energy technologies National Power  Generates and sells electricity from undisposed generating assets (of Corporation (NPC) the old NPC) and independent power producers (IPP) contracts of PSALM  Performs missionary electrification National electrification  Prepares and supervises Electric Cooperatives (ECs) to operate in a Administration (NEA) competitive market  Provides financial, institutional and technical assistance to the distribution utilities (DUs) to make them highly competitive in delivering quality service  Reviews and revises regulatory policies to enhance the viability of ECs Power Sector Assets  Management of NPC assets and liabilities and transmission company and Liabilities pending privatization Management  Manages NPC privatization Process Corporation (PSALM)  Assumes NPC debt and IPP contracts  Administers Universal Charges8

8 A Universal Charge is a non-bypassable charge remitted to the Power Sector Assets and Liabilities Management Corporation (PSALM). It includes Missionary Electrification Charge the amount collected is used for the electrification activities of Small Power Utilities Group (SPUG) that gives basic electric service to remote & unviable to-serve areas, and Environmental Charge. The amount collected is used to rehabilitate and maintain watershed reservations surrounding hydroelectric plants for sustained power generation

AECOM Asia Co. Ltd. 32 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Agencies/Corporation Roles/Responsibility

Energy Regulatory  Independent quasi-judicial regulatory body Commission (ERC)  Promotes competition, ensures customer choice, penalizes abuse of the market Philippine electricity  Operates and governs the wholesale electricity spot market (WESM), Marketing Corporation which is a commodity market where electricity is traded (PEMC) Philippine National Oil  In charge of the exploration, exploitation, and development of energy Corporation (PNOC) resources in the country. National Transmission  Provides nationwide electricity transmission for the electricity generated Corporation (Tansco) by the NPC Distribution Utilities  Provide distribution services and connections to its system for any end- (DUs) and Electric user within its franchise Cooperatives (ECs) Generation companies  Operate facilities used in the generation of electricity (GCs), Independent  Secure a certificate of compliance from the Energy Regulatory Power Producers Commission (IPPs)  Secure health and safety and environmental clearance from appropriate government agencies under existing laws  Comply with cross-ownership provision Suppliers/Aggregators  Engage in retail supply of electricity with contestable customers9  Secure suppliers’ license from ERC  Demonstrate and comply with technical capability, financial capability, and creditworthiness requirements for Suppliers  Comply with rules and regulations concerning abuse of market power, cartelization, and other anti-competitive or discriminatory behavior  Identify and segregate the components of its supplier charges.

Role of the Department of Environment and Natural Resources (DENR)

Since a WtE facility is covered by the Philippine EIS System, the DENR has the following role, as stipulated in the MOA (Memorandum of Agreement) between the DENR and DOE:

1. Train DOE officials/staff in the implementation of the Philippine EIS System as provided for by PD 1586 and DAO 96-37;

2. Update DOE on the current policies on the implementation of the Philippine EIS System, laws rules and regulations, environmental standards and monitoring of ECC compliance;

1) Invite technical experts from DOE to serve as Member of the EIA Review Committee in the conduct of the scoping, substantive review and evaluation of the IEE/EIS and IEE checklist of energy projects;

2) Decide on the ECCs application of energy projects within the specified timeframe as provided for under DAO 96-37;

3) Coordinate with DOE on the establishment and operationalization of the Environmental Monitoring Fund (EMF) and Environmental Guarantee Fund (EGF) as provided for by DENR Administrative Order 96-37 as one of the conditionalities of an ECC; and

4) Advise DOE on the status of ECC compliance of each energy project relative to any administrative or legal measures/remedies that may be necessary to, enforce the compliance with PD 1586 and DAO 96-37 and other pertinent laws.

9 Refer to end-users who have a choice of a supplier of electricity, as may be determined by the ERC in accordance with RA 9136

AECOM Asia Co. Ltd. 33 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Accordingly, this MOA lists out the role of DOE in such a project:

1. Assist DENR in the implementation of the Philippine EIS System;

2. Provide the necessary funds and facilities in conducting trainings for DOE Officials / Staff on the implementation of the EIS System;

3. Provide necessary inputs to the scoping and substantive review of the IEE/EIS documents particularly to energy projects;

4. Coordinate with DENR in the establishment and operationalization of the EGF and the EMF;

5. Assist DENR in ensuring compliance by project proponents with the ECC conditions of energy projects; and

6. Coordinate with DENR in the formulation and review of any environmental policy, guidelines or procedures which may affect the planning and implementation of energy programs and projects.

The National Economic Development Authority (NEDA)

Based on Executive Order No. 230, this Authority shall primarily be responsible for formulating continuing, coordinated and fully integrated social and economic policies, plans and programs.

On matters of infrastructure development, NEDA’s Infrastructure Committee shall have the following roles:

1. Advise the President and the NEDA Board on matters concerning infrastructure development, including highways, airports, seaports and shore protection; railways; power generation, transmission and distribution; telecommunications; irrigation, flood control and drainage water supply; national buildings for government offices; hospitals, sanitation and related buildings; state colleges and universities, elementary and secondary school buildings; and other public works;

2. Coordinate the activities of agencies including government-owned or controlled corporations concerned with infrastructure development; and

3. Recommend to the President Government policies, programs and projects concerning infrastructure development consistent with national development objectives and priorities.

The Department of Science and Technology (DOST) & Industrial Technology Development Institute (ITDI)

Technological verifications are requested by DENR, to be conducted by DOST and ITDI, which “provides various services or interventions to industry to help modernize the production sector and improve their productivity.”

For new technologies, such as WtE, if it is proven available and ready for commercialization, DENR will request for technology verification in order to make sure that said technology will not have any potential negative impacts on the environment, prior to its application for ECC.

The burgeoning problem on solid waste and the inability of the local governments to implement and enforce RA 9003 has created a serious problem for solid waste management. As such, the national government, through the NEDA has released funds to study the feasibility study for setting up WtE facilities in several LGUs around the Manila Bay region.

According to NSWMC, in a paper submitted to the Center for Clean Air Policy entitled “Philippines – Revolving Fund for Waste to Energy Project, WtE technology is unlikely to be mandated due to unique circumstances encountered by each facility that affect the financial viability of such projects. However, there is political support in enacting regulations, and

AECOM Asia Co. Ltd. 34 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

incentives can be put in place to stimulate the expansion of waste treatment facilities. Also, accordingly, the government is interested in exploring the following policy initiatives to reinforce the market such as:

1. Develop guidelines for the design, construction and operation of WtE facilities that are harmonized with the Clean Air Act;

2. Mandate that utilities purchase all power generated from biogas; and

3. Capacity building for public-private partnerships (PPP) to build, operate and maintain WtE facilities.

With the guidelines for the establishment of WtE facilities currently in place, it is safe to assume that the government is taking a positive step to solve the solid waste problem by supporting clean technologies that could convert waste into a renewable energy source.

AECOM Asia Co. Ltd. 35 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

4. TECHNOLOGY AND PROCESS ENGINEERING REVIEW (TASKS 2 & 3)

4.1 Components of the Proposed MERF

The MERF

The proposed MERF in Cabuyao City will consist of three major components and a series of ancillary and supporting facilities, including:

. Waste Preparation Facilities;

. Anaerobic Digestion Unit;

. Thermal Processing Unit; and

. Ancillary and supporting facilities.

The list of major components of the proposed MERF, is presented in Table 4.1. The simplified process flow diagram and indicative site layout of the proposed MERF are shown in Figure 4.1 and Figure 4.2 below. The actual site layout will be prepared during Front-End Engineering Design (FEED).

Table 4.1 Major Onsite Components of the Proposed MERF

Waste Reception & Preparation Facilities Anaerobic Digestion Unit

 MSW reception and storage area  Buffer tanks  Waste feeding system  Anaerobic digesters  Bag Opener and Pre-Shredder  Biogas cleaning and storage  Drum Magnet  Digestate handling and storage  Disc Screens and Fine Screens  CHP Engine  OREX Press  Emergency Flare  CLEANREX Dynamic Cyclone  Process control and monitoring system  Air Winsifter  RDF Shredder

Thermal Processing Unit Ancillary and Supporting Facilities

 RDF storage  Weighbridge  Weigh Hopper  Site security  Gasifier  Administration building and control room  Char Reactor / Ash Storage and  Vehicle washing facilities Handling  Maintenance workshop  Hot Producer Gas Thermal Oxidizer  Wastewater treatment plant  Steam Turbine  Ventilation and odor control system  Emergency Flare  Flue gas treatment system  Process control and monitoring  Cooling tower system  Utilities (including transformers for electricity supply and export, water supply, drainage and sewerage piping, and road access, etc.)

Source: SURE Global

AECOM Asia Co. Ltd. 36 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City) Figure 4.1 Simplified Process Flow Diagram of the Proposed MERF

Other Green Waste

OREX & BUFFER CLEANREX TANK

Char Char and fly cooling ash loadout conveyor

Heat for Electricity Heat + Electricity CO2 + CH4 Internal CHP H2S DRY Consumption ENGINE SCRUBBER

Source: SURE Global

AECOM Asia Co. Ltd. 37 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 4.2 Indicative Layout of the Proposed MERF in Cabuyao City

Source: SURE Global

Offsite Supporting Facilities

Major offsite supporting facilities would include the followings.

Access Roads

The Project will require the use of the existing access road within the Gatchalian Industrial Park in Barangay Banay-Banay, and the use of a new road planned to be constructed by International Container Terminal Services Inc. (ICTSI) in Barangay Niugan. These two roads will connect to the NIA road to access the project site, and will be approximately 12.2 m and 10 m wide, respectively.

Transmission Facility

The transmission facility of the Project will consist of a substation and a transmission line. The transmission line will have a voltage of 115 kV that will connect to a Manila Electric Company (MERALCO) line, with a tapping point that will be approximately 2 km from the project site. The route and tapping point of the transmission line will be determined by MERALCO. The transmission line of the Project will be designed after the application for a Distribution Impact Study (DIS) and Distribution Asset Study (DAS) with MERALCO. Similarly, the design of the substation will be finalized during the FEED, and for approval by the distribution utility where the Project will connect.

4.2 Approach of the Technology and Process Engineering Review

The technology and process engineering review would focus on the three major components of the proposed MERF. They are the Waste Preparation Facilities, Anaerobic Digestion Unit, and Thermal Processing Unit.

AECOM Asia Co. Ltd. 38 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

AECOM has reviewed a number of documents prepared by SURE Global, key technology suppliers (i.e. DB Technologies, Anaergia and ICM) and other third-party auditors on the three major components, including information such as the site layout plan, process flow diagrams, technical specifications, equipment lists, budgetary proposals and performance test reports to come up with the preliminary technology review.

According to the current design (as per the model derived by SURE Global for the Waste to Worth Project) of the Cabuyao City MERF, it is estimated that around 650 tpd10 of MSW would be delivered to the MERF for processing. In the Waste Preparation Facilities, also known as front-end of the MERF (i.e. the MRF), the MSW would first go through manual picking and mechanical separation to remove recyclables and inert materials from the incoming waste stream. Then, the MSW would be separated into two fractions by an organic extrusion press. The wet organic fraction would be delivered to the anaerobic digestion facilities and the dry (inorganic) fraction would be delivered to the thermal processing facilities for further treatment and subsequent energy generation.

Based on the preliminary information provided by suppliers of the Separation and Cleaning Technologies, Anaerobic Digestion (AD) System and the Gasification System, AECOM has conducted a high-level technology review in the following sections. Detailed design documents have yet to be made available for the Consultant’s review.

In addition, it shall be noted that the Consultant has yet to receive information on the Balance of Plant or process unit termination point details to understand the full picture on how the technologies would be integrated. Furthermore, while it is understood that emission control on pollutants such as NOx, SOx, heavy metal, dioxin and particulate matters will be installed at the MERF, relevant equipment design and specifications from the power generation and emission control suppliers have not been received.

4.3 Understanding & Integrating the Technology Approaches

The integration of selected technologies (as selected for the Waste to Worth Project) was reviewed to determine their feasibility to the project. The major technologies include:

i) Separation and cleaning technologies:

After recyclables are picked out at the waste reception area by the waste pickers, waste will be conveyed to a bag opener and mechanical sorting systems before being fed into an organic extrusion press, called OREX. OREX separates the waste stream into a wet (organic) fraction and a dry (inorganic) fraction by a very high pressure in a perforated extrusion chamber that fluidizes the organic waste. The soluble inorganic fraction is separated from the material that is mechanically more resistant (inorganic or solid fraction). The soluble organic fraction is pressed through a perforation. When the compression phase is completed, the door of OREX would be unlocked. The solid fraction could be evacuated sideways with the solid fraction cylinder.

After OREX, the organic wet fraction would pass through a dynamic cyclone, called CLEANREX, to separate and remove stones and plastics prior to entering the Anaerobic Digester. The material is brought into a buffer tank where it is mixed with either process water coming from the digester or clean water to make the material more liquid. From here, the material is pushed with an auger into a cylindrical chamber that works as a cyclone that forces material outside of the cylinder through a strong centrifugal force.

Anaergia has suggested that a grit removal system will also be required to ensure that entrained grit does not settle out in the AD system, thus significantly reducing the operational time. The grit removal system could either be a hydrocyclone or by natural grit settling in the buffer tank. Due to the relatively small amount of designed throughput for the MERF in Cabuyao, Anaergia has suggested that natural grit settling in the buffer tank would be sufficient and cost-effective. The Consultant, however, do not agree with

10 According to the SURE Global.

AECOM Asia Co. Ltd. 39 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

this approach as it is believe that significant grit/glass will settle out in the AD tank, leading to maintenance downtime.

Technology for mechanical separation for this Project will be sourced from DB Technologies BV, an Anaergia company.

ii) Bio-treatment technologies:

From the CLEANREX and buffer tank, the organic wet fraction would enter a bolted steel digester tank to produce a methane-rich biogas and digestate. Biogas will be combusted in a reciprocating gas engine to produce electrical power and heat, while the dry fraction and wet fraction of the digestate will be supplied to farmers as organic fertilizer and recycled as process water respectively. The digester tank will be designed with a hydraulic retention time of approximately 18 days. Feed from the mixing tank will be intermittently pumped into the digester where it will be mixed using two hydraulic mixers and recirculated to maintain homogeneity. A Digester Heat Exchanger will be used to maintain the mesophilic temperature range (32˚C to 45˚C) in the digester. Hot water used by the heat exchanger will be supplied by a heat loop that is pumped from the Combined Heat and Power (CHP) system.

Technology for anaerobic digestion for this Project will be sourced from Anaergia Asia Inc., an Asian operating arm of Anaergia, Inc.

iii) Thermal treatment technologies:

Dry inorganic material coming from OREX will be conveyed into a gasifier to produce Syngas or Producer gas. The Syngas is then combusted in a Thermal Oxidizer to ensure complete combustion, and the heat being removed by a boiler. After that, the steam would be used to produce power with a high-efficiency turbine generator set. The solid residual or char would be combined with recovered ash and cooled for safe handling. The flue gas is processed with emission control equipment to meet the most stringent requirements in accordance with the best standards, meeting all regulatory targets, and is exhausted through a stack. For this Project, the gasification technology will be sourced from ICM, Inc.

It shall be noted that biogas and Syngas will be combusted in separate systems for heat and power generation.

Separation & Cleaning Technologies

DB Technologies BV was established in 2008. As a subsidary of Anaergia, DB Technologies BV has more than 60 years of experience in waste separation areas with wide knowledge of generating quality products through efficient waste separation.

AECOM paid a visit to an AD Facility that included the OREX of DB Technologies BV. The facility was located nearby Kaiserslautern, Germany and the visit took place on 9 May 2014. AECOM were showed around the facility and introduced to the OREX technology by Mr. Wibo Koggel of DB Technologies. The AD Facility was designed to treat around 70,000 tons per annum of residual MSW. However, the AD facility in Kaiserslautern was using a different AD system to that being considered for this project, hence, that AD system was not being studied on site. The dynamic cyclone (or CLEANREX) was also not installed at this site, so the Consultant was not able to inspect this equipment on site.

Based on the Consultant’s understanding, at the beginning of the treatment process, following manual picking, waste is being fed into a feed hopper to the OREX without pre-treatment or removal of large items and/or metals. The OREX would then separate the waste into two fractions, a wet organic fraction and an inorganic dry fraction.

AECOM Asia Co. Ltd. 40 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The separation process consists of a chamber with a very strong mesh, in which waste is compressed using an extremely high pressure depending on the required Calorific Value of the dry fraction of waste. The extremely high pressure converts the wet organic fraction into liquid slurry and this is pressed through the mesh. This wet organic fraction can then be treated in AD Facilities following further separation of the non-digestable parts.

The dry (inorganic) fraction would remain inside the chamber. This dry (inorganic) fraction would then undergo additional separation process, if required, by sorting out recyclables before forming RDF. The OREX can process up to 35 tons of waste per hour.

Bio-Treatment Technologies

Anaergia was established in 1960s. They position themselves as a global leader in the production of clean energy, fertilizer and recycled water from organic waste streams, and offers the widest range of anaerobic digestion technologies for municipal, industrial, commercial and agricultural markets. Anaergia delivers solutions globally through offices established across North America, Europe and Asia.

On 9 May 2014, AECOM also paid a visit to the AD Facility of Anaergia in Bieringen, Germany. AECOM were showed around the facility and introduced to the technologies by Mr. Tim Huang of Anaergia. The facility is based upon UTS technology, part of the Anaergia group of companies. 50 tpd of maize silage was being digested in the facility. The digestion approach is the UTS Triton system.

This maize silage was pre-chopped, forming small particle size and homogeneous feedstock (when compared to typical waste), and fed into a solids feeding / dosing hopper system. The maize is fed into dosing system using a wheeled loading shovel. The maize is then screw-fed into the outer section of the digesters.

The triton digesters have two rings providing an inner section and an outer section. The maize silage is delivered into the outer section which serves as a primary digestion area. Then, it is pumped into the central ring which is a secondary digestion area. The outer ring (primary digestion) operates at a higher rate with a higher solids concentration whilst the second stage is a lower rate with a lower solids concentration. This approach, according to Anaergia, reduces the footprint size of the digestion plant.

The digester would mix the maize using a hydraulic operated mixing system. There were five mixers, and the mixers were positioned in the outer ring and in the inner ring. Each mixer had a service box to allow easy access for maintenance if required.

The hydraulic systems for the mixers were located in a central distribution room along with the chopper pump for moving the contents of the tank from the outer section to the inner section. The same pump was used to feed the digestate separator. The digestate separating device separates the fibers from the liquor. The separated digestate is located in an elevated position above a concrete bay for the fibrous material to be collected. The separator is a compact screw filter press, where the liquor separated is sent to the adjacent tank. The fiber and the liquor would both be used as fertilizers in agricultural land use. The digester would be heated via hot water pumps in the wall of the digester.

For biogas generated in the digesters, it would be cleaned in two ways:

. Small injection of oxygen to reduce the hydrogen sulfide concentration; and

. Use of an activated carbon unit upstream of the gas engines to further reduce the concentration of contaminant gases11. Note that waste derived biogas may contain different contaminant gases that would require further treatment. The expected treatment requirement shall be confirmed with Anaergia.

11 Subject to confirmation with Anaergia on whether the gas generated will be used in a CHP engine or other systems.

AECOM Asia Co. Ltd. 41 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The biogas generated at the Bieringen plant was used to produce power and also heat in CHP reciprocating engines. The majority of the heat was exported in order to gain renewable energy financial credits.

In addition to Bieringen, Germany, AECOM paid a visit to another Anaergia’s facility in Cape Town, South Africa, on 8 May 2017, where Anaergia’s separation and bio-treatment technologies were installed at the same facility. AECOM were showed around the facility and introduced to the technologies by Mr. Bruce Thorndike of Anaergia. Again, the facility is based upon UTS technology, and the designed capacity is 500 tpd of MSW. The digestion approach is the UTS Helios system. More details can be found in Section 5.3 below.

Thermal Treatment Technologies

AECOM understand at the start of the Waste to Worth Project for Cabuyao City, SURE Global has considered various thermal treatment technologies, which includes mass burn, gasification and plasma gasification. A comparison of the thermal treatment technologies can be found in Annex A. Then, based on the designed capacity, the footprint of technologies and cleaner flue gas emission, gasification is selected for the Waste to Worth Project for Cabuyao City. It should be noted that mass burn technologies do not have a significant track record at throughputs as low as those identified for the projects outlined in this document.

Afterwards, during inception stage of the TA, the selected gasification technology supplier was Concord Blue Energy. AECOM met with Concord Blue Energy’s technical personnel, Mr. Sebastian Flahs in particular, at their office in Herten, Germany on 13 May 2014.

However, for commercial reasons, the selected gasification technology supplier has now changed and become ICM. Headquartered in Colwich, Kansas, USA, ICM was founded in 1995 and is specialized in biofuel technology. Their equipment and processes are being used in many of the ethanol plants in USA. In addition, ICM has pioneered technology in power plants and grain processing facilities outside the ethanol industry in USA and around the world, including Canada, Mexico, Argentina, Hungary, India, and Mozambique. Particularly, ICM’s proprietary gasification technology, air- blown gasification system, is based on platform technology developed in the early 1980s (which was supported by the U.S. Department of Energy and Boeing Company).

AECOM began communications with ICM on technical aspects since September 2015. According to ICM, their process design typically consists of the feed system, the gasifier, biochar / ash handling system and a Syngas combustor, all of which are modular in construction. Particularly, the gasifier is a horizontal, positive-displacement auger-transport gasification unit comprised of multiple air injection zones, allowing for the injection of air both at the top and bottom of the biomass bed. A visit by AECOM to ICM head office in Colwich, Kansas, USA, on 27 April 2017 provided a presentation of the basic operating system of the ICM gasifier together with a visit to an operational gasifier in Newton, Kansas, USA, being fed with waste wood.

4.4 Separation & Cleaning Process

Initial Technology Review of the Separation & Cleaning Process

The separation and cleaning system is designed specifically for the separation of organic and non-organic waste fractions, and pre-treatment for anaerobic digestion. It can turn household / municipal solid waste into relatively cleaner and purer products for subsequent treatment. According to DB Technologies, the separation system can achieve a separation efficiency of up to 98 percent, which is an improvement of 30 percent compared to many typical separation methods.

DB Technologies’ solution consists of two technologies working in an integrated system that firstly separates incoming MSW (or other potentially polluted organic waste) with a high- pressure hydraulic press (i.e. OREX), into a biogenic fraction and a dry non-organic fraction. The OREX treatment process can be summarized into the following phases:

AECOM Asia Co. Ltd. 42 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

. Phase 1 – MSW is loaded to the system with a conveyor belt where it would fall from the feed hoppers into bag openers, metal and non-ferrous metal magnetic separation system, and disc screens (80mm) before being fed into into OREX.

. Phase 2 – The high pressure inside OREX separates the biogenic fraction from the non-organic fraction. Dry non-organic fraction (paper, plastic, grit, cellulosic material, etc.) remaining inside OREX would undergo further separation process as described below. The wet pulped fraction separated out by OREX would fall down into a conveying system.

. Phase 3 – The outlet gate opens and pushes out the dry non-organic fraction onto a conveyor belt. This entire process takes less than a minute.

The dry non-organic fraction from OREX would undergo additional separation processes. In some of DB Technologies’ reference plants, inert waste and fine fractions are separated from the material flow. A metal and non-ferrous metal magnetic separation system would sort out the metal parts. Recyclables would be retrieved from the material.

For the case of the MERF, the dry non-organic fraction would go through rejects lump breakers and screens (50mm) before being transferred to wind sifters. The ballistic wind sifters would separate the light fraction, thus, leaving the heavy fraction consisting of stones and glass from the high caloric fraction. This fraction would go through RDF shredders and be shredded into pieces of maximally 30mm large particles, resulting in high quality fuel for thermal treatment.

In terms of the biogenic fraction, a further two-step cleaning process would be carried out. First, the CLEANREX would extract plastic film. Then, buffer tanks would allow both storage capacity for the biogenic fraction and time for grits to settle.

Initial assessment on the information provided by DB Technologies has found that grit removal efficiency is not provided. However, for instance, if 0.1 percent of the incoming waste is grit, then there could be as much as 0.23 tpd of grit. Assuming 90 percent removal efficiency, there would be 0.023 tpd of grit remaining in the waste stream. Over a year’s time, assuming all the grit sinks, there could be over 8 tons at the base of the AD digester, where the method of removal is currently unknown to the Consultant. Anaergia have provided removal efficiencies, but the Consultant note that this is on different waste. It should be noted that DB Technologies is part of Anaergia, so Anaergia shall be responsible for the overall design of the separation and cleaning process as well as the bio-treatment process for the Cabuyao MERF.

Findings of Technical Visit to a Reference Plant in Cape Town, South Africa

Description of the Site

Anaergia is currently operating New Horizons Waste to Energy Project in Cape Town, South Africa. It is a mechanical and biological treatment (MBT) plant that is installed with Anaergia’s separation and bio-treatment technologies. The separation technologies that are being installed at this plant include Anaergia’s Bag Opener, screens, OREX, CLEANREX, wind sifter, etc. The designed capacity of the plant is 500 tpd.

Waste Reception & Storage

The incoming waste is delivered onto a flat floor and is then subsequently loaded into the front on of the materials recycling with a front loader. Large items are manually removed from the flat floor. The feed rate was, however, significantly less than the design throughput of 500 tpd as the supply contracts had not been finalized.

OREX

According to Anaergia, they have plants operating OREX since 2013 without reporting significant issues. The inlet size of OREX should be 100 mm x 100 mm, while the operating pressure can reach a maximum of 4,000 psi (or 280 bar). Based on Orex model 400H3P, it can handle an MSW throughput of 15 tons per hour.

AECOM Asia Co. Ltd. 43 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

CLEANREX

According to Anaergia, separation of the feedstock by CLEANREX would result in approximately 12- 15% TS. The mixer would generate a centrifugal acceleration of up to 170g.

Grit Removal

This is not specifically undertaken at this site.

Technical Visit Constraints

The plant was only able to be fed at about 60% of design due to delivery constraints of the raw feed material. The plant was thus being operated on a stop/start basis to enable the process systems to, as far as possible, work at design capacity.

The AD system, although operational, was not only operating at reduced capacity due to the feedstock constraints, it was not an ideal design as Anaergia had taken over an existing tank system and other infrastructure.

The basic infrastructure and the AD tanks were made available to Anaergia and they have not designed these systems, although the existing AD tanks are similar in design to the Anaergia ‘Helios’ design. The plant was designed to receive 250 t/day of municipal waste but the delivery is currently limited to 150 t/day by the importer, thus the plant is not operating to capacity. The plant has been in commission since January 2017.

4.5 Bio-Treatment Process

Initial Technology Review of the Bio-Treatment Process

Most of the pre-treatment equipment and process equipment for the anaerobic digestion process would be supplied by Anaergia Asia Inc. This includes a few conveyors and sorting platforms, a bag opening shredder, a permanent belt magnet, an OREX, a CLEANREX, a buffer tank and an anaerobic digester. From the mass balance summary included in the budgetary proposal for MSW prepared by Anaergia in September 2015, it is estimated that around 20.2% of the incoming waste is the total solids (TS) (i.e. 44.4 tpd) to be handled by the anaerobic digester and around 85.0% of the TS is the volatile solids (VS) (i.e. 37.7 tpd) to be processed by the anaerobic digester. This would result in around 171.4 kg of VS per ton of MSW to be treated at the site, which is considered to be a reasonable figure for the proposed anaerobic digestion process.

The performance of the anaerobic digestion process depends on several physical and chemical parameters such as pH, temperature, carbon to nitrogen (C/N) ratio, organic loading rate (OLR), hydraulic retention time (HRT) and biogas quantity and quality, etc. For instance, the pH, temperature and C/N ratio have to be maintained within a suitable range for the bacteria to react with the organic material.

The optimal pH for anaerobic digestion is between 6.0 and 7.5. If the amount of VS fed into the digester exceeds the capacity of the bacteria to break down the constituents, acid accumulation would occur and the methanogenic bacteria could no longer perform its function. To avoid acid accumulation, the operator has to monitor the amount of fresh material being fed to the anaerobic digester.

The optimal temperature for anaerobic digestion is between 30°C and 40°C (for mesophilic process) or between 50°C and 60°C (for thermophilic process). The proposed anaerobic digester would operate in a condition similar to the mesophilic range (i.e. between 32°C and 45°C). Mesophilic digesters are more biologically robust in general and can tolerate greater changes in environmental parameters when compared to thermophilic digesters.

For C/N ratio, a value between 25 and 30 is ideal for the anaerobic digestion process. Since the wet organic fraction from the proposed OREX mainly consists of the biodegradable portion

AECOM Asia Co. Ltd. 44 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

of the MSW such as food waste and other organics, it is expected that the C/N ratio would be close to or slightly less than the optimal range for anaerobic digestion.

The OLR and HRT, on the other hand, can be determined based on the design criteria and requirements set out for the project. The OLR indicates the amount of organic material being added to the digester each day and the HRT indicates the period of which the biodegradable material remains in the digester. Normally, a high OLR would be selected because it means a high turnover of the organic material could be achieved in the anaerobic digester. Nevertheless, too high of an OLR can overload the system and inhibit the conversion of organic material. Also, a high OLR usually correlates to a low HRT, which would result in low biogas yield due to low VS reduction. According to the industry best practice, a wet mesophilic anaerobic digestion process typically has an OLR between 1.0 and 4.0 kg VS/m3/d and a HRT between 14 and 30 days, the VS reduction is around 75% and the biogas production is around 125 m3 per ton of MSW input.

As indicated in the design summary provided by Anaergia, the OLR is set at 4.5 kg VS/m3/d, which means a minimum digester volume of 8,378 m3 is required. Assuming no further dilution is applied to the system, the hydraulic retention time is around 38 days. A VS reduction of around 49.7% is assumed for the proposed anaerobic digestion process, this results in around 19,873 Nm3/d of biogas being produced from the wet organic fraction of the MSW with 60% methane content. The above correlates to a biogas production of around 90 m3 per ton of MSW received at the site. The biogas produced from the anaerobic digestion process would be used in the subsequent heat and power generation system to generate heat and electricity for internal use and export to the grid.

Review of Reference Plant Data provided by Anaergia

Based on the supplementary information provided by Anaergia, it is noted that similar anaerobic digestion systems designed to treat municipal organic waste have been in operation elsewhere. The reference plant data would serve as a benchmark for the existing plant design.

For the anaerobic digestion plant in Glenfarg, Scotland, where the feedstock is source- separated commercial and municipal food and organic waste, it is noted that the pH of the system was maintained at around 4 and the operating temperature of the system was kept between 10°C and 40°C from June 2012 to November 2013. These phenomena are quite unusual for an anaerobic digestion process as most of the bacteria would die out if the pH drops below 6 or if the temperature falls below 20°C. The biogas production at the plant, however, was quite reasonable. The plant can achieve a biogas production of between 90 m3 and 170 m3 per ton of waste input from September 2013 to December 2013. The biogas was comprised of around 60% CH4 and 40% CO2.

For the anaerobic digestion plant in Jinan, China, where the feedstock is also source-separated commercial and municipal food and organic waste, it is observed that the pH and the operating temperature of the system were maintained within reasonable range for anaerobic digestion. However, there were slight fluctuations in the incoming feedstock. For example, the %TS and %VS of the incoming feedstock suddenly peaked out on 21 and 24 July 2014, rising from around 10% to 20%. Assuming the plant is accepting the same waste sources on a day-to-day basis, the drastic change in waste composition is not common. Other than that, it is realized that the chemical oxygen demand (COD), volatile fatty acid (VFA) and alkalinity were all within the acceptable range for anaerobic digestion. Similar to the %VS, COD is a measure of the biological conversion capacity of the anaerobic digestion system. A COD level between 2,000 mg/L and 50,000 mg/L are considered suitable for the anaerobic digestion process. VFA is an intermediate product in the anaerobic digestion process. It is usually used as an indicator to check the stability of the system. A VFA level between 200 mg/L and 2,000 mg/L are considered appropriate for the anaerobic digestion process. Last but not least, alkalinity is a measure of the acid-neutralizing capacity of the anaerobic digestion system. An alkalinity level between 2,000 mg/L and 4,000 mg/L are considered optimal for the anaerobic digestion process.

Since the feed material, design capacity and operating conditions of the reference plants are somewhat different from what are being considered for this project, it is hard to deduce whether

AECOM Asia Co. Ltd. 45 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

the AD system supplied by Anaergia for this project would perform the way the reference plants do. In general, the operator has to monitor the performance indicators as discussed above such as pH, temperature, C/N ratio, OLR and HRT, etc. to ensure the anaerobic digestion system is operating according to the design specification and meeting the requirements of the project.

Findings of Technical Visit to a Reference Plant in Cape Town, South Africa, and Subsequent Conference Call with Anaergia

Description of the Site

Anaergia is currently operating New Horizons Waste to Energy Project in Cape Town, South Africa. It is a mechanical and biological treatment (MBT) plant that is installed with Anaergia’s separation and bio-treatment technologies. The bio-treatment technology being installed at this plant is based upon UTS technology, the Helios system, and is designed with a MSW throughput capacity of 500 tpd.

Feedstock

The feedstock was MSW from a third party. The rate of supply was only about 60% of that in the design due to contractual issues.

Grit Removal

Anaergia suggest that the grit and glass present in the waste will be minimal; and that presence will tend to be mostly over 2mm (and thus be rapidly removed by gravity settling systems). The Consultant’s view is that this is based on waste that is not typical in the Philippines, so may be different. It is understood that the proposal will include for a gravity settling system, which forms part of the buffer tank prior to the AD tank.

The Consultant’s concern remains that this may not settle out all lighter solid fractions, which will subsequently settle out in the AD tank, due to a longer settling period of around 18 days, despite mixing. As a minimum, it is recommended that maintenance is allowed for (to dig out settled solids in the AD tank) in the budgeting, and that this may be required fairly frequently – frequency cannot be advised by the Consultant as the reference plants are not available.

Anaerobic Digester Design & Construction

Anaergia currently only have expertise with the Helios design of AD tank when processing waste derived organic fractions. It has been decided by SURE Global to utilize the Triton design for Cabuyao, which is a tank inside a tank. Anaergia are confident that the Triton tank will provide enhanced flexibility for the Cabuyao MERF. The Consultant, however, re-iterate concerns that, although mixing of the tank contents local to each of 4 mixers is a high rate, the overall mass of the AD fluid rotates only slowly and thus small solid particles not settled prior to the AD system are likely to settle out and require manual intervention to remove. As a minimum, it is recommended that the Triton tank system is fitted with appropriate man-access systems for maintenance.

It was not possible to assess the potential for settling in any of the Anaergia reference plants as the systems have not been in operation for very long.

Biogas Generation & Cleaning

The reference plant was only fed with about 50% of the design organic rate – together with the different design of AD tank it was thus not possible to take a view on gas production rates. The reference plant gas cleaning system is completely different to that proposed for the Cabuyao MERF. This is solely due to the destination of the cleaned gas.

At the reference plant the end user is gas to grid, thus, the gas is required to be cleaned such that only high quality methane remains. Carbon dioxide is also exported as a clean gas. For the proposed plant the gas will be utilized to power a reciprocating gas engine, thus, the gas is required to be cleaned to remove hydrogen sulphide and siloxanes. A description from Anaergia

AECOM Asia Co. Ltd. 46 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

suggests that this is proposed to be water based clean-up for hydrogen sulphide, a cooling process to lower the dew point of the gas to provide a dry gas and subsequent activated carbon to remove siloxanes. The Consultant have a concern that the activated carbon may quickly become de-activated as all remaining contaminants as well as siloxanes will be removed. This will cause high replacement (of activated carbon) costs. It is suggested that catalytic removal of siloxanes is investigated during the FEED stage.

Technical Visit Constraints

The final use of gas at the reference plant in Cape Town is completely different to that proposed in Cabuyao, thus, any reference systems are not relevant.

4.6 Thermal Treatment Process – Gasification System

Initial Technology Review of the Gasification System

The gasification system will be supplied by ICM Inc. Similar to the anaerobic digestion system, the gasification system would be installed after the pre-treatment process. That is, once gone past the pre-treatment process, waste would be fed into an OREX and a CLEANREX that separates the waste into a wet organic fraction for the AD system and a dry (inorganic) fraction (or RDF) for the gasification system. The dry (inorganic) fraction would be size-reduced by a shredder and sorting equipment to suit the gasifier sizing requirements before feeding into the gasification system, which would then produce synthesis gas (Syngas). Syngas is high in carbon monoxide and hydrogen content. Gasifier fuel feed dictate that a shredder is placed before the gasifier to limit the maximum particle dimension to 100mm in any direction. ICM confirmed that there is no limit on the size or degree of fines entering the gasifier. The requirement and identification of such RDF sizing equipment shall be discussed with ICM during the FEED stage to ensure complete gasification of all particles during the process. The Syngas would be combusted in a Thermal Oxidizer to ensure complete combustion and the heat used to produce steam in a boiler. The steam would be used to produce power with a high-efficiency turbine generator set. The solid residual or char would be combined with recovered ash and cooled for safe handling. The flue gas would be processed with emission control equipment.

Gasification is a chemical process for converting carbonaceous materials at a high temperature to a combustible synthetic gas (e.g. H2, CO and CO2). It involves the reaction of carbon with air, oxygen, steam, carbon dioxide or a mixture of these gases at 1,300°F (equivalent to 704.44°C) or higher to produce Syngas for power and/or heat generation. In contrast to combustion, which work with excess air, gasification processes operate at sub-stoichiometric conditions with the oxygen supply controlled (generally 35% of the amount of oxygen theoretically required for complete combustion or less), such that both heat and a new gaseous fuel are produced as the feed material consumed – the feedstock is thus chemically broken down into its constituent molecular parts. The presence of gasification agent (air, oxygen, or steam), gasifier operating temperature and pressure, feedstock composition, feedstock preparation and particle size, reactor heating rate, residence time and plant configuration can all affect the quality of Syngas produced.

The Consultant has met with ICM’s technical team at their headquarters in Colwich, Kansas, USA, and conducted to technical visit to their demonstration gasifier in Newton, Kansas, USA, to understand their technology. ICM has also provided some technology information and past performance test reports of the demonstration gasifier for the Consultant’s review. Based on the technical meeting, site visit, information provided and performance test reports, AECOM has conducted a technology review as follows.

Key Technology Design and Operation Parameters

Design Life

Design life is the period for which a component, device or system is expected to function at its designated capacity with proper maintenance and without major repairmen or breakdown. According to ICM, all parts susceptible to wear are designed for replacement. Such

AECOM Asia Co. Ltd. 47 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

replacement frequency will depend on the condition of feedstock, and whether the operator has followed the recommended operation and maintenance procedures. ICM opines that minimum design life would be in excess of 20 years.

Design, Procurement, and Construction Period

Whilst the design and procurement timelines are to be determined in the detailed design phase, the manufacturing and shipment period of the equipment, according to ICM, will take approximately 10 months in total.

Operating Hours

Operating hours is the period of time of which a component is expected to be in operation. As the frequency of stoppages correlates with equipment life, thorough planning on project operation is expected. According to ICM, project operation shall be planned for continuous operation with planned maintenance breaks. The planned operating hours should be at least 80% per year.

Operating Conditions

Operating conditions are the parameters which allows the facility to optimize its performance. According to ICM, the operating temperature of the facility shall be approximately 500 – 870oC. The waste tonnage input shall be approximately 135 metric tons per day. The maximum dimension of the in-feed particle shall be 15mm on one side. Other parameters such as air conditions and carbon contents requirements should be determined in the engineering design phase.

Feedstock

The feedstock requirement outlines the conditions where the feedstock is the most suitable for plant operation. As mentioned above, the maximum dimension of the feedstock shall be 15mm on one side. According to ICM, the waste density shall be between 80-500 kg/m3, as waste with density higher than 500 kg/m3 will be problematic or require blending with RDF or other materials with lower density. The suggested Calorific Value ranges from 12 to more than 20MJ/kg. The suggested moisture content should be approximately 10-45%. When the moisture content exceeds 35%, it is recommended that the feedstock shall be blended with drier ones. It is suggested that the metal contents shall be removed from the feedstock stream.

Syngas Conversion Rate

Syngas is the flue gas produced from the gasification of the feedstock. It contains H2, CO, CH4, Ethylene, Propylenes, H2O, H2S and other gas components. According to ICM, the carbon conversion shall be around 95% to more than 97%. The Feedstock-to-Producer gas carbon conversion can be determined indirectly by measuring carbon content of incoming feedstock and comparing with the residual carbon in char and fly ash produced by gasification and producer gas combustion processes.

Operating Mechanisms

According to ICM, while the typical operating mechanisms and parameters should be defined in the engineering design phase of the project, some general parameters are suggested as follows:

i) Gasifier:

In general, one feed system is required for each gasifier train. The duty of the gasifier is assumed to be 100%. The energy requirement for the gasifier’s drive mechanism is relatively low. According to ICM, even their largest model requires less than 30 kW only. ICM estimated that based on the size of this project, the energy requirement to drive the gasifier will approximately be 15 kW. The actual energy requirement has to be determined in the engineering design phase.

AECOM Asia Co. Ltd. 48 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

In addition, the retention time correlates to the feed rate. According to ICM, the retention time is approximately 10 to 30 minutes in the gasifier and 30 to 50 minutes in the char reactor.

ii) Ash handling:

The ash produced in the gasification process can be cooled with a water spray quench and conveyed to the loadout point.

iii) Control and Monitoring Mechanism:

According to ICM, control logic is used for system control. Sensors on temperature, pressure, flow, level and other measurement elements will be installed. Detailed arrangements will be determined in engineering design phase.

iv) Storage

According to ICM, appropriate storage facilities for raw and prepared feedstock should be included in the project design. No syngas storage mechanism is required as the syngas is generated at high temperatures and nearly atmospheric pressure, and then combusted in the boiler immediately.

Guarantees

According to ICM, no operational guarantees on plants are provided unless ICM is responsible for plant operation and maintenance. Also, the performance of equipment highly depends on the feedstock. ICM will likely guarantee the conversion only based on the limited project scope at the moment.

Operation and Maintenance Procedures

i) Emergency Shutdown Procedure

According to ICM, the Emergency Shutdown Procedure will be included in the Recommended Operating Procedures (ROP), with necessary steps which varies based on situations. Although the processes has already gone through hazard and operability study (HAZOP) analyses, ICM would not preclude the need to conduct similar analyses for the project facility.

ii) Emergency gas discharge Procedure

According to ICM, in the case of an uncontrolled combustion event within the gasifier, rupture panels are provided and would be vented to atmosphere. During startup, shutdown and emergency shutdown sequences, nitrogen purging is usually recommended and provisions for are included in the basic design. Such gas can normally be dealt with in the combustion section of the boiler. Alternatively, a small flare could be included.

iii) Safety Provisions for Syngas Leakage

According to ICM, since very small amount of syngas will be accumulated in the system, and the gas will be close to atmospheric pressure, no specific leak provisions will be provided apart from basic combustion control safety devices.

ICM Biomass Gasification Technology Review (2010)

Based on a performance test report provided by ICM, issued by R.W. Beck, Inc. (hereinafter “R.W. Beck”), titled “ICM Biomass Gasification Technology Review” and dated 21 May 2010, it is understand that ICM has developed, engineered and operated an industrial-scale biomass gasifier. They are offering the gasifier as part of a turnkey unit for commercial use to supply

AECOM Asia Co. Ltd. 49 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

biomass-based fuel to power new or existing boilers, kilns, pulverized coal burners or other direct combustion systems.

With the biomass gasifier, ICM has constructed a commercial-scale demonstration facility in Newton, Kansas, USA. It consists of the feed system, the gasifier, biochar / ash handling system and a Syngas combustor (flare). Particularly, the gasifier is a horizontal, positive-displacement auger-transport gasification unit comprised of multiple air injection zones, allowing for the injection of air both at the top and bottom of the biomass bed, is approximately 6 feet in diameter and 40 feet long and can process up to 200 tpd of biomass.

Prior to R.W. Beck’s review, ICM has operated the demonstration facility for approximately 9 months, and reported the operational data as follows:

. 1,000+ hours of operation; and

. 3,000+ tons of feedstock processed. Feedstock types used included wood chips, corn stover and wheat straw.

During the 35-day review period, the demonstration facility produced Syngas for approximately 650 hours, and was down for maintenance and to correct operating issues for approximately 175 hours. The relatively large portion of downtime, according to R.W. Beck, was due to oversized woody feedstock and metal contained in off-specification fuel caused the majority of unit downtime.

The system is apparently capable of using a variety of biomass-based feedstocks, including wood chips, bark, corn stover, wheat straw, grasses and clean RDF. However, its compatibility with treating MSW / RDF feedstocks is not mentioned.

Normally, gasifiers’ exit temperatures would be designed at 1,300°F (or 704.44°C) or above. However, while the gasifier exit temperatures were targeted to be approximately 1,400°F (or 760°C), during the review period, results indicated that the temperatures were frequently above 1,200°F (or 648.89°C), with only a few tests exceeding the 1,400°F (or 760°C) level.

During the review period, the gasifier successfully processed multiple biomass feedstocks (wood chips, corn stover, and wheat straw) with moisture contents ranging from 26 to 45 percent. However, in the feedstock specification sheet, it is estimated that the RDF stream would have average moisture content ranging from 21 to 33 percent. With slight modification to the system, this should be an acceptable range.

The Syngas produced by the ICM technology has a typical energy content of 120 to 150 Btu/ft3 (equivalent to 4.47 to 5.59 MJ/m3), including potentially condensable gases. This range is slightly broader than the 4.5 to 5 MJ/m3 range that a typical gasification system has.

At the time of review by R.W. Beck, the gasifier design appears capable of producing approximately 70 MMBtu/hr of Syngas from 204 tpd of wood chips. The conversion efficiency to chemical energy in the form of Syngas, in this case, has been demonstrated at 64 percent. Typical conversion efficiencies of the gasification processes are 60 to 70 percent.

ICM RDF Gasification Technology Review (2012)

Based on a performance test report provided by ICM, issued by SAIC Energy, Environment & Infrastructure LLC (hereinafter “SAIC”), titled “ICM RDF Gasification Technology Review” and dated 20 June 2012, on the same industrial-scale biomass gasifier constructed in the demonstration facility in Newton, Kansas, USA. With some modifications, the gasification system this time consists of the feed system, the gasifier, char / ash handling system, the Syngas scrubber and a Syngas combustor (flare). The gasifier is still a horizontal, positive- displacement auger-transport gasification unit comprised of multiple air injection zones, allowing for the injection of air both at the top and bottom of the biomass bed, is approximately 6 feet in diameter and 40 feet long and can process up to 200 tpd of biomass.

AECOM Asia Co. Ltd. 50 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Prior to SAIC’s review, ICM has operated the demonstration facility for over two years on various biomass feedstocks, and reported the operational data as follows:

. 2,500 hours of operation; and

. 8,000 tons of biomass feedstock processed.

During the 7-day review period, the demonstration facility produced Syngas for approximately 168 hours, and was down for maintenance and to correct operating issues for less than one hour.

The system is apparently capable of using a variety of biomass-based feedstocks, including wood chips, bark, corn stover, wheat straw, grasses and clean RDF. It also demonstrated the capability of treating RDF from Ames, Iowa MSW processing facility. According to SAIC, the RDF was primarily a mixture of paper and plastic with occasional small metal particles and other small inerts.

Normally, gasifiers’ exit temperatures would be designed at 1,300°F (or 704.44°C) or above. The gasifier exit temperatures during the review period this time indicated that the temperatures were generally in the 1,400°F (or 760°C) to 1,600°F (or 871.11°C) range, with several periods of testing exceeding the 1,800°F (or 982.22°C) level.

During the review period, the gasifier demonstrated the capability to process the Ames Iowa RDF with moisture contents of approximately 26 percent. This appears within the range estimated in the feedstock specification sheet for the RDF stream, which would have average moisture content ranging from 21 to 33 percent.

The Syngas produced by the ICM Technology has a typical energy content of 120 to 150 Btu/ft3 (equivalent to 4.47 to 5.59 MJ/m3), including potentially condensable gases. This range is slightly broader than the 4.5 to 5 MJ/m3 range that a typical gasification system has. It should be noted that the performance testing results discussed that gasification of the RDF produced a hot Syngas that was burned effectively by adding air without an ignition source in the combustion. However, the total volume available in the stack was not sufficient at time to complete combustion without visible flames above the stack tip. The resulting combustion temperature was hot enough to melt ash (fly ash) that was carried over in the exit duct.

At the time of review by SAIC, the gasifier design appears capable of producing approximately 34 MMBtu/hr of Syngas from 90 tpd of RDF. The conversion efficiency to chemical energy in the form of Syngas, in this case, has been demonstrated in the 66 to 68 percent range. Typical conversion efficiencies of the gasification processes are 60 to 70 percent.

The performance test report has also pointed out several areas where ICM’s system should improve on, including:

. Throughput of the gasifier ranged from 65 to 96 tpd of RDF based on 12-hour averages. A higher production rate of 100 tpd was demonstrated during a 2-hour period late in the testing period, where one of the heat and material balance runs was conducted. However, during this period, the throughput rate ranged from 81 to 114 tpd (10-minute averages) with an average throughput of 101 tpd and a standard deviation of 8.7 tpd. This indicates a potential unstable condition, and may not support a nameplate capacity of 100 tpd.

. The Char/Ash Handling System needs to be upgraded (a refractory lined trough with controlled air addition) to act as a polishing gasifier and increase both the level of carbon conversion and energy output.

. A cyclone should be added to avoid particulate carryover into the product Syngas and capture additional biochar.

. The tar scrubber on the slip stream did not operate for a sufficient period during the performance test to obtain meaningful data. This is not deemed a problem as a tar

AECOM Asia Co. Ltd. 51 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

scrubber is not likely to be required if the Syngas is combusted immediately following the gasifier in a thermal oxidizer.

However, who shall be responsible for designing the improvement works and how should the improvement works be tested is not mentioned in the review document. It is assumed that this issue would be ICM’s responsibility.

Findings of Technical Visit to a Reference Plant in Newton, Kansas, USA

Description of the Reference Plant

The reference plant in Newton, Kansas, USA is a circa 10 tons per day demonstration gasifier installed with a two-stage thermal oxidizer. Feedstock is prepared off site and the syngas produced is combusted in the thermal oxidizer. The demonstration gasifier is fully instrumented and is fitted with a production control system.

The reference plant was originally set up for a commercial gasifier, designed with 150 tpd of treatment capacity, syngas flaring, and had RDF as feedstock. According to the Technology Review Reports provided by ICM dated 2010 and 2012 (as discussed in previous sections), the commercial gasifier was operating in reasonable condition. However, ICM decided to shut down the plant in 2015 for commercial reasons, as they were unable to secure sufficient feedstock for the plant from nearby cities and towns.

Feedstock

The feedstock being utilized during the AECOM inspection was a nominally waste wood, chipped to approximately 200mm maximum dimension. According to ICM, the following feedstock have all been tested previously:

. Wood . Corn Stover . Wheat Straw . Sorghum Stalks . Construction and Demolition (C&D Waste) . Paper Pulp + Plastics . Switchgrass . Corn Bran + Syrup . Auto Shredder Residual . MSW (RDF) . Minimally Processed MSW . MSW (RDF) + Tires . Chicken Litter . Dairy Manure . Manure + Wood chips

It is evident from the various tests and reports that many different feedstock have previously been utilized, including the RDF. According to SAIC’s performance test report (2012) mentioned above, the RDF was primarily a mixture of paper and plastic with occasional small metal particles and other small inerts. The composition of RDF is, in a way, similar to that intended to be provided for the MERFs to be developed and installed in Cabuyao City. It was noted that the inlet feed system had a tendency for sudden pressurization. It is assumed to be due to the dust present in the feedstock at the time of visit. The RDF feedstock for the MERFs in the Philippines is anticipated to have minimal dust due to the upstream pre-treatment, thus, this issue is less likely to occur in the Philippines. It is recommended however that the pressure relief system is re-engineered to provide a safer pressure relief direction.

Throughput

The demonstration plant is a scaled-down system of 10 tpd, although it is noted that the previous commercial scale facility had 150 tpd of throughput. Test data back in 2011 indicates that the 150 tpd gasifier should be capable of the stated throughput.

AECOM Asia Co. Ltd. 52 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Maintenance

ICM stated that the demonstration gasifier had undergone extensive inspections at the end of each campaign. No significant maintenance was required. It was noted that the refractory would require inspection in the production facility on an annual basis, with repairs as necessary. Access to undertake this exercise was reasonable. ICM also noted that the main wear item, the screw feeder, has been inspected following numerous thermal cycles and the wear found to be minimal. The material of construction of this item was suitable for high temperature and high wear applications, but the stainless steel grade was not provided for the Consultant’s review. According to discussion with ICM, the auger in the gasifier is made of stainless steel (steel grade not provided), and that the operating temperature is approaching the upper end of stainless steel's tolerance level. Consideration needs to be made when choosing the grade of stainless steel for manufacturing the gasifier. Overall, AECOM believe that the material is appropriate and, at the very low turning rate, erosion is likely to be minimal.

Installation

It is understood that the production facility will be partially assembled at ICM’s manufacturing facility in Colwich, Kansas, USA, and tested as far as possible, then shipped to the Philippines for final assembling and installation, with ICM’s assistance. According to ICM, the process of equipment procurement, manufacturing, delivery to the Philippines for installation should take approximately 9 to 10 months. There was no evidence of manufacturing onsite requiring specialist skills to ensure a successful installation. It is assumed that all instrumentation would be pre-installed. AECOM recommend that the instrument suppliers are defined in the contract to ensure local back-up if required.

ICM are currently undertaking installation in Brazil, as well as previously in Canada, Argentina, Hungary and Mozambique, thus, they have knowledge of logistics overseas.

Design Life

There is nothing evident from the demonstration gasifier that suggests the basic design will not achieve a design life of 25 years. The test machine has undergone numerous start/stops in its life, leading to numerous thermal cycles. ICM reported that the internal refractory lining had been inspected and showed no signs of requiring maintenance. There was slight corrosion on the support structure, but nothing to suggest gross corrosion would be a long term problem. The framework on the gasifier was showing a significant degree of corrosion and thus galvanizing and/or painting is likely to be required to ensure reasonable design life for the intended outdoor use.

Design & Construction of the Previous Full-Scale Gasifier

Designs exist for gasifiers from 100 tpd to 450 tpd. The basic design is a simple mechanical device and scaling is unlikely to cause operational problems. The main components of the gasifier will be manufactured (and hence QA controlled) by ICM in the U.S. before transporting to the Philippines for installation. ICM will provide experienced installation engineers to ensure the installation is correct. ICM have specific experience of installing gasification systems overseas.

Syngas Generation & Cleaning

ICM do not undertake syngas cleaning in their gasifier. All syngas produced will be combusted in the thermal oxidizer prior to the boiler. The flue gas will then be treated by the flue gas treatment system prior to existing the plant via the stack.

Technical Capability of ICM and Constraints of the Technical Site Visit

As the demonstration facility is not a commercial installation, ICM are reliant on external companies for provision of feedstock – they, therefore, are not in a position to exactly match the feedstock intended for the Philippines. With the variety of feedstocks utilized by the demonstration facility, it is unlikely that the intended feedstock will not gasify as intended.

AECOM Asia Co. Ltd. 53 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The demonstration facility had been lying idle for several months prior to starting up just prior to the visit – following a restart, it was apparent that ICM had not had time to optimize the control of the process using the supplied feedstock. It is thus imperative that ICM engineers are available for future commission and process optimization of any new facility.

Again, since the feed material, design capacity and operating conditions of the reference plant are somewhat different from what are being considered for this project, not possible to definitely deduce whether the gasification system supplied by ICM for this project would perform the way the reference plant do. Particularly, the information that was reviewed by SAIC (including the reference plant’s design calculations, equipment specifications, operation and maintenance records, etc.) has not been provided for the Consultant’s review. Also, even though the system has been tested at over 8,000 tons of throughput and over 2,500 hours of operation, the length of service is rather minimal when compared to the design life, so the system’s durability has not been put to test yet.

However, it appears from the site visit that ICM have a capable team of engineers and project staff to undertake the design, manufacture, delivery and installation supervision of their 150 tpd, 300 tpd and 450 tpd gasifier units.

AECOM also suggest that the framework on the gasifiers provided into the Philippines receive a higher specification coating to minimize corrosion, with the potential to galvanise prior to painting. This is especially relevant for any installation within 1 mile of the sea, as onshore wind could be corrosive.

4.7 Conclusions and Recommendations for Technology and Process Engineering Review

Based on the Consultant’s experience, it is suggested that each supplier should be given clear input and output requirements, with an allowance / deviation for fluctuations in the receiving process. In return, the suppliers should be providing performance guarantees based on the accepted or agreed input and output requirements. Otherwise, the suppliers could choose to design and supply their systems to their likings, which may not suit the local waste characteristics well and/or may not integrate well with other systems in the facility. This could potentially be design and capital risks to the project proponent. The Balance of Plant, if not designed and managed properly, could make it difficult to estimate related costs, which could in turn become a capital risk as well to the project proponent.

The Separation & Cleaning Process

Based on the Consultant’s visit to the reference plants, the DB Technology supplied OREX appears to work in the manner defined.

The AD System

The AD system for Cabuyao has been proposed as a Triton design. As noted elsewhere, there is a potential for small solids/grits (e.g. glass) to settle out in the AD tank and not be re- suspended by the mixers. Anaergia believe that any settled solids would be re-suspended by moving the mixers. For this, the Consultant believe there is a risk that the mixers, on guide rails in a high corrosion environment, would not be easily moved and, even if they were moved easily, it is likely that only very local settled solids would be re-suspended. This raises the risk that periodically, the tanks will need digging out. It is recommended that this, which will require a lengthy shutdown, is allowed for in the financial model and appropriate man access is designed into the tanks.

The gas clean-up system relies on activated carbon to remove siloxanes (which will shorten the life of the gas engine). The Consultant recommend that appropriate allowance is made in the financial model for regular replacement of the carbon. The area around the carbon system should also be designed to allow easy emptying and subsequent refilling. It is recommended that catalytic systems for siloxane removal are investigated during the FEED stage.

AECOM Asia Co. Ltd. 54 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The Gasification System

Following a visit by the Consultant on 27 April 2017 to ICM Inc.’s office and manufacturing facility in Colwich, Kansas, USA, and gasifier test facility in Newton, Kansas, USA, the Consultant believe that, judging from the statements made by ICM and the data viewed at the gasifier test facility, there is no reason to believe that an ICM gasifier, based on the inspected facility, would not achieve treatment of 150 tpd RDF as provided by the intended plant in the Philippines, and produce a syngas suitable for combustion in a boiler.

The Consultant suggest that the framework on the gasifiers provided into the Philippines receive a higher specification coating to minimize corrosion, with the potential to galvanise prior to painting. This is especially relevant for any installation within 1 mile of the sea, as onshore wind could be corrosive.

The Consultant believe that it essential that, during detail design, the balance of plant designers enter into detail discussions with ICM in order to ensure all utility requirements are met and that all termination point details are fully understood. The Consultant understand that ICM will define such requirements, but we still believe that face-to-face discussions are essential.

AECOM Asia Co. Ltd. 55 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

5. FINANCIAL ANALYSIS AND ECONOMIC ANALYSIS (TASK 6)

5.1 Financial Analysis Approach

The financial analysis was undertaken in accordance with the following ADB Guidelines:

(i) Framework for Economic and Financial Appraisal of Urban Development Sector Projects;

(ii) Financial Management and Analysis of Projects; and

(iii) Preparing and Presenting Cost Estimates for Projects and Programs Financed by the Asian Development Bank.

The “Manual for Project Development and Evaluation” of the National Economic and Development Authority was also referenced when conducting the financial analysis.

Discounted cash flow analysis was used to determine the financial viability of the proposed MERF in Cabuyao City. Free cash flows to the project will be computed on the “with-project” and “without-project” scenarios to measure the financial impact of the proposed project. Free cash flow to the project is computed as gross revenues less operating and maintenance expenses less capital expenditures. The free cash flow is adjusted for changes in working capital such as accounts receivable, inventories and accounts payable. Non-cash expenses such as depreciation and amortization are not included in the computation of the free cash flow. Detailed analysis and breakdown could be found in Annex B.

In the financial analysis, the computed financial internal rate of return (FIRR) is compared with the weighted average cost of capital (WACC) to determine financial feasibility. The proposed MERF is considered to be financially viable if the computed FIRR is at least equal to the WACC that is used in the financing of the project.

Sensitivity analyses for various scenarios where changes in certain parameters are likely to occur shall be conducted in terms of the FIRR. The scenarios evaluated are the unexpected increases in project costs, delays in construction, and changes in the volume of feedstock input.

Project Cost Estimates

The proposed 24.26-MW 12 Cabuyao City Waste-to-Worth project is estimated to cost US$110.04 million. The breakdown of the major components of project cost is presented in Table 5.1 below. These costs include the 12% value added tax (VAT), construction all-risk insurance, provision for contingency, engineering, procurement and construction (EPC) fees, project development fees, debt service reserve account (DSRA) requirements, and financial charges during implementation.

The site of the project is located in Barangay Niugan and Banay-bany, Cabuyao City, Province of Laguna. The target date for full commissioning of the MERF is expected to be in the third or fourth quarter of 2020 as per the Initial Project Implementation Plan presented in Section 10. However, it should be noted that the Consultant has conducted the financial analysis based on the financial model constructed by SURE Global, which has assumed an earlier timeline (i.e. construction commences in April 2017 and full operation begins in January 2019).

12 Based on a municipal solid waste (MSW) input of 650 tons per day. Plant capacity will be higher with more daily MSW input from SBH.

AECOM Asia Co. Ltd. 56 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.1 Estimated Project Cost (In current prices)

Amount % of Items US$MM PhpMM Total 1. Materials Recovery Facility 5.60 280.01 5.1% 2. Anaerobic Digestion System 10.00 500.00 9.1% 3. Thermal System (ICM System) 52.29 2,614.67 47.5% 4. Power Generation System 0.00 0.00 0.0% 5. Land Development 2.40 120.00 2.2% 6. Powerhouse, Substation and Transmission Lines 4.11 205.64 3.7% Total Equipment and Installation Cost 74.41 3,720.32 67.6% EPC Fee 5.95 297.63 5.4% Total EPC Cost 80.36 4,017.95 73.0% 7. Miscellaneous Equipment / Expenses 1.32 65.91 1.2% 8. Total Equipment Cost 81.68 4,083.85 74.2% Value Added Tax 9.64 482.15 8.8% 9. BASE COST 91.32 4,566.01 83.0% 10. Miscellaneous Costs 2.09 104.44 1.9% 11. Initial Working Capital 1.34 67.23 1.2% 12. TOTAL PROJECT COST (excluding financing cost) 94.75 4,737.68 86.1% 13. Financing Charges During Implementation 8.86 442.97 8.1% 14. Initial DSRA Funding 6.43 321.25 5.8% 15. ALL-IN PROJECT COST 110.04 5,501.91 100.0% Source: SURE Global * Peso-Dollar Rate: Php50.0-to-US$1

Financing Plan The proposed MERF will be developed through a joint venture arrangement with SBH, which is a waste hauler and landfill operator in the province of Laguna. Financing of the project will consist of about 70% debt (or US$75.19 million) and some 30% equity (or US$34.85 million). Debt financing will be sourced from domestic universal banks and multilateral agencies. Aside from SURE Global, equity constructions are expected to come from potential strategic partners. For instance, ADB has provided commitment to fund up to 15% of project equity and 40% of project debt.

Financial Assumptions and Operating Plan Project Duration and Estimated Useful Life of the Assets. The proposed MERF will have an operating period of 20 years. This is consistent with eligibility period for developers applying for the feed-in tariff (FiT) provided in the Renewable Energy (RE) Law. Under FiT Rules issued by the Energy Regulatory Commission (ERC) in 2010, “eligible renewable energy plants shall be entitled to the applicable FiT for a period of 20 years. After this period, should these plants continue to operate, their tariffs shall already be based on prevailing market prices or whatever prices they should agree with an off-taker.”

Construction of the MERF will commence as soon as the Project Proponent reaches financial closure with various lending institutions. Construction of the entire plant will be completed within a period of 21 months. Hence, if construction of the plant started last 1 April 2017, commercial operations would commence by 1 January 2019. Fixed assets will be depreciated over a 20- year estimated useful life computed using the straight-line depreciation method with zero salvage value.

Revenues. Plant capacity will depend on the volume of municipal solid waste (MSW) SBH can deliver to the project site. SURE Global has entered into a 20-year joint venture agreement with SBH. The company has been in the waste collection and hauling business for over 15 years. Moreover, it currently owns the Cabuyao Transfer Station and the Calamba Landfill. The long- term contract provides a commission structure for SBH depending on volume of MSW feedstock delivered to the project site.

AECOM Asia Co. Ltd. 57 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Under the base case, it is estimated that the company can deliver about 650 tons per day of MSW to the project site. Based on the recent sampling of MSW, the facility can realize an initial gross plant capacity of 24.26 MW, of which 2.94 MW is from the anaerobic digester and 21.33 MW is from the gasifier. However, plant capacity can reach as high as 28.71 MW, if the said company can deliver as much as 750 tons of MSW per day. Table 5.2 summarizes the estimated plant capacity given the daily MSW feedstock input.

Table 5.2 Estimated Plant Capacity, MSW Feedstock Input

MSW Input Estimated Plant Capacity (MW) (tons per day) Anaerobic Digester Gasifier Total 550 2.42 17.64 20.06 560 2.47 18.00 20.47 570 2.52 18.36 20.88 580 2.57 18.73 21.30 590 2.62 19.09 21.71 600 2.67 19.46 22.13 610 2.72 19.83 22.55 620 2.78 20.20 22.98 630 2.83 20.57 23.40 640 2.88 20.95 23.83 650 2.94 21.33 24.26 660 2.99 21.71 24.70 670 3.04 22.09 25.13 680 3.10 22.47 25.57 690 3.15 22.86 26.01 700 3.21 23.25 26.45 710 3.26 23.63 26.90 720 3.32 24.03 27.35 730 3.38 24.42 27.80 740 3.43 24.82 28.25 750 3.49 25.21 28.71

Full-year operations of the MERF will start in 2019. With a combined plant capacity of 24.26 MW and plant efficiency at 95%, gross generation will be 182,384 megawatt-hours (MWh) starting in 2019 (See Table 5.3). Given a combined parasitic load of 10.0%, annual electricity available for sale will be 164,808 (MWh) throughout the 20-year life of the project.

Table 5.3 Gross Generation and Net Electrical Output

Particulars Estimated Value Plant Capacity (MW) Anaerobic Digester 2.94 Gasifier 21.33 Plant Factor / Efficiency (%) 95.0 Operating Hours Anaerobic Digester 8,000 Gasifier 7,900 Parasitic Load (kW) Material Recovery Facility 296.0 Anaerobic Digester 158.0 Gasifier 1,857.2 Annual Gross Generation (MWh) 182,384 Annual Net Electrical Output (MWh) 164,080 Source: SURE Global

AECOM Asia Co. Ltd. 58 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The project will realize additional revenues from the sales of recyclables. The city government is currently buying the recyclables from the waste pickers at the existing transfer station based on the prevailing market price. The project will maintain this scheme where recyclables are purchased from waste pickers and then sold to traders. It is estimated that 13.56 kilograms of recyclables can be produced from every ton of MSW delivered to the facility. Assuming a profit margin of Php7,614 per ton, revenues from the sales of recyclables will be some Php28.31 million per annum over the life of the project.

The ERC has approved in July 2012 a FiT of Php6.63 per kWh for biomass energy with a corresponding initial installation target of 250 MW. The approved degression rate is 0.5% after year 2 from the effectivity of the FiT for biomass energy. The Department of Energy (DOE) has revised the FiT rules wherein FiT eligibility will be granted on a “first come, first served” basis. The new rule means that FiT eligibility will be granted to the renewable energy projects that will be first to operate. As of 31 December 2016, six biomass plants with a combined capacity of 50.35 MW have been issued certificates of confirmation of commerciality by the DOE, while 15 biomass plants with a total capacity of 105.05 MW have been issued certificates of endorsement to ERC under the FiT system.

The FiT rules allow for the pass-through of local inflation and foreign exchange rate variations in the FiT. The adjustment in the initial FiTs will be based on the weighted average of the local inflation rate and the depreciation of the peso-dollar rate with the percentage shares of local and foreign capital as weights. Since there is no precedence to benchmark the proposed FiT adjustment and for purposes of simplicity, annual increases in the FiT were indexed to the local inflation rate in the financial model.

Operating and Maintenance Expenses. O&M costs will amount to an average of Php261.44 million per annum or some Php1.59 per kWh over the life of the project. The largest component of O&M costs is repairs and maintenance, which accounts for over 47% of the total. Other major components of O&M cost are real property taxes and administrative cost with shares to total of 20.2% and 17.2%, respectively.

The parameters and assumptions used in the calculation of the O&M costs are summarized in Table 5.4.

Table 5.4 Operating and Maintenance Expenses: Parameters and Assumptions

Parameters Estimated Values Projected Domestic Inflation Rate (%) 1.5 Personnel Cost (Php million) Materials Recovery Facility 0.90 Anaerobic Digester 3.89 Gasifier 12.59 Repairs and Maintenance Materials Recovery Facility (% of MRF Cost) 7.50 Anaerobic Digester System (% of AD Cost) 3.00 Thermal System (% of TS Cost) 2.25 Other Facilities and Equipment (% of Common Cost) 1/ 3.00 Selling, General and Administrative Costs (% of Revenues) 3.00 PEMC Market Fees (2017) (Php/kWh) 0.0142 Miscellaneous Cost (% of Repairs and Maintenance and Labor Costs) 5.0 Local Business Tax (%) 0.75 Real Property Tax (%) Assessment Level (%) 80.0 Tax Rate (%) 1.5 ER 1-94 Contribution (Php/kWh) 0.01 Income Tax Holiday (ITH) (years) 7 Corporate Income Tax (% after ITH) 10.0 Source: SURE Global 1/ Consists of land development, powerhouse, substation, transmission line, and miscellaneous equipment / expenses

AECOM Asia Co. Ltd. 59 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

A summary of the O&M costs in the first five years of operations of the MERF is presented in Table 5.5.

Table 5.5 Summary of Operating and Maintenance Costs (in million pesos, current prices)

Items 2019 2020 2021 2022 2023 Administrative Cost 33.37 34.38 35.42 36.49 37.59 Personnel Cost 17.53 17.80 18.06 18.33 18.61 Repairs and Maintenance 106.58 108.18 109.80 111.45 113.12 PEMC Market Fees 2.33 2.33 2.33 2.33 2.33 Miscellaneous Costs 6.21 6.30 6.39 6.49 6.59 Local Business Tax 0.00 8.34 8.47 8.59 8.72 Real Property Tax 100.52 95.49 90.47 85.44 80.42 ER 1-94 Contribution 1.64 1.64 1.64 1.64 1.64 TOTAL O&M Costs 268.18 274.46 272.58 270.76 269.01 Sources: SURE Global

Working Capital and Input VAT Recovery. The financial analysis assumes the following working capital parameters: (i) days receivable, 45 days; (ii) days, 15 days; and (iii) days inventory, 15 days. These assumptions are necessary in the calculation of the free cash flows and the preparation of the pro-forma balance sheet. Under the RE Law, sales of power generated from renewable energy sources are subject to zero VAT. With no output VAT to match with, this results in excess input VAT for the project proponent, which is refundable from the Bureau of Internal Revenue. For purposes of conservatism, the analysis assumes the excess input VAT will not be recovered during the operating life of the project.

Loan Disbursement and Amortization Schedule. The financial analysis assumes a debt-to- equity ratio of 70:30. The terms of the loan are presented in Table 5.6. The loan proceeds will be drawn down in two tranches – 55% in the first year of the construction period and the remaining 45% in the second year. The entire equity contribution of the project proponent will be infused in the first six months of the construction period.

Table 5.6 Indicative Terms of the Loan

Particulars Assumptions Loan Amount (US$ million) 75.19 Interest Rate (%) 8.0% Loan Repayment Buffer After COD (months) 6 Loan Repayment Start Date 01 July, 2019 Loan Term (years) 12 Loan Repayment End Date 30 June, 2029 Repayment Term 11 Upfront and Other Financing Fees (%) 1.5% DSRA Requirements (months) 6 Source: SURE Global

Financial Projections and Highlights The financial projections utilized an initial FiT of Php6.63 per kWh. Over the operating life of the MERF, the annual average net income after tax (NIAT) will be Php504.88 million. Moreover, the proposed project will register average earnings before interest, taxes and depreciation (EBITDA) and net income margin of 66.6% and 39.3%, respectively.

The project will realize an average free cash flow to the project of Php530.95 million per annum. The largest negative cumulative free cash flow will be posted in 2018 at Php5,122.43 million. Project payback period is estimated at 8.3 years.

AECOM Asia Co. Ltd. 60 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.7 Financial Highlights (in million pesos, current prices)

Particulars 2019 2020 2021 2022 2023 Gross Revenues 1,112.34 1,129.03 1,145.96 1,163.15 1,180.60 EBITDA 844.16 765.09 781.68 798.69 815.87 % margin 75.9% 67.8% 68.2% 68.7% 69.1% Depreciation 219.34 229.11 229.11 229.11 229.11 Interest Expense 146.39 273.29 245.95 218.61 191.27 Net Income 478.43 262.68 306.61 350.96 395.48 % margin 43.0% 23.3% 26.8% 30.2% 33.5% Cash 470.03 632.07 837.25 1,087.12 1,863.64 Current Assets 920.80 1,070.94 1,265.04 1,503.48 2,268.60 Net Fixed Assets 3,978.88 3,769.47 3,560.05 3,350.64 3,141.22 Total Assets 5,765.84 5,686.86 5,651.86 5,661.19 5,715.04 Current Liabilities 6.82 6.93 7.07 7.20 7.32 Long-Term Debt 3,587.07 3,245.31 2,903.55 2,561.79 2,220.03 Shareholders’ Equity 2,171.95 2,434.63 2,741.24 3,092.20 3,487.69 Free Cash Flow to Project 409.22 777.09 792.89 810.25 1,309.55 Free Cash Flow to Equity 137.62 162.03 205.18 249.88 776.52 Current Ratio (X) 134.96 154.64 178.97 208.95 309.72 Debt-to-Equity Ratio 62:38 57:43 51:49 45:55 39:61 DSCR (X) 2.22 1.24 1.33 1.42 2.43 Sources: SURE Global and Consultant’s estimates

The project will generate sufficient cash flows to fully cover investment cost, operating and maintenance expenses, capital expenditures, and debt servicing. With debt-to-equity ratio at 70:30, project FIRR and equity FIRR of the proposed material energy recovery facility was calculated at 13.2% and 20.0%, respectively. Its lowest debt service coverage ratio (DSCR) will be in 2020 at 1.24 times (See Table 5.8).

Table 5.8 Summary of Results of the Financial Analysis

Parameters Estimates Project Cost In million US dollars 110.04 In US$ million per kW 4,535 Project FIRR (%) 13.2% Equity FIRR (%) 20.0% FNPV at 10% (Php million) 1,311.84 Payback Period (years) Project 8.3 Equity 6.8 Average EBITDA Margin (%) 66.6% Average Net Profit Margin (%) 39.3% Minimum DSCR (times) 1.24 Sources: SURE Global and Consultant’s estimates

The computed project FIRR is compared with the WACC to determine the financial viability of the proposed MERF. The project FIRR should be at least equal to the computed WACC for the project to be considered financially viable (See Table 5.9). The proposed project is considered to be financially viable since the estimated project FIRR of 13.2% is greater than the computed WACC of 9.7%.

AECOM Asia Co. Ltd. 61 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.9 Calculation of Weighted Average Cost of Capital

Financing Component Particulars Domestic ADB LGU SURE Total Loan Loan Share A. Amount (Php million) 3,759.35 - - 1,742.56 5,501.91 B. Weighting (%) 68.3% - - 31.7% 100.0% C. Nominal Cost 8.00% - - 15.00% - D. Tax Adjusted Nominal Cost 7.20% - - 15.00% - E. Weighted Component of WACC 4.92% - - 4.75% 9.67% Source: Consultant’s estimates

Sensitivity Analysis The results of the sensitivity analyses are presented in Table 5.10 to Table 5.13. Four factors – project cost, project delays, tariff scenarios and MSW input – were analyzed to determine the impact of changes in their assumed values on the viability of the project.

Based on the sensitivity analysis, every 5% increase in the estimated project cost will result in a 0.77 percentage point reduction in the project FIRR (See Table 5.10). However, project cost will have to increase by more than 20% for the project FIRR to be less than the computed WACC.

Table 5.10 Sensitivity Analysis – Project Cost

Changes in Project Cost Project IRR Equity IRR -20.0% 17.2% 29.1% -15.0% 16.1% 26.5% -10.0% 15.0% 24.1% -5.0% 14.1% 21.9% 0.0% 13.2% 20.0% 5.0% 12.4% 18.2% 10.0% 11.6% 16.6% 15.0% 10.9% 15.2% 20.0% 10.2% 13.8% Sources: SURE Global and Consultant’s estimates

Delays in project construction are not expected to significantly affect the financial viability of the proposed MERF (See Table 5.11). Even with a 24-month delay in project construction, proposed facility will still be financially viable with a project IRR of 10.4%.

Table 5.11 Sensitivity Analysis – Project Delay

Project Delay (months) Project IRR Equity IRR 0 13.2% 17.1% 3 12.9% 19.2% 6 12.4% 17.9% 9 12.0% 16.9% 12 11.6% 16.2% Sources: SURE Global and Consultant’s estimates

The sensitivity analysis examines to possible scenarios for the electricity tariff – FiT and power purchase agreement (PPA). The FiT, which is currently at Php6.63 per kWh for biomass, was set by the ERC and limited to eligible developers as provided under the RE Law. In the case of the PPA, the tariff will depend on the negotiations of the project proponent with potential off- takers. The project proponent is hopeful that it will be able to forge at long-term PPA with off- takers at price of Php6.50 per kWh. Given the small variance in the electricity tariff under the two scenarios, it is hardly surprising that differences in the FIRRs are not significant (See Table 5.12).

AECOM Asia Co. Ltd. 62 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.12 Sensitivity Analysis – Electricity Tariff

Electricity Tariff Project IRR Equity IRR FIT 13.2% 20.0% PPA 12.9% 19.3% Sources: SURE Global and Consultant’s estimates

The base case assumes 650 tons of MSW per day will be delivered to the facility. Under the long-term agreement, the MSW volume that will be delivered by SBH will range from a minimum of 550 tons per day to a maximum of 750 tons per day. The commission rate of SBH will be higher with more MSW feedstock delivered to the project site. The apparent asymmetry in the results of the financial analysis is mainly attributed to the said commission structure. Table 5.13 summarizes the impact of changes in the MSW input on the IRRs. Hence, it is possible to realize IRRs greater than the base case when the city government delivers less than the guaranteed minimum MSW volume.

Table 5.13 Sensitivity Analysis – Municipal Solid Waste

MSW Input (tons per day) Project IRR Equity IRR 600 12.2% 17.7% 610 12.5% 18.3% 620 12.8% 19.0% 630 13.1% 19.7% 640 13.4% 20.4% 650 13.2% 20.0% 660 13.5% 20.7% 670 13.8% 21.3% 680 14.1% 22.0% 690 14.4% 22.7% 700 14.5% 22.9% 710 14.8% 23.6% 720 15.1% 24.2% 730 15.4% 24.9% 740 15.7% 25.6% 750 15.6% 25.6% Sources: SURE Global and Consultant’s estimates

Financial Model Assumptions

In addition to the financial analysis, based on the financial model constructed by SURE Global (dated 18 August 2017), the Consultant has reviewed the financial model assumptions from a technical perspective. Comments on the financial model assumptions are listed below:

1. The start of construction is defined as April 2017, but the FEED is still ongoing.

2. Operating hours assumed at 8,000 per annum may be reasonable, but this does not appear to have taken into account the downtime necessary for grit removal every few years, especially for the buffer tank and anaerobic digester.

3. With kW being used as the unit, it seems like that the parasitic load might be the installed loads of equipment. If parasitic load is to be used in costing, it would be better to use kVA as the unit.

4. An assumption of 20-year depreciation appears to be a simplified approach. Particularly, some of the equipment may have a shorter depreciation period, while others may have longer depreciation period. This straight line depreciation could cause cash flow problems when large items of the MERF (e.g. CHP engine and shredders) need wholesale replacement.

AECOM Asia Co. Ltd. 63 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

5.2 Economic Analysis Approach

The economic analysis will be undertaken in accordance with the following ADB guidelines:

(i) Framework for the Economic and Financial Appraisal of Urban Development Sector Project; and

(ii) Guidelines for the Economic Analysis of Projects.

The analysis makes reference the “Reference Manual of Project Development and Evaluation” of the National Economic and Development Authority (NEDA). The economic internal rates of return (EIRRs) and economic net present values (ENPVs) will be computed to determine the economic viability of the proposed MERF.

The analysis will focus on the “with-project” and “without-project” scenarios to measure the incremental impact of the proposed project. This means that the analysis will identify the economic costs and benefits associated only with the project, and exclude other economic costs and benefits that will exist whether or not the project will be implemented. Hence, incremental project cash flows will be cash flows with the project less cash flows without the project. Detailed analysis and breakdown can be found in Annex C.

The operating life of the project is assumed to be 20 years. The proposed capital expenditures for the MERF will be implemented over a two-year period starting in 2017. All items of capital costs were depreciated on a straight-line basis and have zero salvage value at the end of the project life. Economic costs and benefits are expressed in terms of constant 2017 prices.

Economic Costs

As prescribed by the NEDA, the economic costs will be determined by converting the financial costs into their economic equivalents using the relevant domestic price numeraire. The conversion factors that will be used are: unskilled labor, 0.6; skilled labor, 1.0; foreign exchange, 1.2; and local materials, 1.0. Taxes and duties will have zero economic cost since they represent transfers to the government. Price contingencies will not be included in the analysis because costs and benefits will be expressed in terms of real prices.

The proposed MERF has an estimated total financial cost of Php4,371.8 million including land acquisition cost amounting to Php114 million. Total capital cost (net of duties, taxes and other transfers) consisted of 78.9% in tradable goods and services, 3.8% in unskilled labor and the remaining 17.3% in other non-tradable goods and services such as materials, equipment rental and skilled labor. Using the conversion factors previously mentioned, the resulting economic cost of project was computed to be Php 4,069.4 million. The breakdown of the major components of project cost is presented in Table 5.14 below.

Table 5.14 Estimated Project Cost (In constant 2017 prices)

Financial Costs Economic Costs Particulars US$MM PhpMM US$MM PhpMM Total Equipment Cost 81.68 4,083.85 87.17 4,358.25 Value-Added Tax 9.64 482.15 0.00 0.00 Base Cost 91.32 4,566.01 87.17 4,358.25 Miscellaneous Costs 2.09 104.44 0.04 2.05 Initial Working Capital 1.34 67.23 0.00 0.00 Total Project Cost (Excluding financing costs) 94.75 4,737.68 87.21 4,360.30 Financing charges during implementation 8.86 442.97 0.00 0.00 Initial Debt Service Reserve Account 6.43 321.25 0.00 0.00 Land Acquisition Cost 2.28 114.00 2.28 114.00 All-In Project Cost 112.32 5,615.91 89.49 4,474.30 Sources: SURE Global and Consultant’s estimates

AECOM Asia Co. Ltd. 64 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Operating and maintenance (O&M) costs from the financial analysis were converted into their economic equivalent using the conversion factors prescribed by NEDA. Projected O&M costs in the first five years of operations of the MERF are shown in Table 5.15.

Table 5.15 Schedule of Operating and Maintenance Costs (In thousand pesos, constant 2017 prices)

Particulars 2019 2020 2021 2022 2023 Selling and Administrative Cost 33,370 33,871 34,379 34,895 35,418 Personnel Cost 16,130 16,130 16,130 16,130 16,130 Repairs and Maintenance 88,885 88,885 88,885 88,885 88,885 Miscellaneous Cost 6,206 6,206 6,206 6,206 6,206 Total O&M Costs 144,592 145,092 145,600 146,116 146,639 Sources: SURE and Consultant’s estimates

Economic Benefits

The economic benefits considered in the analysis are energy delivered, cost savings from the non-operation of the sanitary landfill, reduced dependence on imported fossil fuel, and reduced carbon dioxide emissions. The analysis assumed that full economic benefits would only be realized once the construction of material energy recovery is completed.

Energy Delivered. Once fully completed, the facility can generate an annual electrical output of 164,080 megawatt-hours (MWh) after adjusting for operating hours, plant efficiency and parasitic load. The electrical output is assumed to be incremental in character, as it will expand power supply to meet the demands of a rapidly growing domestic economy. Energy delivered will be valued based on the average wholesale electricity spot market (WESM) price and not the FiT for biomass plants. Presently, there is an embedded subsidy in the FiT to promote the utilization of renewable energy resources in the country. The WESM price used in the economic analysis is Php4.00 per kilowatt-hour (kWh), which is much lower than the FiT for biomass plants of Php6.63 per kWh.

Cost Savings to the Sanitary Landfill Operator. Another benefit of the MERF is that it can take waste that is harmful to the environment and convert them to energy. This reduces the need for a sanitary landfill, which is a method where waste is buried underground or in large piles. Cost savings will be based on the O&M expenses incurred by the operator in running the sanitary landfill. This is estimated to be some Php210.1 million based on an average daily dumpsite disposal of 650 metric tons. The annual figure for operating expenses has been adjusted for taxes and non-cash expenses such as depreciation.

Savings in Carbon Dioxide Emissions. For most part, biomass energy creates a low level of carbon dioxide emissions, which have harmful effects on the ozone layer. In the computation of savings in carbon dioxide emissions, the coal-fired plant was used as the basis of comparison since it accounts for some 49% of gross generation in the Luzon grid.

Based on recently completed studies, carbon dioxide emission from a coal-fired plant is 13 estimated to be 980 grams CO2eq per kWh . For the incineration of municipal solid waste, 14 carbon dioxide emission is estimated at 0.415 ton CO2 per metric ton of MSW . Given an annual gross generation of 182,384 MWh, total emissions for a representative coal-fired plant will be 178,736 tons CO2 per year. On the other hand, assuming 650 tons of MSW is delivered daily to the facility for 333 days in a year, total emissions will be 89,827 tons CO2 per year. The resulting differential or reduction in carbon dioxide emissions will be 88,909 tons CO2 per annum. Value of savings in carbon dioxide emissions will be based on the prevailing price of carbon credit, which traded in the world market at an average of €8 per ton CO2 in 2017.

Fuel Cost Savings. The operation of the material energy recovery facility will lessen the dependence on imported fossil fuel. In the computation of the fuel cost savings, total coal (in

13 Based on “Life-cycle Greenhouse Gas Emissions of Coal-Fired Electricity Generation Systematic Review and Harmonization” published in Journal of Industrial Ecology, Whitaker et al, Vol 16, S 1, 2012, Yale University. 14 http://www.ipcc-nggip.iges.or.jp/public/gp/bgp/5_3_Waste_Incineration.pdf (Page 459).

AECOM Asia Co. Ltd. 65 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

metric tons) required to generate an equivalent volume of MWh is estimated. Coal is used as the basis of comparison since coal-fired plants account for 49% of gross generation in the Luzon grid. Coal requirements will depend on its heating value and net plant heat rate. In the economic analysis, the heating value and net plant heat rate were set at 11,010 British Thermal Unit (BTU) per pound and 9,614 BTU per kWh. Annual deration of net plant heat rate is assumed to be 1% but there will be a 0.5% improvement if periodic maintenance will be undertaken every five years. The landed price of coal is assumed to be US$70 per metric ton.

The resulting estimates of the economic benefits are summarized in Table 5.16.

Table 5.16 Summary of Economic Costs and Benefits (in million pesos, constant 2017 prices)

Avoided Costs Fuel Cost Year Energy Delivered CO2 Savings from Landfill Savings 2019 656.3 216.8 38.4 253.4 2020 656.3 216.8 38.4 255.9 2021 656.3 216.8 38.4 258.5 2022 656.3 216.8 38.4 261.0 2023 656.3 216.8 38.4 263.7 2024 656.3 216.8 38.4 262.3 2025 656.3 216.8 38.4 265.0 2026 656.3 216.8 38.4 267.6 2027 656.3 216.8 38.4 270.3 2028 656.3 216.8 38.4 273.0 2029 656.3 216.8 38.4 271.6 2030 656.3 216.8 38.4 270.3 2031 656.3 216.8 38.4 268.9 2032 656.3 216.8 38.4 267.6 2033 656.3 216.8 38.4 266.2 2034 656.3 216.8 38.4 268.9 2035 656.3 216.8 38.4 271.6 2036 656.3 216.8 38.4 274.3 2037 656.3 216.8 38.4 277.0 2038 656.3 216.8 38.4 279.8 Source: Consultant’s estimates

The economic analysis used a social discount rate of 15%. However, the NEDA reduced the social discount rate to 10% for the cost-benefit analysis of recently approved public infrastructure projects. The hurdle rate of 15% was deemed to be high by today’s interest rate regime.

Results of Economic Evaluation

The economic analysis for the base case yields an EIRR of 19.7% and an ENPV Php1,129.5 million relative to a social discount rate of 15% and given a project life of 20 years. These indicate that the proposed MERF is economically viable.

The results of the economic analysis are summarized in Table 5.17.

Table 5.17 Summary of Economic Analysis (in million pesos, constant 2017 prices)

Economic Net Economic Year Capital Costs O&M Costs Total Costs Benefits Benefits 2017 3,064.9 0.0 3,064.9 - -3,064.9 2018 1,409.4 0.0 1,409.4 - -1,409.4 2019 0.0 144.6 144.6 1,165.0 1,020.4 2020 0.0 145.1 145.1 1,167.5 1,022.4 2021 0.0 145.6 145.6 1,170.1 1,024.5 2022 0.0 146.1 146.1 1,172.7 1,026.5 2023 0.0 146.6 146.6 1,175.3 1,028.6 2024 0.0 147.2 147.2 1,174.0 1,026.8

AECOM Asia Co. Ltd. 66 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Economic Net Economic Year Capital Costs O&M Costs Total Costs Benefits Benefits 2025 0.0 147.7 147.7 1,176.6 1,028.9 2026 0.0 148.3 148.3 1,179.2 1,031.0 2027 0.0 148.8 148.8 1,181.9 1,033.1 2028 0.0 149.4 149.4 1,184.6 1,035.2 2029 0.0 149.9 149.9 1,183.2 1,033.3 2030 0.0 150.5 150.5 1,181.9 1,031.4 2031 0.0 151.1 151.1 1,180.5 1,029.4 2032 0.0 151.7 151.7 1,179.2 1,027.5 2033 0.0 152.3 152.3 1,177.8 1,025.5 2034 0.0 152.9 152.9 1,180.5 1,027.6 2035 0.0 153.6 153.6 1,183.2 1,029.6 2036 0.0 154.2 154.2 1,185.9 1,031.7 2037 0.0 154.8 154.8 1,188.7 1,033.8 2038 0.0 155.5 155.5 1,191.4 1,035.9 Source: Consultant’s estimates

Table 5.18 Results of Economic Evaluation

Indicator Unit Estimated Value EIRR at 15% % 19.7% ENPV Php million 1,129.5 B/C Ratio --- 1.26 Source: Consultant’s estimates

Sensitivity Analysis

There are many possible outcomes for economic costs and benefits, which are the bases of economic analysis. Hence, it is highly improbable that the actual economic cash flows will be equal to the expected economic cash flows used to estimate the project’s ENPV and EIRR. Sensitivity analysis is one possible approach to address this dilemma. Sensitivity analysis evaluates the effects of changes in critical variables on the project’s ENPV and EIRR. It also helps to identify the variables that have the most impact on the ENPV and EIRR.

The sensitivity analysis assessed the following cases:

a) one-year delay in the implementation of the project (or one-year lag in the economic costs and benefits),

b) 20% increase in capital and O&M costs,

c) 20% decrease in economic benefits, and

d) 20% decreases in economic benefits combined with a 20% increase in capital and O&M costs.

The computations of the resulting EIRR, EIRR, switching values (SV), and sensitivity indices are set out in Table 5.19.

Switching value is the percentage change in the selected variable for the project decision to change, which is for the ENPV to become zero or for the EIRR to fall to 15%. A high value indicates that the economic viability is insensitive to changes in the selected variable. The computed values indicate that the economic costs have to increase by at least 25.5% or economic benefits have to decrease by at least 20.3% for the project to be no longer economically viable.

AECOM Asia Co. Ltd. 67 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 5.19 Results of Sensitivity Analyses

ENPV EIRR Particulars SI SV (%) (PhpMM) (%) Base Case 1,129.5 19.7% 1-Year Implementation Lag 940.6 19.5% 20% Increase in Project Cost 243.8 15.9% 3.92 25.5% 20% Reduction in Economic Benefits 17.9 15.1% 4.92 20.3% 20% Increase in Capital and O&M Costs and 20% Reduction in Benefits -867.9 11.7% 8.84 11.3% Source: Consultant’s estimates

AECOM Asia Co. Ltd. 68 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

6. TRAFFIC IMPACT STUDY (TASK 5)

6.1 Description of the Host City

Cabuyao City is an industrial city, which was touted to be the "Richest Municipality of the Philippines” due to the presence of vast industrial estates. It also has a large population of migrant workers employed in the city's industrial estates, which include Nestle Philippines, Asia Brewery, Inc., San Miguel Corporation, Tanduay Distillers, Inc., Wyeth Philippines, Inc., Procter & Gamble (P&G), and the Light Industry and Science Park of the Philippines. It is thus, the fastest growing municipality in Laguna. The City has a total land area of 4, 333 hectares (43.33 sq km), representing 2% of the total land area of the province of Laguna. Almost 70% of the whole area consists of rolling narrow plains and the remaining portion situated in the western part has a few elevated parts. The City has an urban expansion area of 3,973.5648 hectares. As of 2015 census, Cabuyao has a population of 308, 745.

Cabuyao is a first-class city, located in the Province of Laguna, Philippines. It is located about 43 kilometers southeast of Metro Manila, at the western portion of Laguna. It is bounded on the west by the province of Cavite, on the north by the city of Sta. Rosa, and on the south by the city of Calamba. Cabuyao city is approximately 54 kilometers away from Sta. Cruz, the capital of the province of Laguna, and 9 kilometers from the city proper of Calamba City, the Regional center of the region of CALABARZON. Cabuyao city was converted into a component city by virtue of Republic Act No. 10163 after a majority of its citizens voted for its cityhood on August 4, 201215.

6.2 Description of the Proposed Development

The proposed development aims to address to growing solid waste problem in the region. It was recognized that management of the burgeoning MSW is a serious environmental challenge, one that poses health risks to the people in the community if not mitigated properly. Treatment and disposal is a common problem among all LGUs, collection and transport, being the most expensive process.

The project broadly encompasses the following:

 Collection of all fractions of MSW from both residential and commercial establishments;  Segregation of recyclable materials from its Materials Recovery Facility employing the Informal Waste Sector;  Convert residual waste into valuable component, such as renewable energy using clean and reliable technologies, such as thermal treatment technologies, biogas; and composting organic waste into soil amendments;  Create new markets and solicit new buyers of the new products (renewable energy generated by the WtE plant)  Enable the city to sustain a safe ISWM system by involving local and national stakeholders, including LGUs, industries, NGOs and the residents.

The former transfer station of Hain, owned by S.B. Hain Enterprises, will be the location of the proposed development as it would not pose any problems in terms of acquisition. The station is located in a General Development Zone in Barangay Niugan, and was granted a permit for industrial development. The site, a 30-hectare open land, is surrounded by rice fields, resettlement areas and a residential subdivision. The site could be accessed through narrow and poorly-maintained secondary road networks traversing highly residential areas, which are not suited to daily load of heavy trucks. Alternatively, a private road, owned by another industry, is adjacent to the proposed development and can be used as a new access road.

The figure below shows a Google Earth map of the area and vicinity.

15 http://www.cabuyao.gov.ph/index.php/cabuyao-citys-profile/

AECOM Asia Co. Ltd. 69 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.1 Location of the Proposed Development and Its Vicinity

Source: Google Map, 2017

6.3 Objectives and Scope of the Study

The Traffic Impact Study (TIS) aims to assess the current traffic conditions along the intersections of Banlic-Mamatid-Manila South Road, Pulong Diezmo-Manila South Road and Manila South Road in Barangay Sala, and determine the traffic impact of the proposed project. These are the roads and intersections that are likely to receive traffic impacts of the proposed development.

Specifically, the traffic study has the following objectives:

 To determine the present traffic volume at peak hour periods along the intersection of Banlic-Mamatid Road and Manila South Road, specifically: (i) the northbound route of Manila South Road, (ii) Southbound route of Manila south Road, (iii) the Eastbound route of Banlic-Mamatid Road going to the proposed development and the westbound route of Banlic-Mamatid going out; (iv) along Pulo- Diezmo Road (Westbound and Eastbound routes) and Manila South Road, northbound and southbound routes; and (v) along Manila South Road along southbound and northbound routes at Barangay Sala.

 To estimate the future traffic volume along the abovementioned roads to factor the proposed project and the normal growth of traffic in the vicinity.

 To determine possible traffic impact of hauling trucks that will bring in material fuel supply to the proposed Material and Energy Recovery Facility (MERF)

 To propose management measures and possible hauling schedule of hauling contractors to address potential traffic impacts of garbage hauling trucks going in and out of the proposed WtE facility.

The study is limited only to the aforementioned intersections and the surroundings of the proposed project development. Although the proposed MERF has regional significance, a regional TIA cannot be conducted at this time due to budget constraint, and the rapid-changing company client base. A regional TIA implementation would be included in the EIA study which would be conducted in the future.

6.4 Methodology

In conducting the Traffic Impact Study, several methodologies were perused on conducting a proper traffic impact study suited for this type of development. Eventually, the following TIA

AECOM Asia Co. Ltd. 70 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

process guide by the U.P. NCTS Foundation was followed shown in Figure 6.2Error! Reference source not found. below:

Figure 6.2 TIA Methodology

Step 1: Determination of Scope of Work

Step 2: Data Collection Primary Data from Traffic Survey and Secondary Data

Step 3: Traffic Impact Analysis Intersection and Arterial Capacity Analysis; Assessment of Infrastructure

Step 4: Traffic Impact Mitigation Identification of Traffic Mitigation Measures and Traffic Management Plan

Identification of Peak Hours

The study was conducted for the purpose of determining the traffic impact of solid waste collection trucks on the identified access points. Hence, it was deemed necessary to conduct a compact and short-term study only. The peak hours were identified with the help of the managerial staff of SBH. Having discussed with the City Engineer and CENRO Officer, and subsequently with SURE Global, it was decided that the team should observe and conduct the traffic volume count during the peak hours, since peak hours traffic is considered to be the busiest time of the day, and thus, the increased traffic from the proposed development is anticipated to have some traffic impacts during those hours. It was decided that three days will be studied (Monday, Wednesday, and Friday) during the following peak hours:

 6:00 – 8:00 AM  11:00 AM – 1:00 PM  5:00 – 7:00 PM

Selection of Survey Locations

The following table shows the survey locations selected as they are the main access points for the facility, corresponding to the figures that follow Table 6.1 below:

Table 6.1 Survey Points and Assigned posts

Survey Access Points Road Assignments Route Direction Points 1 Mamatid South Manila South Road, North Bound A Out Access Manila South Road, South Bound B In Banlic-Mamatid Road, East bound C In Banlic-Mamatid Road, West bound D Out 2 Pulong Diezmo Pulong Diezmo Road Westbound A Out Road, West Pulong Diezmo Road Eastbound B In Access Manila South Road, South Bound C Out Manila South Road, North Bound D In 3 Barangay Sala Manila South Road, South Bound A In Manila South Road, North Bound B Out

AECOM Asia Co. Ltd. 71 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Location of Potential Access points

Figure 6.3 to Figure 6.5 below show the access points corresponding to Table 6.1 above.

Figure 6.3 Survey Point 1 at the intersection of Banlic-Mamatid Road and Manila South Road

Source: Google Map, 2017

Figure 6.4 Survey Point 2 at Pulong Diezmo Road Intersection with Manila South Road

Source: Google Map, 2017 Note: X means this road was not considered because it is a short road that leads to a subdivision.

AECOM Asia Co. Ltd. 72 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.5 Survey Point 3 at Barangay Sala

Source: Google Map, 2017 Note: Arrows show the traffic flow along this survey point

Preparation for the Survey

A reconnaissance survey was conducted in May 2016 to identify possible survey points, which are current and potential access points of the hauling trucks. Another reconnaissance survey was conducted in November 2016 prior to the actual survey of the study area to determine the final survey points. These were done to firm up location points of observers during actual count and also to check on possible problems during counting and create strategies for smooth observations.

Tally sheets were prepared and printed for photocopying and prepared for distribution to counters. Tally sheets were prepared for 10 counters counting three times a day for three days at intervals of 1 hour per peak hours identified. So that every counter has 2 pieces of tally sheets for every assigned peak hour. In all, a total of 60 tally sheets per day and a total of 180 tally sheets were used for the whole observation period.

Traffic safety vests used in the previous Traffic Impact survey in Cabuyao City were used for this study, providing them to all observers/counters for their safety.

Base Traffic Conditions (Actual traffic count)

10 hired observers (counters) were posted at various stations (refer to Figure 6.3 to Figure 6.5 above). Counting of vehicles was done according to the schedule mentioned, but counting was done separately every hour, for 3 days. The following types of vehicles were counted:

1. Big trucks – all types of big trucks 2 axles or more

2. Small trucks – all types of small trucks 2 axles only

3. Buses

4. Cars

5. Vans

6. Motorbikes

7. Tricycles

8. Jeepneys

AECOM Asia Co. Ltd. 73 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

All counters assembled at the Jollibee at the corner of Pulong Diezmo Road and Manila South Road, given tally sheets on a clipboard with pens and traffic safety vests. They were also briefed and then ferried to their stations at 5:30 am, 10:30 am and 4:30 PM respectively on the first day of counting. They were also picked up from their stations after the counting and taken back to Jollibee after the last counting of the first day and the last day. In between, the counters were expected to report to their respected posts at 6 am and were monitored through mobile phones and visited during the counting period.

Counting of vehicles started at 6:00 am and every hour thereafter until 8:00 in the morning. Then they start again at 11:00 AM, every hour after 1:00 PM, then at 5:00 PM, every hour until 7:00 PM.

Review of Literature

In addition to the preparation of the survey, a desktop literature review was conducted to find related literature to be used as references for methodology and analysis of data for this study.

6.5 Description of Impact Areas

Road Network and Intersections Adjacent to Site and at Access Points

The major road network in Cabuyao, around the access points to the proposed development consists of the national road (Manila South Road) as the main access point on either side (north and south) of Cabuyao as well as city road (Pulong Diezmo Road) as access road of those coming from the west and barangay road (at Barangay Mamatid) as access point for those coming from the south (See Figure 6.6 below).

Figure 6.6 Road Network along Access Points going to the Proposed Development

Source: Google Map, 2017

The following map 16 shows an overview of the impact areas, the major roads traversing Cabuyao, which are the access points of garbage haulers coming from the North, South, and West.

16 http://openstreetmap.org.ph/map/cabuyao

AECOM Asia Co. Ltd. 74 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.7 Location of Major Access Points as Impact Areas

Source: Google Map, 2017

Banlic-Mamatid Road – Manila South Road (Survey Pt 1)

This road is the major access point going to the proposed development. This is a very busy road and is characterized by a mixed land use, where commercial establishments, schools, as well as residential subdivisions can be found.

The 0.88-kilometers long, two-way, 2 lane barangay road is asphalt-paved and with paved shoulders. It is well-traversed by all types of vehicles and is oftentimes characterized by heavy traffic most of the day as it is a major access road gong to the major subdivisions and schools along the area.

Figure 6.8 Manila South Road at the Intersection with Banlic-Mamatid Road

AECOM Asia Co. Ltd. 75 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Pulo- Diezmo Road – Manila South Road (Survey Point 2) Pulo-Diezmo Road is a 2-kilometer stretch of road from the South Luzon Expressway (SLEX). The road connects the eastern of Cabuyao to the west by linking the Manila South Road and SLEX. Residential, industrial, commercial establishments and vacant lots can be found along Pulo-Diezmo Road, hence it is often congested by various types of vehicles, mainly trucks. The road serves as the entry and exit points (toll gate) for vehicles using the South Luzon Expressway to and from Cabuyao.

The road is four-lane, 8-meter-wide and paved with concrete. Its intersections are signalized with traffic lights as well as traffic enforcers manning the intersection during peak hours.

Pulo-Diezmo Road can be used as the potential access road for garbage trucks and haulers coming from Batangas and other client LGUs on the western side of Laguna as it lies between Barangay Pulo and Barangay Diezmo, the industrial barangays of Cabuyao.

Shown in the figure below is a map with Pulo-Doezmo Road connecting the South Luzon Expressway (SLEX) to the Manila South Road (MSR) on the way to the City of Cabuyao.

Figure 6.9 Location of Pulo-Diezmo Road

Source: Google Map, 2015

Figure 6.10 below shows a photo of Pulo-Diezmo Road near the intersection with Manila South Road.

AECOM Asia Co. Ltd. 76 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.10 Pulo-Diezmo Road Viewed from the Western Side of Manila South Road

Figure 6.11 Manila South Road intersection with Pulong Diezmo Road, Viewed from the Northbound Lane.

Manila South Road at Barangay Sala

The Manila South Road is a 27.3 km stretch old National Highway, which is designated as component of the Pan Philippine Highway network (AH26). It starts from Muntinlupa City, enters Laguna and passes through the cities of San Pedro, Biñan, Santa Rosa, and Cabuyao, and ends in Calamba, where the road ends at the intersection of Maharlika Highway and Manila

AECOM Asia Co. Ltd. 77 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

East Road located at Calamba Crossing.17 As an alternative route for going north and south instead of SLEX, occasional heavy traffic can be found on Manila South Road. The road is also used by various types of vehicles coming from the west and east of Cabuyao, which may further worsen the traffic condition.

The old National Highway is a four-lane highway stretching for 27.3 km, and paved with asphalt.

The survey point starts at tip of the Island, which separates the merging point from Rizal St into the national road. Residential, commercial and industrial developments are located along the road. The road is paved with asphalt and without traffic light.

Figure 6.12 Manila South Road at Barangay Sala, Viewed from the Southbound Lane.

6.6 Results of the Traffic Count Survey

Characterization of Baseline Traffic

Since there were no previous traffic studies for this area, the results of this survey constitute the baseline traffic flow for this particular study. A summary of the three-day traffic count (peak hour volume) is provided in Annex D. The actual traffic count survey data can be found in Annexes E-G of this report.

In general, observations showed that during the morning hours, at 6:00 AM, at the start of the observation, traffic condition is considered as “Light” to “Moderate” at all the intersections18. Traffic starts to build up by 6:30 AM and becomes congested before 7:00 AM especially along the Pandan-Mining intersection, reaching its peak at around 7:30-8:00 AM. After that the rush hour has passed and the traffic condition becomes “Moderate” again. Similarly, during the noon time and evening observations, traffic was “Moderate” at the start of each counting period. Traffic builds up and starts to slowly dwindle after the end of each counting period.

Analyses representing the volume of traffic (number of vehicles) from the resulting traffic volume count survey can be found in the following sections. The floating car survey conducted

17 http://wikimapia.org/street/194533/National-Highway-Manila-South-Road 18 Traffic condition is being categorized with the rating and definition presented in Table 6.1

AECOM Asia Co. Ltd. 78 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

along the entire length of Pandan Road recorded an average speed of 4.6 kph, which is an indication of saturated flow.

Banlic-Mamatid-Manila South Road Intersection (Survey Pt. 1)

January 9, 2017 (Day 1, Survey Pt 1), Manila South Road (MSR) North and south bound lanes

The Banlic-Mamatid Road-Manila South Road intersection is a signalized intersection with operating traffic lights controlling the traffic flow. It is a heavily congested area during peak hour periods due to the amount of traffic passing through this area, with residential, commercial and industrial land uses.

Also, the Manila South Road (or National Highway) is a road well-traversed by many vehicles going south from Metro Manila and other parts north of Cabuyao. Likewise, the vehicles such as trucks and other vehicles from the south and from around the area use this road to go to the northern parts of Cabuyao and to other places in Laguna north, west or east of Cabuyao. Figure 6.13 below shows the various directions of traffic flow, while Figure 6.14 shows photo of the intersection (ca. 2015).

Figure 6.13 Traffic Flow at the Intersection of Banlic-Mamatid – MSR Intersection

Source: Google Map, 2017

Figure 6.14 Banlic-Mamatid-MSR Intersection

Source: Google Map, 2015

AECOM Asia Co. Ltd. 79 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.15 below shows the average percentage composition of vehicles passing through the Manila South Road along the Banlic-Mamatid-MSR Road intersection as observed during the peak-hour periods on January 9, 2017. It can be seen in the figure that there are more motorbikes, having 42% of the total average number of vehicles on the northbound lane and 39% of the total average number of vehicles on the southbound lane during the peak-hour periods. The jeepneys also dominate the landscape during the peak-hour periods. Next to motorbikes at 32% on the northbound lanes and 21% on the southbound lane, it is seen that jeepneys ply this route. Trailing after the jeepney are the private cars, which occupy 10% of the average number of vehicular traffic on the northbound lane and 16% on the southbound lane. The rest, although few in numbers are bigger in bodies such as the trucks, buses, and vans. During peak-hour periods, they occupy a big portion of the road. It can been seen that lighter vehicles occupy a large percentage of vehicular traffic during the peak-hour periods, while the larger, big-bodied vehicles such as trucks and buses are fewer and occupy a small percentage of the traffic landscape. Upon convergence on the intersection, they create a traffic congestion, necessitating a traffic enforcer to man this point during the peak-hour periods.

Figure 6.15 Average Percentage Composition of Vehicles along Manila South Road during the Peak-Hour Periods Observed at the Banlic-Mamatid-MSR Intersection on Jan 9, 2017

Banlic-Mamatid Road (Jan. 9, 2017), East and West bound lanes

Banlic-Mamatid Road is a barangay road which links San Isidro Road to Manila South Road. The area along the road has a mixed land use composed of bus and van terminal station, tricycle station, industries, informal settlements, and commercial establishments, institutional and residential housing developments, with some vacant lots in between. Vehicles passing through this road are either going to Barangay Mamatid, Barangay Banlic, or Barangay Baclaran, or to the proposed MERF in Barangay Banay-banay, coming from the south. It is also an access road of other vehicles going to the east from other points. The total number of vehicles passing through the eastbound lane can be seen in the table below.

Figure 6.16 below shows the average percentage composition of vehicles along Banlic- Mamatid Road during the 3-peak hour periods. It can be seen that motorbikes occupy a huge percentage of the traffic along this road observed on January 9, 2017. Along the east bound lane, the motorbikes comprise 47% of all the vehicles, while it comprises only 37% of all the vehicles on the west bound lane on the same peak-hour period. This was followed by private cars, with 20% on the west bound lane, and tricycles, with 19% but only 16% on the east bound lane, showing a higher percentage of cars on the west bound lane than on the east bound lane. The tricycles on the east bound lane are greater than on the east bound lane with 19% and17% on the west bound lane. Big trucks and small trucks comprise only 2% of the traffic composition on the east bound lane but 3% on the west bound lane. The traffic composition also comprise 6% jeepneys on the east bound lane while 7% on the west bound lane.

AECOM Asia Co. Ltd. 80 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.16 Average Percentage Composition of Vehicles during the Peak-Hour Periods along Banlic-Mamatid Road on Jan 9, 2017

Pulo- Diezmo Road-Manila South Road intersection

Day 1 Survey (January 9, 2017)

The Pulo-Diezmo-Manila South Road intersection has a signalized intersection, with traffic lights as well as traffic enforcers manning this area and is a heavily congested area during peak hour periods because this serves as the main intersection for those coming from the north, south, east and west of Cabuyao (the west is occupied by industries, subdivisions and the South Luzon expressway, among others).

The land use surrounding Pulo-Diezmo Road is mixed, including residential, commercial and industrial uses. Also, the Manila South Road (MSR) (or National Highway) is a road well- traversed by many vehicles going south from Metro Manila and other parts north and south of Cabuyao. Likewise, the vehicles such as trucks and other vehicles from the south and from around the area use this road to go to the northern parts of Cabuyao and to other places in Laguna north, west or east of Cabuyao. Aside from these, the Pulo-Diezmo Road serves as the entry and exit points of vehicles coming from and going to the South Luzon Expressway (SLEX where a toll booth lies at the portion of the road entering the SLEX. It is also the entry and exit point for vehicles going to and coming from the western side of Cabuyao. This can also be the potential access for garbage hauling trucks coming from cities and municipalities of Cavite and Batangas Provinces.

Figure 6.17 below shows the traffic flow, indicating various directions traffic may take at any time of the day within this intersection.

AECOM Asia Co. Ltd. 81 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.17 Traffic Flow at the Pulo-Diezmo-MSR Intersection

Source: Google Map, 2017 Note: Arrows are used to distinguish directions only.

Figure 6.18 Average Percentage Composition of Vehicles during the Peak-Hour Period at the Pulo-Diezmo Road – MSR Intersection on Jan 9, 2017

Figure 6.18, above, shows the average percentage composition of vehicles during the peak- hour period. Motorbike is seen dominating the traffic composition of vehicles (35% on the south bound lane and 33% on the north bound lane), followed by passenger jeepneys (21% on the south bound lane and 25% on the north bound lane) and then private cars (18% on the south bound lane and 17% on the north bound lane). Buses occupy only 2% of the traffic landscape on both sides, while vans, small trucks and big trucks have a slightly higher percentage than buses along this intersection.

Along Pulo-Diezmo Road, Figure 6.19 shows a stark difference in the traffic composition, with the westbound lane, wherein there were more vehicles going out of the intersection and into the west bound lane than going into the intersection along the east bound lane. Also, looking at the average percentage composition of vehicles, it can be seen that the traffic composition is highly dominated by motorbikes on west bound lane, while vans dominate the traffic landscape on the east bound lane going into the intersection, followed by motorbikes, cars and

AECOM Asia Co. Ltd. 82 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

tricycles in that order. Jeepneys consist of 1% of the traffic on both sides, while big trucks occupy only 4% of the traffic. However, these are big and heavy vehicles that occupy much of the carriageway, more than the motorbikes that occupy a large percentage of the motorized vehicles on the road but which can run fast and occupy a small percentage of the carriageway when running.

It can be noticed also that cars occupy a larger percentage of the traffic on the west bound lane (27%) compared to the cars on the eastbound lane, coming into the intersection, consisting only of 13% of the average traffic composition. Vans occupy a big percentage of the traffic composition (32%) along the eastbound lane going into the intersection than the opposite lane, wherein vans consist only of 11% of the average traffic composition on the west bound lane of Pulo-Diezmo Road.

Buses comprises only 5% of the traffic composition on both lanes of Pulo-Diezmo Road. Tricycles occupy 11% of the traffic composition on both sides. These slow-moving vehicles can create queueing on the roadside, but given their small percentage of the traffic composition is not much problematic at this time.

Figure 6.19 Average Percentage Composition of Vehicles Passing Through Pulo- Diezmo at the Intersection of Pulo-Diezmo Road - MSR during the Peak- Hour Period on Jan 9, 2017

Manila South Road at Barangay Sala

Manila South Road was considered for this survey because this is a potential access point of haulers coming from the northwest of the city or from the adjoining provinces and municipalities on the northern and northwestern portion of Cabuyao. Figure 6.20 below shows the traffic flow along this point.

AECOM Asia Co. Ltd. 83 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.20 Survey Point 3 along Manila South Road at Barangay Sala

Source: Google Map, 2017 Note: The arrows show the flow of traffic from north and south of the area.

It can be seen that there were more motorbikes cruising along the north bound lane of MSR in the morning peak-hour than on the south bound lane. However, there were few motorcycles on the north bound lane during the noon and evening peak hour compared to the south bound lane. This is illustrated clearly in Figure 6.21, which shows the average percentage composition of vehicles in that survey area. Motorbikes comprise 39% of the traffic on the north bound lane while occupying only 30% of the traffic on the south bound lane. Coming in second to motorbikes in terms of traffic composition are passengers jeepneys, which comprise 20% of the traffic on both lanes.

On the other hand, private cars comprise 13% of the traffic on the north bound lane while only 11% of the traffic on the south bound lane consist of private cars. Tricycles passing this route comprise 11% of the traffic on the north bound lane and 10% on the south bound lane of Manila South Road. Small trucks consist of a small percentage of the traffic at 4% on the north bound lane and 7% on the south bound lane. Big trucks occupy only 2% of the traffic composition on the north bound lane but occupies a slightly bigger percentage on the south bound lane at 6% of the average percentage composition. On the other hand, buses occupy 3% of the average percentage traffic composition on both lanes of Manila South Road.

AECOM Asia Co. Ltd. 84 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.21 Average Percentage Composition of Vehicles during the Peak-Hour Period along Manila South Road in Barangay Sala on Jan 9, 2017

Banlic-Mamatid Road-MSR Intersection Day 2 (January 11, 2017)

Manila South Road, north and south bound lanes

Day 2 survey revealed a comparatively heavier traffic during the morning peak hour period than day 1 but lighter traffic during the noon and evening peak hour period.

As can be recalled from the discussion above, this intersection is also a signalized intersection, with traffic lights as well as the presence of traffic enforcers manning this intersection.

From the data gathered it can be seen that there were more motorbikes on the north bound lane of MSR than on the south bound lane during the morning and noon time peak-hour period. But it can also be seen that there are more motorbikes in the evening peak-hour compared to the noon time peak-hour on the south bound lane. But the amount of motorbike as well as the number of vehicles are considerably lesser on the south bound lane of Manila South Road than on the north bound lane.

Figure 6.22 below shows the average percentage composition of vehicles along the Manila South Road, it can be seen that motorbikes comprise 49% of the traffic composition on the north bound lane, while occupying only 27% of the average traffic composition along the south bound lane. Next to the motorbikes are private cars, occupying 15% of the average traffic composition on the north bound lane while it consists of 17% of the average traffic composition on the south bound lane. Tricycles follow a closely similar patter during the morning and noon time peak-hour period on the north bound lane compared to the south bound lane during the same peak hour period. The number of tricycles, however, have increased on the south bound lane during the evening peak-hour period but are considerably decreased on the north bound lane. Jeepneys follow a closely similar trend on either lane, decreasing on the evening peak- hour period on the north bound lane while increasing on the south bound lane. Vans are relatively few on the north bound lane compared to the south bound lane, which registered a far greater number on the same peak-hour period. Small trucks are also fewer on the north bound lane than on the south bound lane, while big trucks, those greater axels, than 2 axels, are fewer on the north bound lane during the morning peak hour but more on the south bound lane. However, there’s a closely similar number of trucks recorded on the north and south bound lane during the noon time peak hour, decreasing on the north bound lane during the evening peak hour but increasing on the south bound lane on the same peak-hour period.

AECOM Asia Co. Ltd. 85 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.22 Average Percentage Composition of Vehicles along Banlic-Mamatid Road-MSR Road Intersection on Jan 11, 2017

Banlic-Mamatid Road, Jan. 11, 2017

On the Banlic-Mamatid Road, the traffic count shows that there were more motorbikes on the east bound lane than on the west bound lane. However, more cars were recorded on the west bound lane during the morning and noon time peak-hour period but more cars were recorded on the east bound lane compared to the west bound lane during the evening peak hour period. There were more tricycles recorded on the east bound lane during the morning peak-hour period but a closely similar number on the east and west bound lanes during the noon time and evening peak hour periods. More trucks were recorded on the west bound lane going into the intersection than on the east bound lane. More vans were recorded on the west bound lane during the morning peak hour period but lesser during the noon time and evening peak hour period compared to the easts bound lane, which have more vans recorded during the noon time and evening peak hour periods. Jeepneys followed a decreasing trend from the morning to evening peak hour period but an increasing trend on the east bound lane during the same peak hour period.

The average percentage composition of the vehicles along the east bound lane shows the motorbikes as the dominant type of vehicle on this road on both lanes, comprising 40% on the east and 36% on the west bound lanes respectively. Cars are more dominant on the west bound lane (28%) next to the motorbikes but tricycles (23%) are more dominant than cars on the east bound lane. Jeepneys comprise 6% of the average percentage composition on both sides of the lane. Vans comprise 9% of the average percentage composition of vehicles on the east bound lane but only 6% on the west bound lane. Small trucks and big trucks comprise the smallest percentage of the vehicular traffic on both lanes.

AECOM Asia Co. Ltd. 86 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.23 Average Percentage Composition of Vehicles along Banlic-Mamatid Road during the Peak-Hour Periods on Jan 11, 2017

Jan. 11, 2017 Pulo-Diezmo Road-MSR Road Intersection

Manila South Road, north and south bound lanes, Jan. 11, 2017

There was a closely similar number of motorbikes on the south bound lane, coming into the intersection and on the northbound lane of MSR during the morning peak hour period, though considerably less on the south bound lane during the noon time peak hour period compared to the north bound lane, which have registered a high number of motorbikes on this lane during the noon time peak hour period. The south bound lane also had more motorbikes during the evening peak hour period than the north bound lane. On the north bound lane, there were more jeepneys passing along this road than on the south bound lane, which registered a considerably less number of jeepneys on the same peak-hour periods. The total number of cars on the north bound lane are also considerably more than those on the south bound lane during the survey. There were also more tricycles, buses and trucks on the north bound lane compared to the south bound lane during this period of the survey.

Figure 6.24 Average Percentage Composition of Vehicles during the Peak-Hour Period at Pulo-Diezmo-MSR Intersection on Jan 11, 2017

AECOM Asia Co. Ltd. 87 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.24 above shows the average percentage composition of vehicles along the north and south bound lanes of the Pulo-Diezmo-MSR intersection during the peak-hour periods on January 11, 2017.

The figure shows that motorbikes dominate the composition of vehicles on the north bound lane of MSR (41%) as well as on the south bound lane (27%). The second most dominant vehicle on both lanes are the jeepneys, with 26% on the north bound lane and 18% on the south bound lane. Cars are the third most dominant vehicle, having 17% of the vehicle composition on both lanes. Tricycles comprise 9% and 8% respectively, while small trucks are 6% and 4% respectively. Big trucks, although comprising a smaller percentage, have been found to have a bigger percentage (5%) on the north bound lane compared to 2% on the south bound lane. Buses also have a smaller percentage, with 4% on the north bound and 3% on the south bound lanes respectively.

Pulo-Diezmo Road East and West bound lanes, Jan. 11, 2017

The summary of the actual traffic count of vehicles along the east (IN) and west (OUT) bound lanes of Pulo-Diezmo Road along the Pulo-Diezmo Road-MSR intersection conducted on January 11, 2017 is shown on Table 10. Based on this, it can be seen that there are more motorbikes during the morning peak hour period on the west bound lane compared to the east bound lane. The number of motorbikes decreased considerably during the noon time peak-hour period, having similar number during the noon time peak hour period. This number have been recorded to have considerably increased during the evening peak hour period on the east bound lane compared to the west bound lane, which registered a lesser number.

There were more cars on the west bound lane than on the east bound lane on all the peak hour periods but there were more vans recorded on the east bound lane than on the west bound lane on all the peak hour periods. The number of tricycles recorded were greater on the west bound lane during the morning and noon time peak hour period compared to the east bound lane but there were the same number of tricycles recorded on the both lanes during the evening peak-hour period. Buses on the east and west bound lane have a closely similar number on both lanes although there were more buses on the west bound lane than on the east bound lane during the evening peak-hour observation. Small trucks and big trucks have a closely similar number on the west bound lanes, though few, but fewer on the east bound lane. There was a considerably small number of jeepneys recorded on both the east and west bound lanes of Pulo-Diezmo Road.

A look at the percentage average composition of vehicles (Figure 6.25) shows the motorbikes as the dominant type of vehicle on this road, comprising 46% on the east bound lane and 37% on the west bound lane (going out of the intersection). The second most dominant vehicle along the west bound lane are the cars (35% on the west bound lane) but vans are the second most dominant vehicle on the east bound lane (21% compared to 11% of cars). Cars are the third most dominant vehicle on the east bound lane but the vans are the third most dominant type of vehicle on the west bound lane. Small trucks, buses and big trucks are less dominant in terms of average percentage composition though more visible due to their size compared to motorcycles and tricycles. Jeepneys comprise the smallest percentage of all the vehicles along this road (only 1%).

AECOM Asia Co. Ltd. 88 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.25 Average Percentage Composition of Vehicles during the Peak-Hour Period along Pulo-Diezmo Road on Jan 11, 2017

Manila South Road at Barangay Sala, Jan. 11, 2017

Figure 6.26 shows the average percentage composition of vehicles traversing the area on Jan. 11, 2017, wherein, the motorbikes was shown to have the highest percentage composition of the vehicles traversing the north bound lane (40%), at the same time, both motorbikes and jeepneys have the same average percentage composition on the south bound lane (24%). But jeepneys comprise only 20%on the north bound lane. Cars comprise 14% on the north bound lane but 16% on the south bound lane. Vans are 7% and 11% respectively, while small trucks comprise 4% of the average composition of vehicles on the north bound lane but 6% on the south bound lane. Big trucks have a smaller percentage composition at 1% on the north bound lane but a bit bigger on the south bound lane at 6%. Buses also comprise 1% of the average percentage composition of vehicles on the north bound lane but comprise 2% of the vehicles on the south bound lane.

Figure 6.26 Average Percentage Composition of Vehicles along Manila South Road in Barangay Sala

AECOM Asia Co. Ltd. 89 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Traffic Count Survey at Banlic-Mamatid-MSR Intersection on Jan. 13, 2017

Based on the traffic count data gathered, there were more motorbikes during the morning peak hour period but less during the noon time peak hour period on the north bound lane than on the south bound lane. During the evening peak hour period, there were slightly more motorbikes on the south bound lane than on the north bound lane. However, there were more jeepneys on the south bound lane than on the north bound lane. There were also more cars on the south bound lane than on the north bound lane. Likewise, there were also more vans, more trucks, big and small, and more buses on the south bound lane than on the north bound lane on the same peak hour period on January 13, 2017.

Looking at the average percentage composition on Figure 6.27, motorbikes are the most dominant type of vehicle on the north bound lane of Manila South Road along this intersection, consisting of almost half the number of all vehicles. However, motorbikes consist only 37% on the south bound lane. This was followed by cars, which comprised 15% average composition on the south bound lane but 13%. Jeepneys comprise 20% of the average composition of vehicles on the north bound lanes while 24% on the south bound lane. Cars comprise 13% of the composition of vehicles on the north bound lane while it comprises 15% on the south bound lane. Small trucks comprise 3% on the north bound lane but 6% on the south bound lane. Big trucks are only 2% on the north bound lane but 3% on the south bound lane. Vans comprise only 3% on the north bound lane but 7% on the south bond lane. Buses occupy only 2% of the average percentage composition of vehicles on both lanes.

Figure 6.27 Average Percentage Composition of Vehicles along Banlic-Mamatid-MSR Intersection on Jan 13, 2017

Banlic-Mamatid, East bound and West Bound Lane

Along the Banlic-Mamatid Road, the motorbikes still dominate the traffic composition on both lanes, with 48% on the east bound lane and 46% on the west bound lane. Cars are the second most dominant type of vehicles on both lanes followed by tricycles. Small trucks have a larger percentage than jeepneys on the east bound lane but smaller on the west bound lane. Vans and big trucks have the smallest percentage composition on both lanes, which means only few of these types of vehicles are passing through this road, which has a mostly residential land use.

AECOM Asia Co. Ltd. 90 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.28 Average Percentage Composition of Vehicles along Banlic-Mamatid Road on January 13, 2017

Pulo-Diezmo-MSR Intersection

Motrobikes still dominate the composition of vehicles in this intersection, where it comprises 36% of the average percentage composition of vehicles on the south bound lane, followed by jeepneys (25%) and cars (19%). On the south bound lane, cars are the second more dominant type of vehicle (22%) followed by jeepneys (18%). Again, on the north bound lane, small trucks comprise 7%, vans, 7%, Both big trucks and buses comprise 4% respectively.

On the south bound lane, vans comprise 6%, small trucks, 5%, while big truck and buses are 2% respectively. Although few in numbers, these vehicles are big and occupy a bigger portion of the carriageway and have more impact on the traffic and on the road capacity. Heavily loaded trucks have a greater impact on the traffic and on the roadside friction and road capacity.

Figure 6.29 Average Percentage Composition of Vehicles during the Peak-Hour Period along Manila South Road at Purlo-Diezmo-MSR Intersection on Jan 13, 2017

Manila South Road at Barangay Sala, January 13, 2017

The average percentage composition of vehicles is shown on Figure 6.30, allowing a quick view of the percentage composition of vehicles along this survey point.

AECOM Asia Co. Ltd. 91 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 6.30 Percentage Composition of Vehicles along Manila South Road in Barangay Sala on Jan 13, 2017

Figure 6.30 above shows that motorcycles comprise 51% of the average percentage composition of vehicles on the north bound lane of MSR, followed by cars comprising 15%, jeepneys (14%). vans (6%), small trucks (2%), big trucks and buses are 1% of the average percentage composition respectively.

On the south bound lane, motorbikes comprise a smaller portion than on the north bound lane, with only 23% of the total average percentage composition. Jeepneys occupy a bigger percentage at 26%, followed by cars (18%), tricycles (15%), vans (10%), small trucks, 5%). Big trucks and buses comprise 2% respectively.

6.7 Traffic Impact Analysis

Level of Service (LOS) Standards

Level of service (LOS) is a qualitative measurement, which describes traffic conditions in terms of speed, travel time, freedom to maneuver, comfort, convenience, traffic interruptions and safety as well as the quality of service of road traffic. It is used to analyze highways by categorizing traffic flow and assigning quality levels of traffic based on performance measure like speed, density, etc.

Table 6.2 below shows the level of service ratings developed by the Department of Public Works and Highways (DPWH) based on the Highway Capacity Manual (HCM) of the Highway Research Board, Washington DC, 1965. This table is used to describe the LOS observed during the peak hour periods in the intersections studied.

AECOM Asia Co. Ltd. 92 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 6.2 Level of Service Rating Scale

LOS Volume- Traffic Description Average Rating Capacity Condition Speeds of Ratio Vehicles A 0-0.19 Very Light Free flow, low volumes and densities; drivers can 95-110 kph maintain their desired speeds with little or no delay and are unaffected by movement of other vehicles. B 0.2-0.44 Light Reasonably free flow, operating speeds beginning 80-95 kph to be restricted somewhat by traffic conditions. Drivers still have reasonable freedom to select their speeds. C 0.45-0.69 Moderate Speeds remain near free flow speed, but freedom 64-80 kph to maneuver is noticeably restricted. D 0.70-0.84 Moderately Speed begins to decline with increasing volume. 56-64 kph heavy High density flow in which freedom to maneuver is further reduced and traffic stream has little space to absorb disruptions E 0.85-1.00 Heavy Unstable flow, with volume at or near capacity. 45-56 kph Freedom to maneuver is extremely limited with poor levels of comfort and convenience. F >1.00 Very heavy Forced traffic flow in which the amount of traffic 0-45 kph approaching a point exceeds the amount that can be served; saturation traffic volumes; stop and go situation. Note: Developed by the Department of Public Works and Highway based on the Highway Capacity Manual of the Highway Research Board, Washington, D.C., 1965.

Based on the actual field data, wherein a floating car survey was conducted during off-peak hours, it was found that along the Manila South Road, traffic was found to be moderately heavy to heavy according to the recorded speed using the app WAZE, which was between 30-60 kph between intersections, on both sides of the road. However, along Barangay Sala, during off- peak hours, traffic was moderate to light. During the peak hours of observation, traffic gets heavy to very heavy, with speeds between 0-34 km/hour. The same is true for all other road sections along the survey points.

Peak-Hour Analysis

Table 6.3 shows the total number of vehicles that traversed the roads during the peak hour periods of study.

Table 6.3 Total Number of Vehicles passing through the Survey Points (Roads) during the Multiple Peak-Hour Period of Observation

Banlic-Mamatid- Manila South Road Pulo-Diezmo-Manila South Road Bgy. Sala

MSR BM MSR PD MSR Day 1 20648 3752 16535 6832 13654 Day 2 11449 3557 12363 6250 13451 Day 3 13069 4537 13874 7508 15184

Along the Manila South Road, the road with a 12-meter carriageway and 2.5 m sidewalk, the number of vehicles recorded were 20,648, 11, 449, and 13,069 respectively.

Signalized operation was in place at the intersection, which allowed the vehicles to cross the intersection safety and prevented collisions. Traffic congestions might occurred at the intersection as the vehicles accumulated at the intersection and disturbed traffic flow, causing a stop-and-go situation.

The recorded maximum speed at a kilometer from the intersection is 45-50 km/hr. As vehicles approach the intersection, the speed is even lower and turns into a stop and go situation, creating a heavy traffic flow.

AECOM Asia Co. Ltd. 93 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Similar observations were made at the Pulo-Diezmo-Manila South Road intersection as it is also a signalized intersection.

Despite over 13,000-15,000 vehicles were registered at Manila South Road at Barangay Sala, the recorded speed was over 50km/hr, and without stop-and-go situations. Hence, the traffic is not problematic at this survey point.

Daily Capacity

According to DPWH19, the daily capacity in both directions for a 7 meters (m) wide carriageway with adequate shoulder width (2-2.5 m on either side) in good condition and light to medium roadside friction would in flat terrain be about 16,000 vehicles at multiple peak-hour traffic, each one of no more than 8 percent of daily traffic. A similarly configured expressway (two lanes composing a carriageway) should be able to carry around 20,000 vehicles in both directions (a road with dual carriageway with median would have a capacity around 40,000 vehicles in both directions in rural areas). Traffic volumes exceeding these capacities could occur but only at low shares of heavy vehicles or by sacrificing the desirable travel hour to avoid heavy flows.

Based on the above, it can be determined that the vehicles traversing the roads are still within the daily capacity of the road. However, this situation, given the increasing population, the increasing locators in the area, it can be inferred that the volume of vehicles will also increase and the traffic situation along this road would worsen. Adding to this situation are the commercial establishments along the roads, wherein people and other vehicles would stop, which slows down the traffic. Buses also slows down the traffic as they stop to pick up passengers on the road.

6.8 Estimation of Traffic Generation Attributed to the Project

Since there is not enough data to estimate traffic generation due to the proposed development, a numerical estimation cannot be shown at this time. However, we know that solid waste generation is directly correlated with population growth, it is estimated that waste generation will increase (please refer to the report on material supply assessment). The company currently is servicing 23 local government units for garbage collection and transport of municipal solid waste, which they bring to various landfills they are operating in the region.

With this scenario of increasing trend in population growth and solid waste generation, it is expected that the if the MERF becomes operational, company will either use bigger hauling trucks, which will have a bigger impact on the carriageways as well as to the current traffic situation, or medium-sized hauling trucks, which will generate more trips or more trucks to haul the increasing material fuel supply. More hauling trucks would mean additional vehicles plying the routes mentioned, creating a huge traffic impact if they haul during the day, not to mention the huge emissions of these trucks and environmental impacts.

In addition to the waste collection trucks, other vehicles related to the project will also add to the current traffic. This additional traffic of other project-related vehicles would also further degrade the mobility at the intersections identified as access points.

6.9 Recommendations

The planned MERF will have a regional significance, hence a wider scope for the TIA is needed, judging the various clients of the company, now numbering to about 23 clients. The number of clients is expected to increase, which is due to a sound business sense on the part of the management. It is recommended that, during the EIA of the project and following the detailed design of the MERF, to conduct a more thorough traffic impact assessment, to include the housing developments as well as other industrial and commercial locators in the area for the traffic projection to be complete and so that a sound traffic management plan can be done.

19 Department Order No. 22 Series 2013

AECOM Asia Co. Ltd. 94 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Timing of Collection and Transport

As indicated from the survey results, the intersections studied were congested during the peak- hour periods, except for Barangay Sala. However, this is due to the waiting time at the signalized intersections, which causes the traffic to pile up while waiting for the go signal.

Based on the study conducted, the hauling trucks need not add to the traffic especially during the peak hour periods if the timing of collection and delivery to the MERF will be scheduled outside of the peak hours, more specifically at night. It should be designed and properly timed so that the time of arrival of trucks after collection will not coincide with the peak hours and hence will not pass through the intersections during periods of heavy congestion.

Optimal Waste Collection

To optimize the collection and transportation of solid waste collection system, the following steps have to be carried out:

1) Develop a waste collection strategy in order to reduce loading time and the time of filling the truck by increasing the number of containers in collection areas, which are much cheaper than trucks. Bigger and standardized containers can be introduced, especially in strategic places like markets or shopping centres.

2) Introduce automated trucks that have loading and compacting systems with larger capacity as many as possible.

3) Reorganize routes and timetable in order to avoid the peak traffic hours. For example, collection in the city centre at night, and collection in the suburbs during the day.

4) Reduction of the distance travelled by the trucks by optimizing collection routes in order to have all trucks full at or near 100 percent at the end of the route and to reduce time and travel distance. In order to do this, there is a need to limit waste collection in main streets by reducing the number of collection points, avoiding a full door-to-door collection system and defining a maximum distance for the citizen to reach the bins – for example 100 or 200 meters.

5) Optimize the time used for each truck trips by:

a) Organizing regular inspection and maintenance of the trucks and of the bins in order to reduce the frequency and the duration of breakdowns.

b) Operating in two or three shifts per day – or six or seven days per week, if possible.

c) Collecting outside the city centres and transporting outside of the peak hours.

d) Improving the management of the service by defining a new rule system such as defining tasks of all the stakeholders and especially the collection team.

e) Organizing a good supervision of the service, night and day, with an adequate reporting of older data and using this data to improve the service.

f) Organizing a training of the staff: the drivers, the workers and the supervisors.

g) Organizing a communication campaign in order to inform the population about the new service, about the timetable of the service, the new rules, the tasks of the citizen, the tariffs / fees (if tariffs / fees will be collected), etc.

AECOM Asia Co. Ltd. 95 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

7. ENGINEERING GEOLOGICAL AND GEOTECHNICAL ASSESSMENT (TASK 6)

7.1 Geology and Seismicity

Global Tectonic Setting

The earth’s crust (lithosphere) is divided into a mosaic of some 15 major tectonic plates (Error! Reference source not found.) which slide over the more plastic interior (asthenosphere). The plates move continuously at different rates. In addition to the 15 major plates there are smaller sub-plates that accommodate the complex different rates of movements between the major plates. The majority of the earthquakes, volcanic and mountain building processes are associated these plate boundaries.

Figure 7.1 Major Tectonic Plates

Regional Tectonic Setting

The regional tectonic setting in the Philippines is shown in Figure 7.2. The Philippines consists of Mesozoic and Cenozoic island arcs, ocean basins and continental blocks that were emplaced during the Tertiary (Geary and others). It is surrounded by two opposite trending subduction zones: Manila Trench, Negros Trench and Sulu Sea Trench to the west and the East Luzon Trough and Philippine Trench to the east. Most of the major earthquakes, volcanic activity and orogenic processes are associated with plate tectonics. Apart the subduction zones, major active faults are expected to influence the project area seismicity. Some of these are the Philippine Fault Zone (PFZ), Lubang Fault, West Valley Fault and Mindoro – Aglubang Fault, Figure 7.3.

AECOM Asia Co. Ltd. 96 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 7.2 Major Structural Factures of the Philippines

Figure 7.3 Distribution of Active Faults & Trenches in the Philippines

AECOM Asia Co. Ltd. 97 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Manila Trench

Manila Trench is a north-south trending subduction zone located in the offshore area of northwestern Luzon in the South China Sea. It is the surface expression of the eastward dipping subduction of the Eurasian Trench. It is a deep elongated trough stretching from 20 degrees N up to 13 degrees N, in northwest Mindoro Island. The oceanic crust is being subducted eastward along the Manila Trench.

Landward of Manila Trench is West Luzon Trough which is a sediment filled fore arc basin (Karig, 1973). Subduction along the Manila Trench is associated with the formation of the Neogene to Recent volcanic arc from northern Luzon to west of Mindoro (Hamburger, et al, 1983). Slabs of oceanic crust having been translated eastward and now comprising the Zambales mountain range apparently originated from the west. Associated Quaternary volcanism and moderate to high seismicity level as well as the presence of highly deformed sediments in the West Luzon Trough are considered manifestations of active subduction.

The southern extension of the trench south of Manila, near the coastal area of northwest Mindoro appears relatively more active. The latest earthquake activity, Ms 7.7 on April 4, 1942 whose epicenter lies in Mindoro is the largest historical earthquake generated by the Manila Trench. Considering its known strike length of more than 500 km, a maximum credible earthquake of about Ms 8.0 could be expected based on geological criteria. Maximum credible earthquake is defined as the largest conceivable earthquake that an active fault is capable of generating.

The trace of the Manila Trench nearest the site is about 200 km.

Philippine Fault Zone

The Philippine Fault Zone (PFZ) is one of the most dominant tectonic features of the Philippines. With more than 1200 km of mapped length, it dissects the entire archipelago: from eastern Mindanao, thru the eastern Visayas and northern Luzon. (Allen, 1962). The PFZ is a major left- lateral strike slip fault. Movements along the PFZ accommodate the oblique convergence between the Eurasian Plate and Philippine Platelet (Acharya, 1980).

In northern Luzon the fault trace extends from Dingalan Bay to Lingayen Gulf. The fault marks the boundary of the Central Luzon Plain and the Sierra Madre mountain range. The fault splays into a series of northwest trending faults such as the Digdig Fault, Abra River Fault and San Manuel Fault.

The Philippine Fault Zone is undoubtedly one of the most active fault systems in the country. The most recent earthquake generated by the PFZ includes the Ms 7.8 earthquake in Nueva Ecija on July 16, 1990. Needless to say, this last tectonic event had caused extensive damages to buildings in Baguio City, Nueva Ecija and Pangasinan. It also resulted to widespread liquefaction failure of loose sand foundation of buildings and bridges in Pangasinan. Other less significant but also strong earthquakes generated by the fault includes the Ms 7.3 Ragay Gulf earthquake in 1973 and the Ms 7.3 earthquake in Lamon Bay in 1939.

Based on geological criteria of fault length and area, the maximum credible earthquake that the PFZ is capable of generating is about Ms 8.0. The nearest projection of the PFZ relative to the project area is about 60 km.

AECOM Asia Co. Ltd. 98 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

West Valley Fault System

West Valley Fault System (WVFS) consists of two parallel dextral faults located on the western and eastern fringes of Marikina Valley. The fault located on the west side of the valley is referred to as the West Valley Fault while the one on the east side, the East Valley Fault (EVF).

The WVF is a northeast trending right lateral fault with a mapped length of about 150 km. From the northern shoreline of Lake Taal the fault extends to a northeast trend up to Angat, Bulacan. The northern half of the fault had been mapped by Phivolcs but its southern continuity was established mainly on the basis of aerial photo-interpretation and satellite imagery, Punongbayan, et al 1997. Studies made on the EVF indicated a large vertical component of movement. The fault trace on the north is apparently well manifested by a fault scarp which appears to coincide with the western boundary of Sierra Madre Mountain.

No historical earthquake record exists which suggest that the WVFS is active. The WVFS is known to have displaced the Pleistocene Diliman tuff. Recent mapping and trenching by Phivolcs, however, indicated that the WVF had displaced alluvial fans and streams. Appreciable vertical component of movement is associated but the most recent movements seem to indicate more of lateral mode of displacement.

The results of detailed trench mapping and sampling undertaken by Phivolcs in cooperation with the United States Geological survey (USGS) led to the conclusion that the fault is active and that it had ruptured at least 3 to 4 times during the past 1200 to1400 years. Based on geological criteria, the fault is capable of generating a credible earthquake of about Ms 7.1 The projection of the WVF nearest to the project area is about 3.5 km. A ‘near field’ tectonic event is thus expected in case the WVF ruptures near the project area.

Lubang Fault

Lubang Fault, also sometimes referred to as Verde Island Passage Fault, is a nearly east-west trending fault which lies in the offshore area between Batangas and Mindoro, Figure-5. It is allegedly the most active fault system west of the PFZ. Earthquake records indicate that the fault has generated several strong earthquakes such as the intensity IX tremor in 1852 and the intensity VII in 1972. Strike length of the Lubang Fault is about 230 km. On the basis of geological criteria Lubang Fault is capable of generating a maximum credible earthquake of about Ms 7.4. The fault trace nearest the project area is located about 117 km.

Mindoro- Aglubang Fault

Very few information is available regarding the Mindoro-Aglubang Fault. More detailed mapping and field exploration is needed to characterize the said fault system. Aglubang Fault is a north- northwest trending right lateral strike slip fault located in northeastern Mindoro, Figure-5. It merges with the Mindoro Fault to the south, thus comprising the Mindoro-Aglubang Fault system. Earthquake record indicated that the fault ruptured on November 15, 1994, Ms 7.1. The Nov 15 earthquake was accompanied by a 35 km long ground rupture along the Aglubang Fault, with a vertical slip of 3.4 m and horizontal displacement of 1.2 m. On the basis of geological criteria, the fault is capable of generating MCE of about Ms 7.4. The fault trace is located about 145 km relative to the site.

AECOM Asia Co. Ltd. 99 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Peak Ground Acceleration

Deterministic Procedure

Peak ground acceleration (PGA) is the most important seismic parameter in structural design as well as in the evaluation of the susceptibility to liquefaction of the soil foundation. In this report the PGA is computed based on attenuation relation developed in other country provided the geological and tectonic setting in that country is similar to that of the Philippines. The attenuation relation developed recently in Japan by Fukushima and Tanaka finds wide acceptance in this country. The Fukushima- Tanaka equation indicated below is used in this report.

0.41 M Log10 A = 0.41 M – log10 (R + 0.032 x 10 ) – 0 0034 R + 1.30

Considering medium ground site condition, the expected PGA for the various active faults and subduction zones surrounding the project area are indicated in Table 7.1.

Table 7.1 Peak Ground Accelerations

Earthquake Distance, km Max Credible Peak Ground Sources Earthquake, Ms Acceleration in g Philippine Fault 60 8.0 0.20 Zone Manila Trench 200 8.0 0.03 West Valley Fault 3.50 7.1 0.55 Lubang Fault 117 7.4 0.06 Mindoro- Aglubang 145 7.4 0.04 Fault

According to Fukushima and Tanaka, the peak acceleration level at very short distances from the earthquake source is 0.632g, irrespective of magnitude. The PGA 0.55g above for the WVF considers medium ground site condition. The design PGA for the project is therefore 0.55 g, based on rupturing of the WVF.

Stratigraphy

Figure 7.4 is Regional Geological Map of central and southern Luzon, after the work of the Mines and Geosciences Bureau. It will be noted that the geological setting north and south of Laguna de Bay Lake is markedly different in terms of age and rock types. While older rock types, including the basement rocks ranging in age from Cretaceous to Recent are found on the northern region, very young rock types comprised of young volcanic and pyroclastic rocks underlie extensively the area south of the lake. The project area is located south of Laguna de Bay Lake.

The oldest rocks in the northern block are Cretaceous sedimentary and volcanic rocks. Highly folded and faulted, these rock types comprised the core of the Sierra Madre mountain range. The Cretaceous rocks consist mainly of spilitic basalt, andesite, chert, pelagic to hemipelagic sediments, turbidites, limestone and shale. The main exposures are found extensively on the coastal area of Quezon province. Limited isolated exposures occur on the western foothills of Sierra Madre north of the lake.

The basement rocks are overlain by a thick succession of volcanic and sedimentary rocks dated Cretaceous to Paleogene (KPg in the geological map). Occurring largely on a north-south trending belt, these are highly folded and truncated by large, north-south and northwest trending fault systems. Because of the generally weak regional metamorphism associated, these rocks are commonly mapped as meta-sedimentary and meta-volcanic rocks.

In turn, the Cretaceous to Paleogene rocks are overlain by inter- bedded sedimentary and volcanic rocks dated Paleocene to Oligocene. Also arranged in north-south trending belt, mainly at the core of the Sierra Madre Mountain, this rock formation consists mainly of marine

AECOM Asia Co. Ltd. 100 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

sandstone, shale and limestone with associated dacite, andesite lavas and pyroclastic rocks. Strong NW and NE trending faults commonly dissect the rocks.

Stock size intrusive rocks dissect all the older rock types. Generally intermediate to acid in composition the intrusive rocs are comprised of commonly of diorite, and occasionally dacite and granodiorite. Notable exposures have been mapped on the western foothills of Sierra Madre Mountain. Smaller isolated exposures have been noted in the Antipolo area and on the headwaters of Tayabasan River. The main intrusive body is hornblende diorite. Smaller exposures of dikes of granodiorite and quartz diorite were mapped.

Layered sedimentary rocks dated early Miocene generally underlie the western foothills of Sierra Madre Mountain. Overlying unconformably the Cretaceous Kinabuan formation, the sedimentary rocks (Angat formation) occur on a general N-S belt. The formation is composed of a basal conglomerate then shale, sandstone and clayey sandstone. Upward the clastic rocks grade into white to buff coralline limestone. Angat formation is tightly folded.

Progressively younger rock types occur on the western side of Sierra Madre Mountain. The Angat formation is overlain conformably by Madlum formation. This formation is exposed extensively on the upper reaches of Montalban River. In accordance to the MGB geological map, the Madlum formation consists of a basal clastic member, a middle zone of volcanics (Alagao volcanics), and an upper limestone member (Buenacop limestone). The lower clastic member consists mainly of conglomerate and shale. Agglomerate, tuff, indurated greywacke and volcanic lava flows constitute the Alagao volcanics.

The southern and western fringes of the Sierra Madre Mountain are made up mainly of young rocks consisting of volcanic ejectamenta, lava flows, and pyroclastic rocks ranging from Pliocene to Pleistocene in age. These rock masses are highly similar to the rock exposure that prevails on the southern, eastern and western flanks of the Laguna de Bay Lake. The aerial distribution of these rocks is so widespread that it cover almost entirely the provinces of Laguna, Batangas and Cavite.

AECOM Asia Co. Ltd. 101 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 7.4 Regional Geological Map of Central and Southern Luzon

AECOM Asia Co. Ltd. 102 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Structural Geology

Folds

Figure 7.4, Regional Geological Map of MGB, indicates that the older rocks are tightly folded. The folds generally trend N-NW and N-NE, parallel to the general pattern of rock distribution. The young rocks are apparently not folded.

Faults

The most prominent structural features north of the lake are the N-NW trending regional faults. These are parallel to the Philippine Fault Zone. The Philippine Fault Zone is a left lateral strike slip fault which occurs on the offshore area of Lamon Bay. It is reputedly one of the most active fault systems in the country. The other major active fault is the region is the West Valley Fault. It is a left lateral strike slip fault known to have ruptured recent alluvial sediments. This fault system also cuts thru the Pliocene to Pleistocene pyroclastic rocks.

7.2 Project Area Geology

Figure 7.5 is the Project Area Geological Map, based on the work of MGB. The coastal area of Laguna de Bay, including the project site is underlain by Quaternary Alluvium. To the west and south of the site, the alluvium is underlain by Pliocene to Pleistocene Taal tuff. Quaternary volcanics are widespread in Los Banos and Calamba.

Quaternary Alluvium

Quaternary alluvium, mostly clay and sand, underlies the coastal area of Laguna de Bay Lake. These sediments are weathering products of the pyroclastic rocks that underlie the rolling topography west of the site. The sediments of unknown thickness shall form the founding bed for the future structures. Being formerly a rice field it is highly possible that layered clay and silt could be expected beneath the site. The Lipa tuff is the bedrock below the alluvium. However, the thickness of the alluvium is not known.

Bedrock Lithology

Quaternary Volcanics

Pliocene to Quaternary volcanics, Qv in the geological map, consists of andesite and basalt lava flows. These are generally confined at the volcanic centers and the surrounding rugged terrains south of Los Banos, Figure 7.6 Geological Map after Phivolcs).

Based on information at Phivolcs, no historical record exists concerning the past eruptive activity of Mt Makiling. Studies made by Ebasco in 1977 in connection with the Bataan Nuclear Power Plant Project indicated that the subsidiary crater, Mt Mapinggan, which is located northwest of Mt Makiling was emplaced about 100,000 years ago. Samples of lava flows taken at the Buka area near Dampalit River are dated 200,000, 180,000 and 510,000 years old. Although no record of past volcanic eruption exists, the presence of welded tuff around Mt Makiling strongly suggests that the previous eruptions have been violent.

The present volcanic activity of Mt Makiling is limited to manifestations of steaming vents and pits (solfatara) to bubbling pools and hot springs. These are very evident on the northern flank of Mt Makiling in Calamba and Los Banos.

AECOM Asia Co. Ltd. 103 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Pliocene to Quaternary Lipa Tuff

Pliocene to Quaternary Lipa tuff (Qtt in the map) is the designation applied to the pyroclastic rocks that crop out on the rolling hills to the west and south of the project area, Figure 7.6. It consists predominantly of pyroclastic rocks inter-bedded with tuffaceous sedimentary rocks and, to a limited amount, volcanic lava flows. Most of the pyroclastic rocks are thin to medium bedded vitric tuff, volcanic cinder deposit, lapilli tuff and rarely agglomerate. Generally the fine grained tuf exhibits well defined bedding planes indicating under water deposition. The bedding planes are close to horizontal (less than 10 degrees) and there seems no definite orientation.

Based on the studies made by the MGB, the Quaternary Lipa tuff is the most potential aquifer in the area. This is very likely the source of groundwater in most of the subdivisions surrounding the site.

AECOM Asia Co. Ltd. 104 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 7.5 Project Area Geological Map

AECOM Asia Co. Ltd. 105 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Figure 7.6 Pliocine to Quaternary Geologic Map After Phivolcs

AECOM Asia Co. Ltd. 106 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

7.3 Geotechnical Considerations

Soil Types Based on Available Information

It is not easy to determine the soil types beneath the selected site without drilling information. Most of the soil materials obtaining at the site are transported sediments, derived from the weathering and erosion of the pyroclastic bedrock west of the project area. The sediments are fluvial deposits, deposited by the nearby streams.

Because of utter lack of sub-surface information, the City Engineer’s Office was consulted in the hope that drilling information is available. It is apparent that drilling information is scarce. Few shallow boreholes were drilled for the investigation of the foundation for school buildings. The following information was obtained.

Several school building sites explored are: (a) Barangay Pulo School Site, (b) Barangay Niugan School Site, (c) Mamalid Elementary School. In all the sites explored, the top soil layer consists of slightly plastic sandy silt. Up to depths of about 3 to 4 meters the sandy silt is with soft to medium stiff consistency. Below 3 meters depth the sandy silt is underlain by non-plastic silty sand. The silty sand is generally fine grained and ranges from loose to medium dense relative density. The N-values are erratic, in most cases 8 to 10 blows but occasionally very low, 2 to 4 blows.

Apart the relatively low penetration resistance the water table depth varies from 0.20 to about 1.50 meters. The water table depth was measured in December.

Soil Types at SBH Property

At Barangay Banay banay, being originally rice field, the soil types expected are probably similar to the school sites investigated. As the site used to be rice field it is possible that the founding bed is clay instead of sandy silt. Without sub-surface information and for conservative estimate of the soil strength, the clay is assumed with soft to medium stiff consistency.

The clay and/or sandy silt is likely underlain by silty sand. The sand underlying the school buildings is generally medium dense but rarely with loose relative density. The sand could be assumed medium dense like most of the sands underlying the school building. The N Value is assumed to increase with depth.

Assuming the founding bed is with soft to medium consistency, the cohesive strength of the founding bed is expected to range from 350 to 600 lbs. / sq. ft. The sand bed is expected to lie about 4 meters below the surface.

For 1 to 2 storey structure the soft clay could serve as founding bed. However the main concern is the possibility of liquefaction failure of the silty sand bed.

7.4 Geological Hazard Assessment

Fault Related Ground Rupture Hazard

As the project site is fully covered with alluvial soil it is not possible to determine the presence of active fault at the site. Geological features suggestive of active fault such as fault scarp, fault line valley, sag pond and gravel offset were not recognized at the site. It can be assumed therefore that no active fault passes thru the site.

AECOM Asia Co. Ltd. 107 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Ground Shaking Hazard

As discussed under Section 5.1.1 Regional Tectonics, the West Valley Fault is only 3.50 km away from the site. Considering that this fault system is capable of generating as much as Ms7.1 earthquake, very intense ground shaking could be expected should the WVF near the site ruptures. The ground shaking is expected to intensify further because of the soft consistency of the underlying sediments. Earthquake ground shaking shall cause foundation settlement.

Soil Liquefaction

A cause of concern is the high possibility of liquefaction failure of the underlying silty sand foundation. This is particularly true if the relative density of the sand is loose and the water table depth is nearly near the ground surface. Only actual drilling done at the site could provide all the information necessary in ascertaining the susceptibility of the site soils to liquefaction. Because of the possibility of ‘near field’ tectonic activity, the possibility that the medium dense sand could liquefy is not remote. Susceptibility to liquefaction is analyzed by taking into consideration the penetration resistance, the soil types and peak ground acceleration of the active fault. The cyclic stress ratio (due to active fault) that is expected at the site is compared to the cyclic stress ratio that causes liquefaction. If the ratio is less than 1, the sand foundation is likely to liquefy.

Tsunami

Tsunami is not expected at the site.

Landslide

No landslide is expected because of the characteristic flat topography at the site.

Flood

Local residents are claiming that the SBH site is not prone to flooding. Their conclusion is based on their experience during typhoon Ondoy which caused widespread flooding of most Metro- Manila area including the coastal areas of Laguna de Bay Lake.

Langhaya Creek passes thru a portion of the Hain Property. It is alleged that this creek was previously clogged with landfill. The clogging caused diversion of the creek discharges. To avoid flooding, the landfill clogging the creek must be removed.

Volcanic Eruption

Mt Makiling Volcano in Los Banos is located about 7 kilometers from Cabuyao City. Past eruption record of Mt Mkiling is not available at Phivolcs. However based on the studies made by Ebasco in connection with the Bataan Nuclear Plant indicated that the basalt lavas at Mt Maapinggan, subsidiary crater of Mt Makiling, and on samples taken at Buka area near Dampalit River, the rocks are dated 100,000 to 510,000 years old. Because of this advanced age of the rocks it is highly possible that the volcano is no longer active. Present volcanic activity is limited to manifestations of steaming vents, bubbling pools, hot springs, and pits (solfatara).

AECOM Asia Co. Ltd. 108 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

7.5 Conclusion and Recommendation

On the basis of the foregoing discussion, the following are concluded and recommended:

(a) The geological setting north and south of Laguna de Bay Lake is markedly different both in age and type of rocks. North of the lake the rocks are much older ranging from Cretaceous to Recent while on the south side of the lake Pliocene to Pleistocene rocks are prevalent. The project area is located south of Laguna de Bay Lake.

(b) The project area of the SBH Property is located near the southern shoreline of Laguna de Bay Lake. It is underlain by Quaternary alluvium. The rolling hills west and south of SBH Property the rock exposures consist mainly of pyroclastic rocks with inter-bedded tuffaceous sedimentary rock. Vitric tuff together with lapilli tuff, volcanic cinder deposits and tuffaceous sandstone constitute the main rock exposures.

(c) Besides the pyroclastic rocks, the Pliocene to Pleistocene Laguna formation includes basalt and andesite. Volcanic centers in Los Banos and Calamba are only about 7 km away from the site. No record exists to confirm that the volcanoes are active. Sampling of volcanic lava made by Ebasco in connection with the Bataan Nuclear Power Plant indicated that the lavas range from 100,000 to 510,000 years old. On this basis, the volcanoes near the site are believed dormant.

(d) The Quaternary alluvium consists mainly of sandy silt and silty sand possibly with occasional clay. As the SBH Property used to be a rice field, it is possible that the upper section is made up of clay.

(e) The project area is included in a region characterized by moderate to high seismicity. The Philippines is surrounded by opposite trending subduction zones: Manila Trench, Negros Trench and Sulu Sea Trench to the west and East Luzon Trough and Philippine Trench to the east. The subduction zones are major sources of earthquakes in the country.

(f) In addition to the subduction zones major active faults surround the site within a radius of 200 kilometers. The subduction zones and the active faults are earthquake generators.

(g) Earthquake records are utterly lacking in the Philippines. Consequently, geological criteria is largely used to determine the design earthquakes. Using the geological criteria and employing the Fukushima-Tanaka equation the seismic parameters are evaluated. Because of the high similarity in tectonic and geological setting, the Fukushima- Tanaka equation finds aide acceptance in this country.

(h) Using the Fukushima-Tanaka equation the peak ground accelerations for medium soil site condition in g’s are as follows:

AECOM Asia Co. Ltd. 109 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Table 7.2 Peak Ground Acceleration in g

Earthquake Sources Distance, km Max. Credible Earthquake PGA in g (1) Philippine Fault Zone 60 8.0 0.20 (2) Manila Trench 200 8.0 0.03 (3) West Valley Fault 3.50 7.1 0.55 (4) Lubang Fault 117 7.4 0.06 (5)Mindoro- Aglubang Fault 145 7.4 0.04

Being very close to the trace of the West Valley Fault, only 3.50 km away, a ‘near field’ tectonic activity may be expected. According to Fukushima and Tanaka the PGA for very near faults irrespective of distance is 0.632 g. The PGA 0.55 g in the above table considers medium ground site condition.

Soil investigation records at the City Engineer’s office are scarce. Most of the information available are obtained from drilling investigation done for the school buildings. Most of the sub- surface information indicated 3 to 4 meters thick of sandy silt bed overlying fine grained silty sand. The N-Value is variable but generally indicates soft to medium stiff consistency. The underlying sand bed is usually medium dense, N-Values ranging from 8 to 10 but in few occasions loose relative density. The relative density of the sand generally increases with depth.

As the site used to be rice field, it can be assumed that the founding bed is clay. It is very likely that the clay is underlain by sand. The above information, soft to medium stiff clay as founding bed is applicable to 1 to 2 storey building. More than 2 storey building drilling investigation is necessary.

Very intense ground shaking can be expected if the WVF near the site ruptures. As most of the information available indicates that the water table is near the surface, and because the sand is medium dense, the possibility of liquefaction is not remote. However, this could only be confirmed by actual drilling investigation.

According to the residents the SBH Property is not prone to flooding. No flooding occurred at the site during typhoon Ondoy. Most of Metro-Manila area and Laguna were submerged during that typhoon. However, an efficient surface drainage system is needed to protect the site from future flooding.

Based on experience, the sandy tuff and the tuffaceous sandstone beds are potential ground water aquifers. The nearby subdivisions are most likely sourcing their domestic water supply from these rock types.

AECOM Asia Co. Ltd. 110 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

8. ENVIRONMENTAL AND SOCIAL ANALYSIS (TASK 7)

8.1 Stakeholder Engagement Exercise

Three focus group discussions (FGDs) were organized and arranged to present the proposed project and identify the issues, perception and concerns from the stakeholders about the project. The first FGD was conducted on 25 August 2016 at the Cabuyao City Hall, Laguna, in which representatives of the Cabuyao City government and SBH participated. These participants would consist of officers from Environment and Natural Resources Office, agriculture Office, Agriculture Office, Health Office and the Office of the Mayor.

The second FGD was conducted on 25 August 2016 at the Cabuyao City Hall, in which sectorial representatives of Barangay Niugan were participated.

The third FGD was conducted on 26 August 2016 at the Cabuyao City Hall, in which Barangay Captains of Cabuyao City were participated

A key informant interviews (KIIs) was conducted on 7 September 2016 with the waste pickers at Cabuyao City Transfer Station. Through the KIIs, the Consultant was able to determine their income sources and if they are satisfied with their income.

8.2 Initial Environmental Examination, Social Impact Assessment and Resettlement Safeguard Assessment

The Consultant has also undertaken an initial environmental examination (IEE) study following all the Philippine regulations and policies and in accordance with ADB’s Safeguard Policy Agreement (2009) and ADB’s Environmental Assessment Guidelines (2003). The findings of the IEE, together with the social impact assessment, gender analysis, following ADB’s Handbook on Social Analysis (2007), Guidelines for Gender Mainstreaming Categories of ADB projects, ADB’s Safeguard Policy, and all Philippine regulations and polices as well as the resettlement safeguard assessment, are all presented in the IEE report. Whist the report will be submitted separately from the Final Report, the summary of the IEE report contents are listed in the subsequent sections.

Policy, Legal, and Administrative Framework

Philippine Regulatory Requirements

The legal framework to be adopted for the implementation of the Project is influenced by the regulatory framework governing solid waste in general, the characterization of the solid waste subject of the MERF as an asset, and applicable renewable energy laws. The implementation of the Project within Cabuyao City is also envisioned to involve transactions with the Cabuyao City local government unit (LGU), namely, the provision of service by the MERF for the receipt, storage, separation, conversion, or otherwise processing of solid waste. Laws, rules, and regulations relevant to the Project include:

 Republic Act 9003, the Ecological Solid Waste Management Act of 2000 and its implementing rules and regulations;  Republic Act 8749, the Clean Air Act of 1999 and its implementing rules and regulations;  Republic Act 9513, the Renewable Energy Act of 2008 and its implementing rules and regulations;  Republic Act 9136, the Electric Power Industry Reform Act and its implementing rules and regulations;  Revised Rules, Terms and Conditions for the Provision of Open Access Transmission Service;  Republic Act 7160, the Local Government Code and its implementing rules and regulations;  Republic Act 6957, the Build-Operate-Transfer Law and its implementing rules and regulations;  Executive Order No. 226, the Omnibus Investment Code of 1987

AECOM Asia Co. Ltd. 111 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 Republic Act 9184, the Government Procurement Reform Act;  Republic Act 5183, An Act Regulating the Award of Contracts for the Supply to, or Procurement by, any Government-owned or Controlled Corporation, Company, Agency, or Municipal Corporation of Materials, Equipment, Goods, and Commodities, and Providing Penalty for the Violation thereof; and  National Solid Waste Management Commission (NSWMC) Resolution No. 669 Series of 2016, Adopting the Guidelines Governing the Establishment and Operation of Waste to Energy Technologies for Municipal Solid Wastes.

Permitting requirements of the Project include but are not limited to:

 Incorporation documents from the Securities and Exchange Commission (SEC),  licenses from the Bureau of Internal Revenue (BIR)  Board of Investments (BOI) for availment of incentives;

Local Approvals

 Local government permits (e.g. business permit, building permit, wiring permit, sanitary permit, etc.);  Approvals from the NSWMC;  Environmental permits such as the Environmental Compliance Certificate, authority to construct and permit to operate from the Department of Environment and Natural Resources;  Renewable Energy operating contract, confirmation of the declaration of commerciality, and certification of eligibility for feed-in-tariff (FIT) from the DOE (and required documentary attachments related thereto), grid/system impact studies and interconnection agreements, various certificates of endorsements, Memorandum of Agreement under ER 1-94, among others;  Transmission services agreement, connection agreement and metering services agreement with the National Grid Corporation of the Philippines, or interconnection agreement with the local distribution utility;  Submission of Environmental Technology Verification Protocol with the Department of Science and Technology (DOST);  Certification from the National Commission on Indigenous Peoples (NCIP);  Permits for land use, and acquisition of right of way; and  Compliance with bidding requirements for the construction and operation of the Project.

Asian Development Bank Safeguard Requirements

The Project is also set to comply with the ADB’s safeguard requirements in accordance with the 2009 ADB Safeguard Policy Statement (ADB SPS) for three key safeguard areas:

Safeguard Requirements 1: Environment - outlines the requirements that borrowers/clients are required to meet when delivering environmental safeguards for projects supported by ADB, and aims to ensure the environmental soundness and sustainability of projects and to support the integration of environmental considerations into the project decision-making process

Safeguard Requirements 2: Involuntary Resettlement - outlines the requirements that borrowers/clients are required to meet in delivering involuntary resettlement safeguards to projects supported by ADB, and aims to avoid or minimize involuntary resettlement, enhance or restore the livelihoods of all displaced persons relative to pre-project levels, and improve the standards of living of the displaced poor and vulnerable groups

Safeguard Requirements 3: Indigenous Peoples - outlines the requirements that borrowers/clients are required to meet in delivering indigenous peoples safeguards to projects supported by ADB, and aims to design and implement projects in a manner that fosters full

AECOM Asia Co. Ltd. 112 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

respect for Indigenous People’s identity, dignity, human rights, livelihood systems, and cultural uniqueness

Description of the Project

The Waste to Worth Project is a project that involves the development of a MERF in Cabuyao City by combining the design, construction and operation of mechanical and biological treatment (MBT) and Waste to Energy (WTE) facilities at the same site. It aims to create worth from municipal solid waste (MSW) that would otherwise be disposed of in landfills by:

 Recovering recyclables;

 Anaerobically digesting biodegradables to produce biogas for electricity generation; and

 Thermalizing residuals to produce syngas for electricity generation.

The proposed MERF will be able to generate 21 MW of electricity per day by operating at 95% plant capacity. Approximately 650 tons of MSW feedstock daily is required to produce this power. Feedstock for the MERF will be sourced from S.B. Hain Enterprises and General Services (SBH), a company that is currently contracted by the local government unit (LGU) of Cabuyao City as well as nearby cities and municipalities to collect, haul, and dispose the city’s MSW.

SURE Global W2Wi (SURE Global), a joint venture partnership between W2Worth Innovations, LLC, Solutions Using Renewable Energy Inc. and JUM Global, Inc., will be the owner/operator of the MERF. SBH will be a local JV partner who will provide land for the MERF development and waste collection and delivery services for the Project.

The Project will consist of three components, which include the MERF, access roads, and transmission facilities. The MERF will consist of Waste Preparation Facilities, an Anaerobic Digestion Unit, a Thermal Processing Unit, and ancillary and supporting facilities.

The Project is currently undergoing a feasibility study to determine its viability. Commercial operation of the MERF is expected to commence on a staggered basis because of the varying construction periods required for the various components. The target date for the commissioning of the MERF is expected to be January 2019. The total capital cost of the Project is estimated to be approximately USD 93.4 million (as of 2017).

The local government officials of Cabuyao City have faced challenges in the management of the city’s solid wastes for the last 11 years. These challenges can be mainly attributed to the large number of relocation and migration of families and individuals into the city in 2005, which resulted in the increase of volume of waste. Economic benefits associated with the Project include:

 Generating an annual electrical output of 140,666 megawatt-hours (MWh) (after adjusting for operating hours, plant efficiency and parasitic load);  Converting waste that is harmful to the environment to energy, thereby reducing the need for a sanitary landfill that may translate to cost savings for the city;  Savings in carbon dioxide emissions; and  Fuel cost savings.

Analysis of Project Alternatives

Site Selection

A high-level site selection exercise for four sites was conducted last December 2014 as part of the PPTA to determine the most viable site for the development of the Project in Cabuyao City. These include:

AECOM Asia Co. Ltd. 113 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 Site 1 – Cabuyao Transfer Station Site

 Site 2 – Gatchalian SME Industrial Park Site

 Site 3 – Potenciano-Philsteel or Potenciano 1 (PO1) Site

 Site 4 – Ranch or Potenciano 2 (PO2) Site

The four sites were assessed based on a scoring system that constitutes a two-tier categorization of site selection criteria using Four Basic Criteria (Planning, Environment, Engineering, and Social), which were sub-classified into 17 Detailed Criteria in the scoring system.

The current site of the Project (Cabuyao Transfer Station Site) had the lowest score (i.e. least viable) among the four sites assessed last December 2014. However, as of July 2016, the new city administration of Cabuyao has made a promise to build a wide access road near the Cabuyao Transfer Station Site. The City Planning and Development Coordinator has also confirmed that they would allow waste-to-energy businesses in the site as long as all the requirements are met and relevant licenses are obtained. As a result, the accessibility and zoning issues associated with the Cabuyao Transfer Station Site could be partially mitigated (if not entirely), and the score of this site could potentially be improved. SURE Global and SBH have, therefore, chosen to develop the MERF in Cabuyao on Site 1.

Technology and Process Engineering Review

A high-level technology review to determine the feasibility of the integration of technologies that were selected for the Project was undertaken as part of the PPTA. These technologies include:

 Separation and cleaning technologies offered by DB Technologies BV 20 (DB Technologies) that separate organic and non-organic fractions in the waste stream;

 Bio-treatment technologies offered by Anaergia Asia Inc.(Anaergia) that receive the organic fraction from the waste stream. The technologies apply anaerobic digestion to stabilize the organic waste and generate biogas for heat and power generation; and

 Thermal Treatment technologies offered by ICM Inc (ICM) that receive the non-organic fraction from the waste stream. The technologies apply gasification to chemically convert the non-organic fraction of waste into Syngas for heat and power generation.

No Project Option

The “no project” option must be weighed against the social and economic benefits of the Project and the development plans of Cabuyao City in terms of managing the solid waste of the city. One of the city’s strategies identified in their 10-Year City Solid Waste Management Plan for 2016 to 2025 is to provide alternative solutions for waste management such as Waste to Energy options. If the W2W Project will not proceed, the Cabuyao City local government may pursue other Waste to Energy undertakings from other interested proponents. Cabuyao City may also continue to dispose their solid waste in landfills if a Waste to Energy project does not materialize, or they may implement other strategies mentioned in their 10-Year City Solid Waste Management Plan for 2016 to 2025. The Transfer Station may continue to operate if the Project does not push through, and the project site may be developed by SBH for other purposes according to their preference, given that it is their private land.

Anticipated economic benefits of the Project will also not materialize if the Project does not proceed.

20 DB Technologies BV is an Anaergia Company.

AECOM Asia Co. Ltd. 114 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Description of the Environment and Social and Cultural Conditions

Environment

The Project is proposed to be located within SBH’s 30-ha private property in Cabuyao City. The project site has an approximate area of 5.7 ha, and is adjacent SBH’s existing waste Transfer Station. The project site is a predominantly flat open area with an elevation of approximately 180 m above sea level, bounded by a few elevated areas along the western section of Cabuyao City. The site is currently being used by SBH to house their fighting cocks and grow some fruit- bearing trees for their own consumption.

The project site lies approximately 10.4 km to the east of the nearest trace of the active West Valley Fault close to Puting Kahoy, Silang, Cavite. In terms of geohazards, it is highly susceptible to ground shaking, liquefaction, volcanic hazards, and differential settlements. It is moderately susceptible to flooding due to its low elevation, low relief and close proximity to the coast of Laguna Lake. The soil type within the project site is Guadalupe Clay.

Based on the Modified Coronas system of classification, the project site is located under Type 1 climate area which has two pronounced seasons – dry season from December to May and wet season from June to November. The prevailing wind direction is northeast, based on data from the nearest climate and agromet monitoring station (University of the Philippines, Los Baños, Laguna Climate and Agromet station).

There are no rivers, streams or creeks that drain the project site. The nearest water body to the project site is the Langhaya Creek, which is located approximately 180 m north of the proposed MERF. The creek was observed to have poor water quality (i.e. very turbid and polluted with garbage) at the time of the site reconnaissance for this assessment. The creek is currently used for discharge of domestic wastewater and effluent from a paper mill (pulp manufacturing).

The groundwater class of the project site is Class I (B) based on the groundwater classes of the Mines and Geosciences Bureau. This groundwater class consists of rocks in which flow is dominantly inter-granular, with fairly extensive and productive aquifers and moderate to high permeability. Known production well yields mostly 20 L/s but as high as 60 L/s at some sites. The project site has a groundwater pump owned by SBH used for bathing and occasionally, drinking. This groundwater well is approximately 24 meters deep.

There are no environmentally sensitive ecosystems within and in the immediate vicinity of the project site. The nearest protected area is the Mount Makiling National Park approximately 11 km southeast of Cabuyao City and the project site. Most of the recorded flora species in the project site are associated with open and disturbed areas, consisting of grass and some fruit- bearing trees.

Based on available secondary data, all recorded mammal species (i.e. various species of bats, rats, and shrew) in the Province of Laguna that thrive in the habitat types represented by the project site (agricultural, grassland, garden and open areas, and human habitation) are not listed under the IUCN Red List of 2016, the Philippine Wildlife Act of 2001, and the CITES 2016 list. The presence of these species in the project site potentially indicates a degree of tolerance to occupy highly-urbanized habitats.

Twenty-four out of the 349 bird species found in Laguna may be associated with the conditions in the project site. These bird species thrive in non-forest habitats such as built-up areas, grasslands, brush/shrubland, and agricultural land. None of the bird species associated with the project site are listed under the Philippine Wildlife Act of 2001 and the IUCN Red List of Threatened Species (2016). Seven amphibians and eight reptiles associated with habitat types represented by the project site (i.e. open areas, built-up areas and human habitations, or areas that have been modified by anthropogenic activities (agricultural lands)) are either unlisted or considered as ‘least concern’ under the Philippine Wildlife Act of 2001, the IUCN Red List of Threatened Species 2016 and the CITES 2016 list.

AECOM Asia Co. Ltd. 115 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Social and Cultural Conditions

The City of Cabuyao is a first-class21 city consisting of 18 barangays. Seventeen of the 18 barangays are classified as urban, and the city is classified as 99.99% urban. Majority of the city’s income are sourced from industries, commercial, services, agriculture and farming. In 2012, the city had an annual income of PhP 905,545,623.44. Before it was converted into a Component City, after the ratification of a plebiscite on 4 August 2012, Cabuyao was also identified as the "Richest Municipality of the Philippines" and the fastest growing municipality in Laguna.

The population of Cabuyao City is fast-growing. Rapid urbanization has brought significant increase in the number of migrants working in the city’s dynamic industrial and business estates. From 66,975 in the 1990 census, it grew to 308,745 in 2015, which makes Cabuyao the fifth most populous city in the province of Laguna, comprising about 10% of the total provincial population. It is also the third most densely-populated city in Laguna as of 2015, with a population density of 7,100/sq km. The number of households in Cabuyao in 2015 was 81,573, with an average household size of 3.8 members per family.

A high literacy rate (97%) was recorded for both males and females in the city based on 2008 to 2010 data. The potential labor force of Cabuyao City as of 2007 was around 131,039 (about 64% of the total population of the city). The number of children and youth groups had a total of 67,297 (33% of the total population), while the elderly population (65 years old or over) was 7,040 (3% of the total population). Based on the distribution of population, the total dependency ratio is 58%.

In 2015, the percentage of poverty incidence in the province of Laguna, where the city of Cabuyao belonged, was 4.1% and the magnitude of poor families was 32,973. There is no available data on poverty threshold and incidence for Cabuyao City.

No indigenous peoples are found in the project area. The Laguna Lake Development Authority22 reports that there are no indigenous peoples with ancestral domain or land claims in Laguna. The inhabitants of Laguna are mainstream lowlanders of native and migrant stock; the indigenous peoples residing in the province are migrants and therefore are not indigenous to Laguna. There are no known structures or sites of historical, archaeological, or architectural significance within the project site.

In 2008, the ten leading causes of mortality in all ages were hypertension, pneumonia, and cancer while the leading causes of illnesses were diarrhea, hypertension and TB respiratory diseases

The ten existing land uses listed in the Comprehensive Land Use Plan of the city include residential, institutional, cemetery, road, commercial, industrial, agricultural, strategic agriculture and fisheries development zones (SAFDZ), open space, and water development zone. The greater portion of the city consists of residential and agricultural areas. The local government however, is targeting to increase the industrial areas.

The proposed project site is in Barangay Banaybanay based on its title or Torrens Certificate of Title (TCT), but historically, it belongs to Barangay Niugan. Both barangays are zoned under residential areas based on the city’s land use map. Barangay Niugan, presently zoned as Residential, is proposed to be re-zoned as a Special Development Zone (Mixed Use) that admits Light Industry in the update of the CLUP/ZO for the next planning period. SBH has applied for the conversion of the land use of its site from ‘residential’ to ‘light industrial’, a move that is consistent with the proposed re-zoning of Barangay Niugan. Light industrial zones are

21 Cities with total annual revenue during the next preceding fiscal year amounts to one million pesos or more 22 The Laguna Lake Development Authority (LLDA) is a special development and regulatory agency of the national government that has jurisdiction over the resource and hydrological region comprising the a) all towns and cities of Rizal and Laguna provinces, b) the towns of Silang, Gen. Mariano Alvarez, Carmona, and Tagaytay City in Cavite province, c) Lucban in Quezon province, d) the city of Tanauan and the towns of Sto. Tomas and Malvar in Batangas province, and e) the cities of Marikina, Pasig, Taguig, Muntinglupa, Pasay, Caloocan, Quezon and the town of Pateros in Metro Manila.

AECOM Asia Co. Ltd. 116 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

areas principally for non-pollutive/nonhazardous and non-pollutive/hazardous industries. MERFs are included in the list of non-pollutive/hazardous industries. While local city council has signed off on the proposed CLUP/ZO, the same planning documents still has to undergo review and approval by the Provincial Land Use Committee and the Regional Land Use Committee. At present, the project site is utilized by SBH to house their fighting cocks and grow some fruit-bearing trees for their personal consumption.

Domestic water in the city is mainly obtained from groundwater sources by means of deep and shallow wells. The water service provider of the government in the city is the Cabuyao Water District (CABWAD), which was formed in 1996 and operates under the supervision of the Local Water Utilities Administration (LWUA). CABWAD is classified as a “Category C” water district with 10,376 active service connections as of December 31, 2015. Water service in the city is also partly provided by Laguna Water, a piped-water service provider. The city’s electricity requirement is provided by Manila Electric Company (MERALCO). Communications and telecommunications services available in the city include telephone companies, mobile service providers, and cable and internet service providers.

Modes of transport in the city include rail, road, and water with road transportation being the most utilized. Existing transport infrastructure consists of road networks, railways, bridges, and terminals. The city has an extensive road network with a total length of 94.44 km (as of 2015) spread across the three poblacion Barangays and along the circumference of the city, and a road density of 2.1810623. Roads surfaces are mostly of concrete and asphalt designed to accommodate light to medium vehicles like cars and buses and at most medium-sized trucks. The main modes of public transport in the city are jeepneys and tricycles.

Anticipated Environmental and Social Impacts and Mitigation Measures

The construction and operation of the MERF in Cabuyao City is expected to have limited impacts (if any) in terms of resettlement, historical/cultural monuments, and vegetation loss based on the current status of the Project’s proposed location. In terms of encroachment of environmentally sensitive areas, the environmental impacts are also anticipated to be acceptable, mitigatable and contained within the Project site and its vicinity. There will also be no significant impact on livelihood displacement and/or the earnings of pickers/sorters during the pre-construction and construction stages of the Project since the current volume that goes for picking and sorting will remain the same.

The key potential environmental and social impacts of the Project include the:

 Potential increase in ground level concentrations of air pollutants from vehicular and plant equipment emissions, and the flue gas that will be generated by the MERF;

 Generation of dust, odor, and noise;

 Attraction of feral animals and disease-carrying pests which may cause nuisance in sensitive receptors surrounding the project site;

 Change in soil quality in the project site by leachate from MSW;

 Generation of traffic;

 Exposure of workers and communities to hazards associated with the transport, handling, and storage of MSW (or unacceptable waste in some cases) and the construction and operation of the MERF and its associated facilities;

 Generation of employment for local skilled and unskilled workers during construction and operations, respectively;

 Increase in the number of waste pickers/sorters and/or more working days available (with more regular and predictable earnings) for pickers/sorters during the operations phase of the Project; and

AECOM Asia Co. Ltd. 117 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

 Impacts associated with informal settlements or temporary accommodations (i.e., make-shift overnight dwellings) adjacent the project site as a result of people seeking employment and income-earning opportunities which could lead to uncontrolled growth and its attendant problems

The Project’s front-end engineering design will address these potential impacts as much as practicable, and will be mitigated along with proposed measures in the Project’s Environmental and Social Management Plan. SURE Global will also comply with all local regulations and relevant international standards throughout all the phases of the Project.

Public Consultation and Information Disclosure

Focus group discussions (FGDs) and key informant interviews (KIIs) were undertaken in Cabuyao City to present the proposed Project to stakeholders and solicit their issues, perceptions, and concerns regarding the proposed development. SURE Global has also worked extensively with the wastepicker community to ascertain how they wished to be leveraged in the Project and how their working conditions can be improved The pickers have also provided boundaries as to what practices they wish to remain in place (such as being paid for what they pick as opposed to salaried), as input to the MRF design of the Project.

Salient issues and concerns that emerged from these consultations are:

 The proposed site of the Project (i.e., in an urban area), the details and timeline of the Project, and the effect of the Project’s operations on the environment and public health;

 The threshold and magnitude of the waste required by the Project vs the waste produced by Cabuyao per day;

 Generation of bottom ash;

 Vehicular traffic resulting from the magnitude of waste that will be transported to the transfer station and the inadequacy of the road system;

 The benefits the city will gain from the Project;

 The project site being near farm lands including SAFDZ;

 The potential smell and other nuisance the Project may generate citing the experience with the present MRF;

 How the wastes will be managed if the facility is not able to process the MSW immediately;

 Effects of the Project to wastepickers/sorters;

 Compliance to legislation; and

 Community and social acceptability.

Some of those consulted also expressed their support for the Project, as long as the safety of the environment and health of the community is assured.

The wastepicker community on the other hand expressed that they want to continue to have access to the waste and work as independent entrepreneurs, where they are paid for the waste they individually collect at market rates.

The Project’s front-end engineering design will address these concerns as much as practicable, and will be mitigated along with proposed measures in the Project’s ESMP. SURE Global will comply with all local regulations and relevant international standards throughout all the phases of the Project. A continuing stakeholder engagement program will also be implemented by SURE Global, to foster transparency, ensure that stakeholders have access to timely and

AECOM Asia Co. Ltd. 118 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

correct information, and make informed judgments on concerns that affect their lives and their communities. Information disclosures for the Project will be conducted in the local language of affected communities (as necessary), will be made with consideration to targeting disadvantaged or vulnerable groups, and will be free from external manipulation, interference, coercion, and intimidation.

Grievance Redress Mechanism

A Grievance Redress Mechanism (GRM) will be established by SURE Global to receive and manage community complaints or concerns associated with the construction and operation of the Project. It is proposed that the Project adopts the principles and practices of the International Finance Corporation (IFC) enunciated in its ‘Good Practice Note: Addressing Grievances from Project-Affected Communities: Guidance for Projects and Companies on Designing Grievance Mechanisms.

The GRM will provide procedures on how to receive and record complaints or concerns, identify appropriate representatives who will address them, and provide a feedback mechanism to stakeholders who raised them. Stakeholders will be given the opportunity to raise complaints through multiple means including meetings, written complaints, a hotline number that will be established by SURE Global and SBH, drop-boxes, and email. The identity of and the concerns raised by stakeholders will be kept confidential.

The Environmental and Social Management Unit that will be set-up for the Project will be responsible for regularly liaising and coordinating with project stakeholders and implement the Grievance Redress Mechanism for the Project.

Institutional Requirements and Environmental Monitoring Plan

Mitigation measures to address the potential environmental and social impacts of the Project will form part of an Environmental and Social Management Plan (ESMP) that will be developed and implemented for the Project, to ensure that the Project meets all local regulations and relevant international standards, and that potential impacts are minimized or mitigated. The Project will also have a monitoring plan that identifies the critical aspects that will be monitored periodically throughout the various phases of the Project, along with the scope and timetable for the monitoring activities. This plan is a live document, and will be continually updated as further details about the Project are determined. SURE Global will form an Environmental and Social Management Unit to efficiently implement and monitor the ESMP and Environmental Monitoring Plan for the Project. The Environmental and Social Management Unit will also be responsible for reporting on the environmental and social performance of the Project based on:

 Compliance with relevant environmental regulations;

 Compliance with international standards e.g. European Union Waste Incineration Directive 2000/76/IEC on dioxins and nitrogen oxide;

 Compliance with ADB’s SPS 2009 and social protection principles;

 Compliance with labor standards and applicable national laws; and

 Actual impacts against predicted impacts in the IEE.

While the FEED for the MERF has not been completed, the estimated cost for implementing the ESMP is approximately 4-6% of the project capital cost.

Conclusions and Recommendations

The IEE conducted for the Project shows that the construction and operation of the MERF in Cabuyao City is expected to have limited impacts (if any) in terms of resettlement, historical/cultural monuments, and vegetation loss based on the current status of the Project’s proposed location. In terms of encroachment of environmentally sensitive areas, the environmental impacts are also anticipated to be acceptable, mitigatable and contained within

AECOM Asia Co. Ltd. 119 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

the Project site and its vicinity. There will also be no significant impact on livelihood displacement and/or the earnings of pickers/sorters during the pre-construction and construction stages of the Project since the current volume that goes for picking and sorting will remain the same.

The key potential environmental impacts of the Project include the:

 Potential increase in ground level concentrations of air pollutants from vehicular and plant equipment emissions, and the flue gas that will be generated by the MERF;

 Generation of dust, odor, and noise;

 Attraction of feral animals and disease-carrying pests which may cause nuisance in sensitive receptors surrounding the project site;

 Change in soil quality in the project site by leachate from MSW;

 Generation of traffic;

 Exposure of workers and communities to hazards associated with the transport, handling, and storage of MSW (or unacceptable waste in some cases) and the construction and operation of the MERF and its associated facilities;

 Generation of employment for local skilled and unskilled workers during construction and operations, respectively;

 Increase in the number of waste pickers/sorters and/or more working days available (with more regular and predictable earnings) for pickers/sorters during the operations phase of the Project; and

 Impacts associated with informal settlements or temporary accommodations (i.e., make-shift overnight dwellings) adjacent the project site as a result of people seeking employment and income-earning opportunities which could lead to uncontrolled growth and its attendant problems

The Project’s front-end engineering design will address these potential impacts as much as practicable, and will be mitigated along with proposed measures in the Project’s EMP. SURE Global will comply with all local regulations and relevant international standards throughout all the phases of the Project.

Since this report is an Initial Environmental Examination (IEE) that does not form any part of the application process of the Environmental Compliance Certificate (ECC) for the Project, the next stage of work for SURE Global is to complete the documentary requirements of DENR’s IEE Checklist through their online application system. It is recommended however that SURE Global coordinate with DENR-EMB Region III to confirm if they have additional requirements for the Project’s ECC application.

It is also recommended that the following studies be completed to provide further details for the Project:

 Air quality and noise modeling;  Assessment of potential land and groundwater contamination and landfill gas migration at the site to determine if site remediation is necessary;  Detailed Traffic Impact Assessment; and  Detailed EGGAR (with drilling).

AECOM Asia Co. Ltd. 120 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

9. REGULATORY REVIEW (TASK 8)

This PPTA aims to determine the viability of constructing two (2) MERFs in the Philippines. It is understood that the MERF may consist of both material recovery facilities (which may include the facilities for hauling, receiving, handling and segregation of the MSW), and power plant facilities (for the conversion or generation of energy from MSW). The Consultant has conducted a regulatory review to ensure the Project’s compliance with applicable laws, rules and regulations.

9.1 Identification of Various Implementation Options for the Project Structure

The Consultant examined relevant laws, rules, and regulations on the possible mode or mechanism of cooperation between the LGU and SURE Global to implement the MERF. Following such review, various options were explored, taking into account their advantages and disadvantages in relation to the Project.

Attached as Annex H is a Memorandum dated 20 March 2015 (updating the initial Memorandum dated 17 July 2014) which highlights the proposed cooperation option between the relevant LGUs and SURE Global based on inputs received on the envisioned role or participation of the LGUs in the MERF projects.

The Memorandum also took into account the regulatory framework governing solid waste in general and the characterization of the solid waste, which is subject of the MERFs as an asset, including applicable renewable energy laws.

For the implementation of the Cabuyao City MERF, it was envisioned that the host LGU would not provide any form of Government Undertaking23. Rather, the participation or role of Cabuyao City in the development and construction of the MERF would be limited to outsourcing of waste collection services to private solid waste collectors and haulers, which S.B. Hain Enterprises and General Services, Inc. (“SBH”) is currently doing with several LGU’s including Cabuyao City.

Republic Act No. 5183 24 prescribes that contracts, through public bidding or negotiated contracts for the supply to, or procurement by government agencies and instrumentalities, can only be awarded to a contractor or bidder who is (a) a citizen of the Philippines, (b) a corporation or association at least sixty percent (60%) of the capital of which is owned by Filipino citizens, or (c) a citizen, corporation, or association of a country whose laws or regulations grant similar rights or privileges to Filipino citizens.25 The foregoing rule on eligibility of foreign contractors or bidders based on reciprocity has been adopted in Republic Act No. 9184 as well.

23 As defined under Section 1.3(m) in relation to Section 13.3 of the Revised Implementing Rules and Regulations of R.A. No. 6957, “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes,” as Amended by R.A. No. 7718, Government Undertaking refers to any form of government support or contribution, such as, but not limited to (a) Cost Sharing, which entails the LGU bearing a portion of capital expenses associated with the establishment of an infrastructure development facility, such as the provision of access infrastructure, rightof-way, transfer of ownership over, or usufruct, or possession of land, building or any other real or personal property for direct use in the project and/or any partial financing of the project, or components thereof; (b) Credit Enhancements, which refers to support to a development facility, which may include government guarantees on the performance or the obligation of the LGU, (c) Direct Government Subsidy, which involves, among others, the LGU defraying, or paying a portion of the costs or expenses for operating or maintaining the project, or providing any contribution of any property or asset, or (d) Direct Government Equity, or (e) Security Assistance, such as the deployment of government security forces in the vicinity of the project site. 24 An Act regulating the award of contracts for the supply to, or procurement by, any government-owned or controlled corporation, company, agency or municipal corporation of materials, equipment, goods and commodities, and providing penalty for the violation thereof.25 Section 1. 24 An Act regulating the award of contracts for the supply to, or procurement by, any government-owned or controlled corporation, company, agency or municipal corporation of materials, equipment, goods and commodities, and providing penalty for the violation thereof.25 Section 1. 25 Section 1.

AECOM Asia Co. Ltd. 121 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Considering that SBH (and/or its affiliates) has a number of contracts concurrently with Cabuyao City and several other LGU’s, it is deemed to comply with the foregoing eligibility requirements26.

It must be noted that the contracts for waste collection services have a 1 year term. In the event that SBH fails to secure sufficient contracts to provide the requirements of the MERF facility, and SURE Global is not qualified or does not fall among the allowable circumstances to address the eligibility requirements, SURE Global can explore the possibility of entering into a joint venture agreement with another private Filipino entity to comply with the foregoing eligibility requirements, and forming a special purpose vehicle (SPV) that would bid for the provision of service for the receipt, conversion and processing of the solid waste from Cabuyao City and other LGU’s.

There are two options that SURE Global can explore in this regard:

Option 1:

1. Form a special purpose vehicle (SPV) with a Filipino partner that would bid for the provision of service for the receipt, conversion and processing of the solid waste from Cabuyao City LGU; 2. The SPV would then enter into an agreement for a long-term waste supply with SURE Global; and 3. SURE Global can fully own the MERF and enter into lease agreement with SBH which owns the Cabuyao City Project Site.

Option 2:

SURE Global can explore the possibility of entering into a joint venture agreement with another private entity, and implement the Cabuyao City MERF. As such:

1. It can form an SPV with a Filipino partner that would bid for the provision of service for the receipt, conversion and processing of the municipal solid waste from Cabuyao City LGU; and

2. The SPV would then develop, construct, own and operate the Cabuyao City MERF.

Based on the envisioned participation of Cabuyao City, the following are the possible arrangements which may be undertaken by said LGU:

1. Cabuyao City needs to conduct a public bidding for the procurement of the service for the receipt, storage, separation, conversion or otherwise processing of solid waste. Cabuyao City LG may undertake the following steps in this regard:

i. The subject of the bidding would be limited to the (1) procurement of services for the receipt of municipal solid waste, (2) with the requirement that the winning bidder shall be responsible for the storage, separation, conversion or otherwise processing of solid wastes in conformity with existing environmental regulations.

26 Section 23.5.1 of the GPRA IRR prescribes the following eligibility requirements for the bidding for the supply of goods: (a) Duly licensed Filipino citizens/sole proprietors; (b) Partnerships duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the interest belongs to citizens of the Philippines; (c) Corporations duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the outstanding capital stock belongs to citizens of the Philippines; (d) Cooperatives duly organized under the laws of the Philippines, and of which at least sixty percent (60%) belongs to citizens of the Philippines; or (e) Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That Filipino ownership or interest of the joint venture concerned shall be at least sixty percent (60%). For this purpose, Filipino ownership or interest shall be based on contributions of each of the members of the joint venture as specified in their JVA.27Initiatives for Dialogue and Empowerment through Alternative Legal Services, Inc. (IDEALS, Inc.), et al., v. Power Sector Assets and Liabilities Management Corporation, et al., G.R. No. 192088, 9 October 2012.

AECOM Asia Co. Ltd. 122 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

ii. The long-term waste supply contract would, among others, specify the minimum number of tons of waste per day to be delivered by the Cabuyao City LGU, and any associated penalty for any shortfall.

iii. Presumably, the winning bidder would be the entity that offers such service at minimal or no cost to the Cabuyao City LGU. For instance, if an entity would not charge any tipping fee for the delivered waste, or charge a minimal fee for such service, then it would likely win the bid.

iv. SURE Global can then establish the technology it deems proper for the receiving, storage, separation, conversion or otherwise processing of the solid waste, including the establishment of a MERF, consistent with environmental laws and guidelines.

The resulting relationship between the Private Proponent, Facility Partner and the Cabuyao City LGU shall be as follows:

Figure 9.1 Relationship Illustration between SURE Global, SBH and Cabuyao City LGU

Considering that the MERF is intended to be a purely private endeavour with no participation from the Cabuyao City LGU other than as supplier of solid waste, the same may be undertaken through modes other than the Build-Operate-and-Transfer (“BOT”) Law or a joint venture arrangement with the host LGU. Should increase participation from the host LGU be subsequently required, which may be considered as involving a Government Undertaking, the implementation of the MERF through schemes authorized under the BOT Law or through a joint venture arrangement with the host LGU may be revisited.

9.2 Identification of Regulatory Issues to the Project Structure

The Consultant also reviewed relevant laws, rules, and regulations on any restrictions that may be relevant to the Project. Following such review, a Memorandum dated 27 May 2014 was prepared which raised the possibility of the application of nationality restrictions on the development and ownership of the MERFs, in view of the provisions of the 1987 Philippine Constitution and the Renewable Energy Act of 2008 regarding the exploration, development and utilization of natural resources.

Based on the initial memorandum, various courses of action were discussed to ensure compliance of the Project with such nationality restrictions. Eventually, the Consultant sought clarification/confirmation from the DOE on the application of foreign ownership restrictions in the ownership of the MERFs. The letter sent to DOE dated 25 July 2014 requesting clarification on the applicable nationality restrictions and structuring options for the MERFs is attached under the Annex of Annex I.

AECOM Asia Co. Ltd. 123 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

On 7 November 2014, the DOE issued its response to the request for clarification and issued the following clarifications: 1. Given the characterization of the Municipal Solid Waste (“MSW”), which contain less than 50% biodegradable organic waste, the MSW does not fall squarely within the definition of "Biomass Resources" under the RE Act and its IRR; however, it can still be classified as a Renewable Energy ("RE") resource. 2. As an RE resource, the utilisation of the MSW must be covered by an RE Contract in order to provide the RE Developer an exclusive right to a particular area where the resource is located and for the purpose of availing incentives under the RE Act.

3. There are no legal or constitutional proscriptions for a 100% foreign corporation to engage in the utilisation of MSW for energy generation. Hence, even foreign-owned companies may fully own the MERFs established and developed under the Project, which convert and generate energy from such MSW, without the need to comply with the nationality restrictions under the Philippine Constitution.

The DOE further explained that since the collection, segregation, hauling and delivery of the MSW are already being undertaken by the local government units or private contractors with at least 60% Filipino equity, it can be concluded that the exploration, development, and utilisation of the MSW is already being undertaken by entities which meet the nationality requirement. Consistent with the ruling in IDEALS, et al. v. PSALM, et al.27, there is no longer any impediment for foreign-owned corporations undertaking the generation of electric power, to convert such MSW which was already developed and utilized by qualified Filipinos, into energy.

Attached as Annex of Annex I is the DOE’s response dated 7 November 2014 containing these clarifications.

Considering the length of time since the opinion was issued and the ensuing changes in the DOE administration, it would be prudent to clarify with the present DOE administration if the opinion remains valid and binding to date.

9.3 Identification of the Consents, Approvals, Permits and Licenses Required for the Project

The Consultant also reviewed relevant laws, rules, and regulations to identify the various permits and licenses needed for the MERFs.

Attached as Annex J is a Memorandum dated 22 August 2014 discussing the applicable permits and licenses (including procedure and indicative timelines) for the implementation of the Cabuyao City MERFs. The list of relevant requirements and forms to secure these permits and licenses are attached under the Annexes of Annex J.

Based on the review, the required consents, approvals, permits and licenses required for the Project, include, but are not limited to:

a) Incorporation documents from the Securities and Exchange Commission (SEC), and licenses from the Bureau of Internal Revenue (BIR), and Board of Investments (BOI) for availment of incentives;

b) Local approvals, such as Sangguniang Panlungsod resolutions approving the Project, inclusion of the Project in the LGU’s solid waste management plan, and accreditation of the SURE Global by the Cabuyao City Environmental and Solid Waste Management Regulatory Office;

c) Local government permits such as business permit, building permit, wiring permit;

27Initiatives for Dialogue and Empowerment through Alternative Legal Services, Inc. (IDEALS, Inc.), et al., v. Power Sector Assets and Liabilities Management Corporation, et al., G.R. No. 192088, 9 October 2012.

AECOM Asia Co. Ltd. 124 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

d) Approvals from the National Solid Waste Management Commission (NSWMC) for the updated Cabuyao City Solid Waste Management Plan, which includes the scope of services provided by the MERF;

e) Environmental permits such as the Environmental Compliance Certificate, authority to construct and permit to operate from the DENR;

f) Renewable Energy operating contract, confirmation of the declaration of commerciality, and certification of eligibility for feed-in-tariff (FIT) from the DOE (and required documentary attachments related thereto), grid/system impact studies and interconnection agreements, various certificates of endorsements, Memorandum of Agreement under ER 1-94, among others;

The 250 MW FIT allocation for biomass technologies remain undersubscribed three years after the program’s implementation. As of 31 December 2016, six biomass plants with a combined capacity of 50.35 MW have been issued certificates of confirmation of commerciality by the DOE, while 15 biomass plants with a total capacity of 105.05 MW have been issued certificates of endorsement to ERC under the FiT system. The current FIT rate for biomass Plants with Commercial Operations Date within January to December 2017, has been set at 6.5969 (PhP/kWh) per ERC Resolution No. 1, Series of 2017.

In the event that the installation target has already been fully subscribed, the RE developer has some alternative options to sell their electricity under other business schemes:

. Entering into a bilateral agreement with a distribution utility (DU) or any off-taker. A competitive selection process (CSP) 28 is now required for Power Supply Agreements (PSAs) of DUs in off-grid areas.

. Exporting the power generated directly to the Wholesale Electricity Spot Market (WESM), subject to the FIT guidelines on “must-dispatch”.

. Entering into Power Supply Agreements with Commercial Bulk Consumers. The retail competition and open access (RCOA) was introduced by the EPIRA. It allows large electricity consumers in the Philippines to source their electricity from any retail electricity supplier in the electricity market. Contracts will be made between consumers and the retail supplier. The RCOA ensures "open access" to a power network, and allows distribution and transmission grids to be used as a means to transport the traded electricity under a business-to-business scheme.

g) The RE developer must notify the DOE regarding the option chosen. Certificate of Compliance from the Energy Regulatory Commission;

h) Transmission services agreement, connection agreement and metering services agreement with the National Grid Corporation of the Philippines, or interconnection agreement with the local distribution utility;

i) Submission of Environmental Technology Verification Protocol with the DOST;

j) Certification from the NCIP;

k) Permits for land use, and acquisition of right of way; and

l) Compliance with bidding requirements for the construction and operation of the Project.

28 DOE Department Circular No. 2015-06-0008

AECOM Asia Co. Ltd. 125 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

10. IMPLEMENTATION PLAN (TASK 9)

An Initial Implementation Plan for the MERF in Cabuyao City is developed to present the roadmap and estimated schedule and milestones for implementation. The plan would draw upon the findings of Tasks 1-8 and the outputs from the waste characterization studies from Package 2 of the PPTA with critical path analysis to ensure the effectiveness and efficiency of Project implementation. Key tasks starting from project feasibility to operation of the project are presented in the implementation plan, including Pre-Feasibility Study, Front-End Engineering Design, Construction and Commissioning of the MERF, and Completion of Design and Construction.

Table 10.1 shows the Initial Project Implementation Plan for developing the MERF in Cabuyao City with key milestones and relevant activities and descriptions.

Table 10.1 Initial Project Implementation Plan

Completion No. Tasks and Descriptions Start Date Date

1. Pre-Feasibility Study 05/2014 10/2017

- Material Supply Market and Land Use Assessment - Site Selection - Technology Integration and Process Engineering Assessment - Financial and Economic Analysis

- Initial Environmental and Social Assessment - Initial Geological Assessment - Traffic Impact Study - Regulatory Review - Initial Implementation Plan

2. Front-End Engineering Design 09/2017 12/2018

- Preparation of Environmental Impact Statement (EIS) and application of environmental permit - Geotechnical investigation - Traffic impact assessment - Land allocation / acquisition / re-zoning - Detail engineering design of the MERF - Site layout plan

- Building plans and drawings - Civil and structural works design - Waste receiving and pre-treatment area design - MERF treatment process review and design - Utility connections, piping, electric and instrument design - Ancillary systems and facilities

AECOM Asia Co. Ltd. 126 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Completion No. Tasks and Descriptions Start Date Date - Materials submission, testing, and approval - Procurement of equipment, including fabrication and shipping - Obtain all relevant permits and licenses for construction and operation - Prepare undertakings and insurances - Prepare design and construction plans and programs - Liaison with the city government and utility companies

3. Construction and Commissioning of the MERF 12/2018 09/2020

- Construction stage - Site establishment and temporary works preparation - Excavation, piling, and land formation works - Construction of MERF and ancillary facilities - Installation of mechanical and electrical plants, including equipment for system control and monitoring

- Preparation of testing and commissioning plan - Testing and commissioning stage - Site testing - Systems commissioning - Process startup and plant commissioning - Preparation of operation and maintenance manuals - Checking and approval from government authorities

4. Completion of Design and Construction 09/2020 12/2020

- Preparation of as-built records and drawings

AECOM Asia Co. Ltd. 127 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

11. CONCLUSION AND RECOMMENDATIONS

The Procter & Gamble Company Waste to Worth Project (the “Project”) aims to develop an integrated municipal solid waste (MSW) management plan and Waste-to-Energy (WTE) facilities in developing markets that will address the growing challenges in the disposal of MSW and concurrently promote the mitigation of environmental and social (E&S) impacts of current waste management practice in the Philippines. This Project Preparatory Technical Assistance (PPTA) funded by the Asian Development Bank (“ADB”) with sponsored funding from Procter & Gamble Company (“P&G”) was conducted to determine the feasibility of developing two Material and Energy Recovery Facilities (MERFs) in Cabuyao City and Cabuyao City of the Philippines. SURE Global W2Wi (“SURE Global”), a joint venture partnership between W2Worth Innovations, LLC and Solutions Using Renewable Energy Inc., will be the owner / operator of the MERF.

AECOM Asia Co. Ltd. (“AECOM” or “the Consultant”), as the Consultant of this PPTA, has undertaken the following activities to determine the feasibility of the Project. The MERF to be developed in Cabuyao City is the main focus of this report.

1) Site Selection Assessment; 2) Material Supply Market and Land Use Assessment; 3) Technology and Processing Engineering Review; 4) Financial and Economic Analysis; 5) Traffic Impact Study and Optimization of Waste Collection Logistics 6) Engineering Geological and Geohazard Assessment; 7) Environmental and Social Analysis; 8) Regulatory Review; and 9) Implementation Plan.

11.1 Site Selection

During inception stage of the Project, three sites were shortlisted by the S.B. Hain Enterprises & General Services Inc. (“SBH”) for the development of the MERF. A high-level site selection exercise for four sites was conducted last December 2014 as part of the PPTA to determine the most viable site for the development of the Project in Cabuyao City. These include:

 Site 1 – Cabuyao Transfer Station Site  Site 2 – Gatchalian SME Industrial Park Site  Site 3 – Potenciano-Philsteel or Potenciano 1 (PO1) Site  Site 4 – Ranch or Potenciano 2 (PO2) Site

The four sites were assessed based on a scoring system that constitutes a two-tier categorization of site selection criteria using Four Basic Criteria (Planning, Environment, Engineering, and Social), which were sub-classified into 17 Detailed Criteria in the scoring system.

The current site of the Project (Cabuyao Transfer Station Site) had the lowest score (i.e. least viable) among the four sites assessed last December 2014. However, as of July 2016, the new city administration of Cabuyao has made a promise to build a wide access road near the Cabuyao Transfer Station Site. The City Planning and Development Coordinator has also confirmed that they would allow waste-to-energy businesses in the site as long as all the requirements are met and relevant licenses are obtained. As a result, the accessibility and zoning issues associated with the Cabuyao Transfer Station Site could be partially mitigated (if not entirely), and the score of this site could potentially be improved. SURE Global and SBH have, therefore, chosen to develop the MERF in Cabuyao on Site 1.

AECOM Asia Co. Ltd. 128 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

11.2 Material Supply Market and Land Use

Zoning / Land Use Planning of the Selected Site

“Site 1 – Cabuyao Transfer Station” is the selected site for developing the MERF in the City of Cabuyao. It is located in the General Development Zone in Barangay Niugan and Barangay Banay-banay, and will occupy about 5.7 ha of the 30-ha private property owned by SBH, which is located approximately 61 m south of the existing Transfer Station. This SBH property used to be a landfill site owned by SBH but was converted into a transfer station (the landfill site was closed in 2006).

Material Supply Market – The Competitive Landscape

The Consultant has assessed the competitive landscape by profiling the existing entities which could be potentially competing for waste streams in the future such as current supplies to waste disposal facilities nearby the City of Cabuyao.

Based on the assessment above, it is understood that Pilotage Trading and Construction Inc. in San Pedro, Laguna Province, and three other waste disposal facilities in San Pablo, Kalayaan and Kalayaan, Laguna Province are currently competing for municipal solid waste collection contracts with SBH. There is also another waste disposal facility in Batangas Province competing with SBH for municipal solid waste collection contracts.

In addition, several nearby cities in Laguna Province and Metro Manila were planning to develop WTE facilities or clustering to improve their waste management, these projects could be potential competitors for waste supplies in the Laguna and Metro Manila area if they are materialized in the future.

Material Supply Market – Waste Generation Projection

Prediction on waste supply projection of Cabuyao is difficult due to constantly changing client list of SBH each year. Therefore, the Consultant estimated the waste generation projection based on LGU clients of SBH in Package 2 of the project and the 2015 Population Census conducted by Philippine Statistics Authority. Based on the current estimation method, the actual daily throughput is approximately between 767 tpd and 825 tpd for the two SBH waste facilities. Hence, the waste collected could potentially reach 1,000 tpd or more.

11.3 Technology and Process Engineering

The proposed MERF in Cabuyao City will consist of three major components and a series of ancillary and supporting facilities. The technology and process engineering review would focus on the three major components of the proposed MERF, which include:

 Waste Preparation Facilities;  Anaerobic Digestion Unit; and  Thermal Processing Unit.

Based on the Consultant’s experience, it is suggested that each supplier should be given clear input and output requirements, with an allowance / deviation for fluctuations in the receiving process. In return, the suppliers should be providing performance guarantees based on the accepted or agreed input and output requirements. Otherwise, the suppliers could choose to design and supply their systems to their likings, which may not suit the local waste characteristics well and/or may not integrate well with other systems in the facility. This could potentially be design and capital risks to the project proponent. The Balance of Plant, if not designed and managed properly, could make it difficult to estimate related costs, which could in turn become a capital risk as well to the project proponent.

AECOM Asia Co. Ltd. 129 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

Waste Preparation Facilities – DB Technologies BV

In the Waste Preparation Facilities, also known as front-end of the MERF (i.e. the MRF), the MSW would first go through manual picking and mechanical separation to remove recyclables and inert materials from the incoming waste stream. Then, the MSW would be separated into two fractions by OREX and CLEANREX, where both will be supplied by DB Technologies BV (an Anaergia company). The wet organic fraction would be delivered to the anaerobic digestion facilities and the dry (inorganic) fraction would be delivered to the thermal processing facilities for further treatment and subsequent energy generation. Based on the Consultant’s visit to the reference plants, the DB Technology supplied OREX appears to work in the manner defined by SURE Global.

Anaerobic Digestion Unit – Anaergia Asia Inc.

The AD system for Cabuyao has been proposed as a Triton design. As noted elsewhere, there is a potential for small solids/grits (e.g. glass) to settle out in the AD tank and not be re- suspended by the mixers. Anaergia believe that any settled solids would be re-suspended by moving the mixers. For this, the Consultant believe there is a risk that the mixers, on guide rails in a high corrosion environment, would not be easily moved and, even if they were moved easily, it is likely that only very local settled solids would be re-suspended. This raises the risk that periodically, the tanks will need digging out. It is recommended that this, which will require a lengthy shutdown, is allowed for in the financial model and appropriate man access is designed into the tanks.

The gas clean-up system relies on activated carbon to remove siloxanes (which will shorten the life of the gas engine). The Consultant recommend that appropriate allowance is made in the financial model for regular replacement of the carbon. The area around the carbon system should also be designed to allow easy emptying and subsequent refilling. It is recommended that catalytic systems for siloxane removal are investigated during the FEED stage.

Thermal Processing Unit – ICM Inc.

Following a visit by the Consultant on 27 April 2017 to ICM Inc.’s office and manufacturing facility in Colwich, Kansas, USA, and gasifier test facility in Newton, Kansas, USA, the Consultant believe that, judging from the statements made by ICM and the data viewed at the gasifier test facility, there is no reason to believe that an ICM gasifier, based on the inspected facility, would not achieve treatment of 150 tpd RDF as provided by the intended plant in the Philippines, and produce a syngas suitable for combustion in a boiler.

The Consultant suggest that the framework on the gasifiers provided into the Philippines receive a higher specification coating to minimize corrosion, with the potential to galvanise prior to painting. This is especially relevant for any installation within 1 mile of the sea, as onshore wind could be corrosive.

The Consultant believe that it essential that, during detail design, the balance of plant designers enter into detail discussions with ICM in order to ensure all utility requirements are met and that all termination point details are fully understood. The Consultant understand that ICM will define such requirements, but we still believe that face-to-face discussions are essential.

Joint Venture Agreement

On 17 June 2016, SURE Global (through SURE Global W2WI Philippines, Inc. – a 100% owned Philippine corporation) has entered into a 20-year Joint Venture Agreement (the “JVA”) with the S.B. Hain Enterprises & General Services Inc. (“SBH”) for the development and operation a Material and Energy Recovery Facility in Cabuyao City. Considering that the MERF is intended to be a purely private endeavour with no participation from the Cabuyao City LGU, the participation or role of Cabuyao City would be limited to outsourcing the collection and hauling of municipal solid waste within Cabuyao City to SBH.

AECOM Asia Co. Ltd. 130 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

11.4 Financial; and Economic Analysis

Financial Analysis

The financial projections utilized an initial FIT of Php6.63 per kWh. Over the operating life of the material energy recovery facility, the annual average net income after tax (NIAT) will be Php504.88 million. Moreover, the proposed project will register average earnings before interest, taxes and depreciation (EBITDA) and net income margin of 66.6% and 39.3%, respectively.

The project will realize an average free cash flow to the project of Php530.95 million per annum, which could be sufficient to cover investment cost, operating and maintenance expenses, capital expenditures, and debt servicing. With debt-to-equity ratio at 70:30, project FIRR and equity FIRR of the proposed material energy recovery facility was calculated at 13.2% and 20.0%, respectively. Its lowest debt service coverage ratio (DSCR) will be in 2020 at 1.24 times. Project payback period is estimated at 8.3 years.

The proposed project is considered to be financially viable since the estimated project FIRR of 13.2% is greater than the computed WACC of 9.7%.

Sensitivity analysis has revealed that:

Every 5% increase in the estimated project cost will result in a 0.77 percentage point reduction in the project FIRR. But the project cost will have to increase by more than 20% for the project FIRR to be less than the computed WACC.

Delays in project construction are not expected to significantly affect the financial viability of the proposed MERF.

If the project proponent could secure a long-term PPA with off-takers at FiT of no less than Php6.50 per kWh, the FIRRs would only vary slightly.

Due to the penalty provisions and revenue-sharing arrangement in the long-term agreement, it appears that it is still possible to realize IRRs greater than the base case throughput capacity (650 tpd) when the city government delivers less than the guaranteed minimum MSW volume

In addition, the Consultant has the following comments on the financial model assumptions:

1. The start of construction is defined as January 2017, but the FEED is still ongoing.

2. Quantity of power transformers is assumed to be 0, which is likely not the case

3. Operating hours assumed at 8,000 per annum may be reasonable, but this does not appear to have taken into account the downtime necessary for grit removal every few years, especially for the buffer tank and anaerobic digester.

4. An assumption of 10-year depreciation appears to be a simplified approach. Particularly, some of the equipment (e.g. shredders) may have a shorter depreciation period, while others may have longer depreciation period.

Economic Analysis

The economic analysis would focus on the “with-project” and “without-project” scenarios to measure the incremental impact of the proposed project. This means that the analysis would identify the economic costs and benefits associated only with the project, and exclude other economic costs and benefits that would exist whether or not the project would be implemented. Hence, incremental project cash flows would be cash flows with the project less cash flows without the project.

AECOM Asia Co. Ltd. 131 November 2017 TA 8117 PHI: The Procter & Gamble Company Waste to Worth Project (Package 1) Asian Development Bank / The Procter and Gamble Company Final Report (Cabuyao City)

The analysis for the base case yields an EIRR of 19.7% and an ENPV Php 1,129.5 million relative to a social discount rate of 15% and given a project life of 20 years. These indicate that the proposed MERF is economically viable.

Sensitivity analysis has revealed that the economic costs have to increase by at least 25.5% or economic benefits have to decrease by at least 20.3% for the project to become no longer economically viable.

11.5 Traffic Impacts and Optimization of Waste Collection Logistics

Traffic Impact Study

As a part of the Traffic Impact Study, the traffic volume count was conducted for three days in January 2017, on Monday, Wednesday and Friday during the following time period (identified as peak hours in Cabuyao):

. 6:00 – 8:00 AM

. 11:00 AM - 1:00 PM

. 5:00 – 7:00 PM

In general, observations showed that during the morning hours, at 6:00 AM, at the start of the observation, traffic condition is considered as “Light” to “Moderate” at all the intersections. Traffic starts to build up by 6:30 AM and becomes congested before 7:00 AM especially along the Pandan-Mining intersection, reaching its peak at around 7:30-8:00 AM. After that the rush hour has passed and the traffic condition becomes “Moderate” again. Similarly, during the noon time and evening observations, traffic was “Moderate” at the start of each counting period. Traffic builds up and starts to slowly dwindle after the end of each counting period.

A numerical estimation on traffic cannot be shown as there is not enough data to estimate traffic generation due to the proposed development. Yet, the general trend traffic can be estimated using the data obtained from Material Supply Assessment. The assessment estimates an increase in population in the 23 LCUs served by SBH, which may also increase the amount of solid waste generated.

Based on this scenario, it is expected that the company will either use large or medium-sized hauling trucks to tackle the increasing solid waste supply, which might lead to bigger impact on carriageways and traffic situations, as well as higher GHG emissions.

A thorough traffic impact assessment is recommended to be conducted during the FEED of the project before the application of Environmental Compliance Certificate (ECC). The assessment shall include industrial, commercial locators as well as housing developments in the area for the traffic projection so that a proper traffic management plan can be formulated.

Optimization of Waste Collection Logistics

Time and motion study on waste collection trucks is not conducted as the waste supply stream comes from various LGUs located far from Cabuyao City. In general, to optimize the collection and transportation of solid waste collection system, the following steps have to be carried out:

1) Develop Waste Collection Strategy - increase the number of containers in collection areas to reduce loading time and the time of filling the truck; introducing bigger and standardized containers, especially in strategic places like markets or shopping centres.

2) Automated Trucks – Trucks with loading and compacting systems and larger capacity.

3) Reorganize Routes and Timetable - Avoid peak traffic hours. For example, collection in the city centre at night, and collection in the suburbs during the day.

4) Optimizing Collection Routes – Plan collection routes with the aim to:

AECOM Asia Co. Ltd. 132 November 2017