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Environmental & Social Review Summary
This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Heavy Fuel Oil - Thermal Power Generation
THIKA POWER LIMITED
Date ESRS disclosed
September 30, 2011
Invested: October 25, 2012
Signed: May 24, 2012
Approved: December 15, 2011
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
IFC’s review of the project included:
A site visit including discussions with representatives from the Company, KPLC, IFC’s Industry Specialist, the Independent Engineer appointed by the various lenders whose Terms of Reference included a review of environmental and social issues
Discussions with the environmental and social specialists from the other lenders including the World Bank, African Development Bank and Absa
A review of the two separate environmental and social assessments undertaken for the project and the report compiled by the Independent Engineer
The project involves the design, construction and operation of an 87 megawatt (“MW”) heavy fuel oil power plant (‘the project”) located 5 km from the town Thika which is some 38 km north-east of Nairobi, the capital city of Kenya. Electricity generated by the project will be supplied to the Kenya Power and Lighting Company (“KPLC”), the national transmission and distribution company. The project is one of 3 Independent Power Projects (“IPPs”) for which KPLC sought Expressions of Interests in June 2009 and have been awarded based on a completive bidding process. The IPPs are expected to generate 60-80 MW each using heavy fuel oils (“HFO”) as the fuel source.
The project is being developed by Thika Power (hereafter referred to the “Company “or “Thika Power”). Thika Power is a special purposes company registered in Kenya and wholly owned by Melec PowerGen (BVI), which is part of the Matelec Group of Companies (Lebanon). Construction commenced in June 2011 and is currently limited to earthworks. Commissioning of the project is expected in early 2013.
The project site was acquired by KPLC and will be leased to Thika Power. Adjacent to the site which occupies some 4 ha, KPLC are constructing a 132 kV substation which is similarly some 4 ha in extent. The project will consist of a simple cycle power block with five engine powered generator sets, and one steam turbine. The engines will have a combined generation capacity of 80 MW, while the waste heat from the exhaust gases emitted from the engine-generator sets will be recovered to generate steam for the turbine. The latter will improve the project’s efficiency by generating an additional 7 MW. All electricity generated by the project will be fed into the adjacent KPLC substation. The national Energy Regulator has approved a Power Purchasing Agreement (“PPA”) between Thika Power and KPLC which will come into effect on the first day of operations and extend for a period of 20 years.
Identified applicable performance standards
While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:
PS1: Social and Environmental Assessment and Management Systems
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health Safety and Security
The site was acquired on a willing buyer, willing seller basis by KPLC on 23 August 2010 and was under cultivation as part of an adjacent coffee farm. Thus neither PS 5: Land Acquisition and Involuntary Resettlement or PS: 6 Biodiverstiy Conservation and Sustainable Natural Resource Management apply. There are no Indigenous People in Kenya, thus PS 7: Indigenous Peoples is not applicable. The land had previously been graded and cultivated and during consultation undertaken during the environmental assessments, no cultural heritage issues were identified. Thus PS 8: Cultural Heritage is not applicable.
Environmental and social categorization and rationale
The Project is one component of a larger World Bank lending program to KPLC that will support the establishment of the three IPPs. The World Bank has categorized these IPPs collectively as Category “A” projects. The IFC-supported project related to Thika Power will have limited environmental and social impacts and can be managed via the existing project design, or via readily available mitigation measures as defined in the management plans to be applied to the project. However, despite the limited impacts, the Project has been categorized as “A” to maintain consistency with the World Bank’s categorization.
Key environmental and social issues and mitigation
Description of key Environmental and Social Issues and Mitigation:
The key environmental and social issues relate to air quality, noise, occupational health and safety, community health and safety, traffic management, hazardous material and waste management, and access to water during operations. The Company has presented information on its planned policies and practices that will address environmental and social risks and impacts to ensure that the proposed project will, upon implementation of specific additional agreed measures, comply with host country laws and regulations and IFC’s Performance Standards on Social and Environment Sustainability. The findings of IFC’s review and conclusions are summarized in the paragraphs below. Additional actions to be undertaken by the Company are listed in the attached supplemental Environmental and Social Action Plan (“ESAP”), which is complementary to the Environmental and Social Management Plan (“ESMP”) compiled as part of the environmental and social assessments undertaken for the project; implementation of the ESAP will be a condition of IFC’s investment.
PS1: Environmental, Health, and Safety (EHS) Management and Organization
The national Environmental Management and Coordination Act of 1999 (“EMCA”) defines specific activities which require an Environmental Impact Assessment (“EIA”) and includes the activity to be undertaken by Thika Power. The specific approach to EIA’s is defined in the Environmental (Impact Assessment and Audit) Regulations of 2003 and the National Environmental Management Authority (“NEMA”) is the relevant authority responsible for implementation of EMCA and the associated Regulations.
Thika Power commissioned an EIA by a local consultant which included extensive consultation with stakeholders, including local communities, and was completed in May 2011. The EIA defines various potential environmental and social impacts during the project’s construction, operational and decommissioning phases, and associated mitigation measures. On the basis of the EIA, NEMA approved the project and issued the Company with an EIA license on 27 July 2011 that contains various conditions of approval that apply to the respective project phases.
In addition to the local EIA, the Company also commissioned an Environmental and Social Impact Assessment (“ESIA”) by an international consulting company to ensure compliance with the lenders environmental and social requirements. The ESIA was undertaken in parallel with the local EIA where possible to limit the potential for confusion amongst stakeholders and local communities and was completed in August 2011. As with the local EIA, the focus is also on the project’s construction, operational and decommissioning phases. Unless otherwise referenced, the review of potential environmental and social issues and impacts as discussed below is based on the findings of the ESIA with the focus on construction and operations.
The substation adjacent to Thika will link into adjacent transmission lines being constructed as part of a regional distribution project initiated by KPLC. However, as defined in the ESIA, the latter projects are not considered as associated activities as they are not being developed or controlled by Thika Power, and their viability does not depend on the project. The substation and attendant transmission lines are infrastructure that was planned and are being implemented irrespective of whether the project was implemented or not. However, KPLC have undertaken environmental and social assessments for the substation and transmission lines referred to and received approval from NEMA.
KPLC have obtained a “Change of User Approval” for re-designation of the site from “agricultural” use to electrical “substation” by the County Council of Thika. This approval was subsequently amended to include “power station” as a permitted land use. A schedule of all the requisite permits and licenses has been defined by the lenders Independent Engineer and the Company will be required to demonstrate to IFC compliance thereto.
The ESIA includes an Environmental and Social Management Plan (“ESMP”) to be applied by the Company during the construction and operational phases. The ESMP defines the organizational arrangements for implementation of the plan which includes the requirement for an Environmental Manager during the construction phase and establishment of an “ESMP Unit” during the operational phase. Specific plans included in the ESMP relate to; i) construction management; ii) traffic control; iii) construction spoil and waste management; iv) emergency response; v) occupational health and safety; vi) worker management; vii) stakeholder engagement; viii) social investment and; ix) monitoring. As applicable, Thika Power is required to update the ESMP for the construction and operational phases and demonstrate compliance thereto.
The Company has appointed a joint venture between MPG Services S.A.L. and MAN Diesel & Turbo SE (“the Contractor”), the latter being the engine suppliers, to implement the project on an engineering, procurement, construction, commissioning and startup basis. As defined in the contract between Thika Power and the Contractor, the project is to be designed so as to comply with relevant international codes and standards, including the IFC’s environmental and social requirements, the World Bank Group Environmental, Health and Safety (“EHS”) EHS Guidelines and applicable guidelines of the African Development Bank. Both companies have extensive experience in power projects and Thika Power has an experienced project management team in-country to oversee the construction phase and ensure compliance with the contractual conditions.
Effective implementation of the ESMP during construction will require appointed of an Environmental Manager by Thika Power. The Manger will also be responsible for ongoing community liaison and implementation of the OHS plan during the construction phase.
For operations, Thika Power will have a dedicated EMSP Unit / EHS Department staffed with appropriately qualified individuals. In addition, the Company will develop and implement and an environmental management system (“EMS”) aligned with the requirements of this Performance Standard. Inclusive within this system will be training and monitoring requirements. The outcome of the monitoring activities will be reporting internally and annually to IFC. These requirements are defined in the ESAP.
PS 2: Labor and Working Conditions
There will be a total of approximately 500 construction workers on-site over the period of construction with a maximum of 350 workers on site at any one time; the remaining 150 will be specialist skills used for short periods of time. Work is only undertaken during day time and between Monday-Saturday and there will be no accommodation on-site.
As defined in the Worker Management Plan, the Contractor is required to develop and implement a plan for the management of workers that complies with Kenyan law and this Performance Standard. The guiding principles as defined in the Plan include, adherence to international standards, a commitment to transparency and non-discrimination and equality, optimization of local content and a commitment to health and safety. The OHS plan within the ESMP provides the overarching framework for OHS management during construction. Submission of documentation confirming compliance with the Worker Management Plan and OHS Plan is a requirement of the ESAP.
During operations 40-50 workers will be employed on a 3 shift basis and there will be no on-site accommodation. Prior to project commissioning, Thika Power will develop and implement a Human Resources Policy and related procedures and practices agreed with IFC to ensure compliance with this Performance Standard. This will include confirmation of workers terms of employment including wages and benefits, hours of work and leave availability under varying circumstances. Further requirements also include a policy regarding non-discrimination and equal opportunity, a procedure for retrenchment and a grievance mechanism.
Kenya is a signatory to some 49 conventions of the International Labor Organization including that related to freedom of association and collective bargaining, non-discrimination and minimum age. Thus compliance with national labor legislation will to a large extent ensure compliance with the requirements of this Performance Standard.
Kenya has well developed OHS legislation and as per this, Thika Power will be required to convene an OHS committee comprising of management and union members / workers as applicable. Aside from compliance with national legislation, the Company will implement an OHS system based on recognized industry practices for similar operations. This will include clearly defined procedures and work instructions to manage all aspects of work on site, training and monitoring programs and the requirements for personal protective equipment associated with the various tasks performed on-site.
PS 3: Pollution Prevention and Abatement
Potential pollution issues as identified during the construction phase are those typically associated with construction sites and include, amongst others, the discharge of contaminated (high silt loads / oil and grease) stormwater and diesel and oil spills. In addition, there is the potential for nuisance impacts (e.g., noise and dust) on surrounding land users. These impacts though are readily mitigated through implementation of the applicable plans in the ESMP. Thika Power will appoint an Environmental Manager to monitor compliance with the ESMP.
During construction water will be supplied to the project by tanker, and during operations via borehole. Operational requirements for stormwater include that related to the steam turbine, the fire fighting system, potable water and sanitation, cleaning and equipment washing and cooling. Based on the findings of the geohydrological study there will be no significant impacts on the ground water resources and the aquifer has sufficient capacity for the project’s requirements.
While the site’s stormwater management plan is still to be defined, the objective will be to separate contaminated and clean stormwater. Contaminated stormwater such as that from the bunded storage areas will discharge via a waste water treatment plant. Water from the oil/water separators, various sumps and laboratories will also discharge via the treatment plant. Monitoring of waste water will be undertaken prior to discharge from the plant and treatment will continue via recirculation until the applicable Kenyan and World Bank Group EHS Guidelines are have been complied with. During construction, stormwater will be directed away from the site via diversion a channels, though mitigation measures will be further defined in the ESMP. In the operational phase, clean stormwater and waste water will be discharged to ground on an unused portion of the site via a soakaway or reticulated drainage network.
During construction chemical toilets will be used and emptied by the supplier. During operations, sewerage will be disposed of via a septic tank which will be emptied by a contractor approved by NEMA.
The project will have a 65 m stack height which has been increased from the original design specification of 35 m to address potential air quality impacts. Given the project will use HFO as a fuel source, the focus of the air quality assessment was on particulate matter (“PM”), sulfur dioxide (SO2), oxides of Nitrogen (NOx) and carbon monoxide. Flue gas emission rates via the stack are below that defined in the World Bank Group EHS Guidelines for SO2,, equivalent to that defined for PM, and 8% above the value defined for NOx. NOx is converted to nitrogen oxide (NO2) in the atmosphere and thus the impact of this pollutant on ambient air quality is considered relative to the level of NO2 in the atmosphere.
The impact of the flue gas emissions on ambient air quality was assessed using the USEPA AERMOD model. Specific assumptions applied in the modeling were that the project operates with a sulfur content of 2% and at 100% capacity on a continuous basis. These are considered conservative assumptions in that as defined in the PPA, a 2% sulfur content in the fuel is the maximum allowable amount and the project will operate at times with a lower content. In addition, the project will typically operate at 85% capacity to supply the agreed quantity of electricity to KPLC.
Kenya has a draft ambient air quality standard, though it is not currently legally binding. Nevertheless, air quality impacts were assessed against this standard, as well as the European Union ambient air quality standards. This evaluation against the Kenyan and EU standards for SO2, PM and NO2 indicates the quantity of these pollutants will be well within the allowable levels for all the averaging periods (i.e., 1 hour, 24 hour and annual ambient averaging periods). Thus, the impact on air quality is considered insignificant in the ESIA. For SO2 the impact is 29- 46% of the maximum concentration values defined by the standards, whilst for PM it is 1.2- 2.5% of the maximum values. Although NOx emissions are 8% above the stack emission limits suggested by the World Bank Group EHS Guidelines for Thermal Power, the resulting ambient NOx concentrations are 21-62% of the maximum values defined by the Kenyan and EU ambient air quality standards.
Meteorological data was used to assess the potential impact on air quality, namely dust emissions, as a result of construction activities. Impacts on the closest receptors are considered unlikely and dust emissions can be readily mitigated through effective implementation of the measures defined in the ESMP. Such measures include temporary protection of un-vegetated areas, transportation of materials in covered trucks and dampening of access roads with a water tanker.
The project will have a continuous emission monitoring system to monitor stack emissions and the EMS for the operational phase will include a monitoring plan in compliance with the World Bank Group EHS Guidelines.
Traffic generated during construction and operations will result in limited additional noise given access is via the heavily trafficked Nairobi-Thika highway. Noise generated by site activities during construction will exceed the Kenyan standard for construction sites at two of the eight sensitive receptors. However, at six of the sensitive receptors the values exceed the World Bank Group EHS guidelines value of 55 dBA. With mitigation measures as defined in the ESMP though, the noise can be effectively reduced. Such measures include the erection of noise barriers and ensuring vehicles do not operate unnecessarily. Construction activities are temporary and no construction will occur during the day and the impacts are defined as negligible – minor in the ESIA.
Information on noise during operations was sourced from the equipment suppliers and Thika Power. Modeling indicates there are no exceedances above the daytime guideline value as defined in the World Bank Group EHS Guidelines, while during the evening there are exceedances at 4 receptors above the guideline value of 45 dBA. During the day there are minor exceedances above the standard of 55 dBA at 3 receptors relative to the Kenyan standard. During the night time there are exceedances at all receptors when compared with the Kenyan national standard of 35 dBA. However, the predicted noise levels are based on preliminary noise data and Thika Power has committed to compliance with the World Bank Group EHS Guidelines, or to ensure the values are no higher than the baseline values currently defined. This will be verified via a regular noise monitoring program.
The ESIA provides a detailed overview of wastes to be generated during the construction and operational phases, including potential options for reuse and recycling and ultimate disposal. The specific approach to the management of waste, including the storage of waste will be defined in the project’s ESMP. A key focus thereof will be the on-site storage and disposal of hazardous waste such as sludge from the oil water separators, used oil filters and used oils.
The fuel storage requirements for the site include three, 4,700 m3 HFO storage tanks and a 560 m3 distillate fuel oil tank which is used a secondary fuel for maintenance and auxiliary services. These storage tanks will be co-located in a bunded tank farm and constructed in accordance with the American Petroleum Institute Standard. Additional storage tanks on-site will include a 560m3 HFO service tank, 75 m3 sludge tank, and a 75 m3 and 50 m3 lubricant oil storage tank. These tanks will also be located in bunded areas and all bunds will have sufficient capacity to contain 110% capacity of the material being stored within the bund. Operating at 85% capacity and using an average of 470 m3 per day of HFO, the project is predicted to emit approximately 445,000 tons of CO2 per year.PS 4: Community Health, Safety and Security
The ESMP has an emphasis on minimizing the health, safety and security impacts to surrounding communities from the construction and operation phases. Aside from ambient air quality and noise, a key focus is on traffic management and the ESIA includes a traffic assessment. The average daily number of vehicles accessing the site during construction is estimated at 53 per day, while during the operational phase it is 35. During the construction phase it is likely that most of this traffic will comprise heavy vehicles, particularly during the initial site clearance and excavation. During the operational phase the number of heavy vehicles delivering fuel will be a maximum of 15 per day. Relative to the adjacent heavily trafficked Nairobi-Thika highway, this is estimated to result in an increased traffic loading of less than 0.4% during construction, while during operations it is an increase of 0.2%. These increases are considered small and will add little to the existing traffic volumes on the adjacent highway. To facilitate site access, ingress and egress lanes will be constructed from the highway to the site access road.
An assessment of routing options has also been undertaken for vehicles travelling from Mombasa such as those delivering equipment during construction, and fuel during operations. All the routing options identified avoid access via Nairobi.
The Company will update and implement the traffic management plan included in the ESMP to mitigate potential traffic and related safety impacts. Further, there will be a clearly defined approach to manage the potential impact of HIV/AIDS as result of the project inclusive of HIV/AIDS training for workers during the construction and operational phases, drivers and the local community. The community grievance mechanism as defined in the Stakeholder Management Plan will also be implemented.
The project is being designed by personnel that have wide experience in similar operations and an assessment of safety risks has been undertaken during the design. Building on the emergency response plan included in the ESMP, Thika Power will develop an emergency response plan for the project’s construction and operational phases.
The Company will retain unarmed security contractors to protect its personnel and equipment.
Client's community engagement
The ESIA includes a detailed socio-economic assessment and a Stakeholder Engagement Plan. In the local EIA, during September-November 2010 consultation was undertaken with the Witiethie community who are situated closest to the site, teachers at a nearby school and the owner of the coffee farm. In addition, Government agencies were also consulted including the provisional administration, Thika County Council, Thika Town Council and the District Agricultural Office. A public meeting was also held in Witiethie on 17 September 2010. The ESIA also included consultation with various District representatives, local schools in the area, community based organizations and the Witiethie community during November-December 2010 and March 2011. In addition, a public meeting was held with the Witiethie community on 10 March 2011. Key issues identified by stakeholders included local employment opportunities, improved security as a result of increased night lighting in the area, a reduction in power outages, support to the local economy and various concerns related to potential impacts on air quality, noise, water availability and traffic congestion. Details of all the issues raised and interactions with the various stakeholders are included in the local EIA and ESIA. The extent of the information provided about the project was considered to be adequate and the stakeholder comments were considered to be free in their expression. While noting the issues identified which have been addressed in the respective assessments undertaken, there were no specific objections to the project.
During construction the Environmental Manager will undertake community liaison and build on the existing Stakeholder Engagement Plan. This will include a communication strategy to keep the community informed of the risks and impacts from the project and the mitigation measures in place and compliance with the ESMP. In addition, the Manager will be responsible for implementing the grievance mechanism as defined in the ESMP.
Local access of project documentation
Thika Power disclosed the local EIA in accordance with the Kenyan requirements and the document was made available on the NEMA website on 12 June 2011. Documentation including background information updates were also made available during the ESIA. The EIA and ESIA are made available with this document and for further information on the project Thika Power should be contacted as per the details below.
Purshotum House, Chiromo Lane
Tel: +254 711737421
Fax: +254 203742035 / +254 203749919
IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.
In addition, Affected Communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC. The CAO is mandated to address complaints from people affected by IFC-supported business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of IFC.
Independent of IFC management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of IFC’s environmental and social performance through its compliance arm.
Complaints may relate to any aspect of IFC-supported business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC-financed business activity. Complaints can be submitted to the CAO in writing to the address below:
Compliance Advisor Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
The CAO receives and addresses complaints in accordance with the criteria set out in its Operational Guidelines which are available at: www.cao-ombudsman.org
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