Initial Environmental and Social Examination Project Number: 52127-001 January 2019 Sermsang Khushig Khundii Solar Power Project, Mongolia Prepared by the Tenuun Gerel Company, LLC for the Asian Development Bank. CURRENCY EQUIVALENTS (as of 28 Jan 2019) Currency unit – tugrik (MNT)} MNT1.00 = $0.00038 $1.00 = MNT2,634 ABBREVIATIONS ADB – Asian Development Bank – contractor environmental and social management CESMP plan EIA – environmental impact assessment EMP – environment management plan EMR – environmental monitoring report ESMP – environmental and social management plan ESMS – environment and social management system GHG – greenhouse gas GOM – Government of Mongolia GRM – grievance redress mechanism IEE – initial environmental examination IESE initial environmental and social examination MET – Ministry of Environment and Tourism PV – Photovoltaics REA – rapid environmental assessment TGC – Tenuun Gerel Construction Company LLC SPS – Safeguard Policy Statement (2009) SSP – Sermsang Solar Power Corporation soum – district WEIGHTS AND MEASURES km - kilometer kg - kilogram ha - hectare kVA - kilovolt-ampere m - meter m3 - cubic meter mg - milligram mg/l - milligrams per liter MW - megawatt t - metric ton NOTE In this report, "$" refers to United States dollars. 2 This initial environmental and social examination is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. Your attention is directed to the “terms of use” section on ADB’s website. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic 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. 3 EXECUTIVE SUMMARY The Tenuun Gerel Construction LLC (TGC) of Mongolia is part of an international private sector consortium which will develop the Sermsang Khushig Khundii Solar Power Project (the Project) 40 km southeast of Ulaanbaatar (UB). The Project which is located on open grassland steppe will consist of the following three main components: (i) a new 48ha, 15MW PV solar power plant of comprised of approximately 51,000 PV solar panels; (ii) a new 13.5 km 110kV transmission line; and (iii) an existing substation expansion to accommodate the new transmission line. The 110kV transmission line will transfer electrical power from the solar power plant to the existing substation located at the new international airport of UB. The new solar power plant will provide clean, much needed electrical power to the Central Energy System (CES) of Mongolia with zero greenhouse gas emissions pursuant to the 2007 National Renewable Energy Law. The TGC is the Project owner and part of the private sector consortium comprised of TGC, Sharp Energy Solutions Corporation (Sharp), and Sermsang Power Corporation Public Company, Ltd. (SSP). The consortium will construct and operate the Project. Assessment Context The Project is category B for environment and category C for involuntary resettlement and indigenous peoples pursuant to ADB 2009 Safeguard Policy Statement1. A category B project for environment will have potential adverse impacts that are less adverse than those of a category A project, are site- specific, largely reversible, and can be mitigated with an environmental and social management plan (ESMP). A category C project for involuntary resettlement has no involuntary resettlement impacts including no physical or economic displacement. A category C project for indigenous peoples will not have any impact on indigenous peoples. Pursuant to the Mongolian Law on Environmental Impact Assessment (2012), a General Environmental Impact Assessment (GEIA) of the Project was conducted by the Ministry of Environment and Tourism (MET). The GEIA identified environmental and social management conditions for the Project with which TGC will comply. Benefits of the Project The electric power provided by the Project will contribute to the economic development that the government has planned for the new international airport development zone south of Ulaanbaatar. The project will also provide training and employment opportunities for local community in renewal energy development and operation as requested by the governor of the Sergelen soum. Over the 25- year operating period the 15 MW solar power plant will offset an estimated 30,000 tons of greenhouse gas emissions, and result in a reduction of 23,420 tons of coal consumption and 146,500 tons of water consumption (Feasibility Report 2016). 1 ADB. Safeguard Categories. 4 Potential Impacts The environmental and social impacts of the three components of the Project are minor and temporary. No resettlement or private land or asset acquisition will occur, and no ethnic minorities are affected by the Project. The environmental impacts are restricted to temporary dust and noise, and disturbance to the grassland steppe from the construction phase which can be prevented or mitigated. No rare or endangered wildlife, critical habitat, or protected areas will be affected by the Project. At the time of writing the construction of the 15 MW PV solar power plant was underway. Solar panels were being installed and the control building, inverter enclosures, and plant transformer were under construction on the 48ha site. A 2.0 meter barb wire perimeter fence surrounds the entire PV solar plant site to protect herder’s livestock, and the general public. No significant environmental or social impacts were observed during the site visit to the PV solar power plant which is under construction. The only perturbation was the noise generated from the mobile jackhammers as the machines installed the vertical foundation piles for the mounting structures of the solar panels. The construction workers’ camp was notably clean and well organized. The construction of the new 13.5 km, 110kV transmission line and the expansion of the substation at the new international airport station have not begun which will follow construction of the solar power plant. Potential impacts of the operation of phase of the Project consist of pollution from process and domestic waste produced at the PV solar power plant, and along the alignment of the transmission line from tower maintenance. Worker accidents or injury could occur as a result of the operations and maintenance of the plant and transmission including injury from lightning strikes. Potential injury of the public could also occur if unauthorized access to the facilities occurred. An environmental and social management plan (ESMP) has been developed for the Project pursuant to the SPS (2009) which focuses on the remaining construction activities of the PV solar power plant, the imminent construction phase of the 110kV transmission line and airport substation expansion, and the operation of the completed Project. The ESMP prescribes impact mitigation and monitoring requirements for remaining construction, and future operation of the three completed components of the Project. The ESMP supplements and consolidates the Health, Safety and Environmental (HSE) management plan and Environment Management System (EMS) for the remaining construction of the PV solar power plant including additional impact mitigation measures that were identified during the environmental and social (E&S) due diligence site visit of the plant under construction. The supplemented HSE management plan and EMS for the remaining construction of solar power plant will be tailored to the imminent construction of the 110kV transmission line and airport substation expansion. The ESMP identifies environment and social safeguard measures for the ESMS templates (e.g., HSE, EMS & SOPs) that will be provided by Sharp and adopted by TGC for the future operation of all three completed Project components. The ESMP also supplements safeguard requirements the non-compliance EMP that TGC prepared to secure construction licensing for the solar power plant. Risks of Climate Change A climate change risk assessment (CRA) of the Project was conducted. The initial climate risk screening of the REA and subsequent screening by AWARE software identified changes to permafrost as a high risk of climate change followed by snow & ice loading, and rainfall/flooding. Upon further investigation it was determined that the risk of the destabilizing impact of permafrost reduction 5 from climate change on the foundations of the transmission towers is zero because the Project site is not located on permafrost. AWARE identified the project site has a high exposure to flood events. The review of the flood risk assessment conducted for the project suggested that the project area is not considered to be at high risk to large area flooding. There is potential risk from periodic flash flood events and ongoing erosion of bank of the stormwater gully that is adjacent to the western boundary of the PV solar power plant Flood protection canals were constructed in the facility as a proactive measure against potential flash flood events. Though these risks are deemed to be marginal, rainfed water run-off and erosion in the dried gully should be monitored during the project operation for necessary structural measures, such as building armor stone wall, whenever needed. The projected increases in winter temperatures and precipitation from climate change could create snow and ice load problems for the Project. Heavy