, I Document of The World Bank Report No: 30427-PE PROJECT APPRAISAL DOCUMENT ON A PROPOSED CARBON FINANCE OPERATION IN THE AMOUNT OF EUROS 1.03 MILLION TO SINERSA FOR THE PERU - POECHOS HYDROPOWER PROJECT November 21, 2004 Bolivia, Ecuador, Peru and Venezuela Country Management Unit Finance, Private Sector, and Infrastructure Department Latin America and Caribbean Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
, I
Document of
The World Bank
Report No: 30427-PE
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CARBON FINANCE OPERATION
IN THE AMOUNT OF EUROS 1.03 MILLION
TO SINERSA
FOR THE
PERU - POECHOS HYDROPOWER PROJECT
November 21, 2004
Bolivia, Ecuador, Peru and Venezuela Country Management UnitFinance, Private Sector, and Infrastructure DepartmentLatin America and Caribbean Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective)
Currency Unit = EUROSI EURO = US$1.27
US$1 = 0.78 EUROS
FISCAL YEARJuly 1st -- June 30th
ABBREVIATIONS AND ACRONYMSCAS: Country Assistance StrategyCER: Certified Emission ReductionCFU: Carbon Finance UnitCII: Corporacion interamericana de inversionEA: Environrnental AssessmentEB: Executive BoardEMP: Environmental Management PlanENVCF: Carbon FinanceER: Emission ReductionERPA: Emission Reduction Purchase AgreementGEF: Global Environmental FacilityGHG: Greenhouse Gas EmissionsHDI: Human Development IndicatorIDB: Interamerican Development BankKP: Kyoto ProtocolLRMC: Long term marginal costNCDMF: Netherlands Clean Development FacilityPPA: Power Purchase AgreementSEIN: National Interconnected electrical systemTC02e: Tons of C02 equivalents
Vice President: David de FerrantiCountry Manager/Director: Marcelo Giugale
Sector Manager/Director: Sue GoldmarkTask Team Leader/Task Manager: Francisco Femandez-Asin
PERUPERU - POECHOS HYDROPOWER PROJECT
CONTENTS
A. Project Development Objective Page
1. Project development objective 22. Key performance indicators 2
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 3
C. Project Description Summary
1. Project components2. Key policy and institutional reforms supported by the project3. Benefits and target population4. Institutional and implementation arrangements
D. Project Rationale
1. Project alternatives considered and reasons for rejection2. Major related projects financed by the Bank and/or other development agencies3. Lessons learned and reflected in the project design4. Indications of borrower and recipient commitment and ownership5. Value added of Bank and Global support in this project
The project development objective is to provide a new venue for investment in projects in thePeruvian power sector contributing to global greenhouse gas Certified Emission Reductions(CERs); initially through development of a privately developed small hydropower project totaling15.4 MW of capacity, and additional small hydro and other projects to be determined.
2. Key performance indicators: (see Annex 1)
The primary performance indicator will be the creation and purchase of Carbon EmissionsReductions for the project measured in tons of carbon dioxide equivalent (TCO2e).Implicit within these ERs is the ongoing production of electricity for sale to other customers that,with the ER purchase by the Netherlands Clean Development Mechanism Facility (NCDMF), oneof the funds managed by CFU, increases the stream of project revenues under the financing plan.Other indicators will include broadened private experience in the development, operation, andmaintenance of hydropower electricity generation, increased experience in accommodating smallerdistributed sources that offer potential energy, capacity, and diversification benefit, and themeasuring of the environmental and social management plan.
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: Date of latest CAS discussion:
The project is well correlated with key CAS priorities in increasing competitiveness of the country(including access to basic social services), and builds on institutional work in the area ofprivatization of the utility sector. In the environmental area, the project augments global and localenvironmental benefits described in the Peru CAS under the GEF portfolio.
la. Global Operational strategy/Program objective addressed by the project:
Based on World Bank Operational Policy 4.37 and taking into account further guidance from the
World Bank Latin America Region, Poechos Hydropower Project meets all of the followingcriteria, established by the World Bank Latin American Region: (i) a newly constructed dam islower than 10 meters, (ii) reservoir capacity is less than 1 million cubic meters, (iii) spillwaycapacity is less than 2000 cubic meters, and (iv) crest length is smaller than 500 meters.
Under this arrangement, in addition to the NCDMF project selection and portfolio criteriaspecified in the NCDMF Instrument, the NCDMF will give preference to projects where:
* Required licenses, concessions, permits, etc, have been obtained;* Letter of Agreement provided to the NCDMF by National CDM Authority;* Debt and/or equity finance for the underlying project will be in place such that financialclosure can be attained by the time the NCDMF ERPA is negotiated;* An Environmental Impact Assessment (EIA) has been prepared and approved by the local
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environmental authority and the World Bank.
2. Main sector issues and Government strategy:
In Peru key areas of government focus include competitiveness of the country, equity and socialjustice, and development of institutions to support an efficient, transparent, and decentralizedstate. In terms of infrastructure, increased private sector engagement and development is a keypriority for the government in a range of infrastructure areas, including electricity generation anddistribution, in selected water supply and sanitation systems, and in the highway sector.Government strategy is to improve the efficiency of management of these services, and to attractprivate sector investment to expand services. These efforts build on an already active program ofprivatization completed between 1992 and 2002, which covered mining, hydrocarbons, airports,one seaport, telecommunications, and energy.
Since the mid-1980's, Peru has undertaken a gradual process of power sector reform, includingvertical separation of generation, transmission, and distribution, and thus far has transferredapproximately 65% of generation capacity to the private sector and has established clearconcession arrangements for private power, supply contracting, and spot market transactions.Hydropower has historically dominated in Peru; while installed capacity is evenly balancedbetween hydropower and thermal sources, actual generation in 2002 was over 86% hydro-based.In the future, development of gas deposits in the Camisea region is expected to significantlycontribute to the generation mix in the future.
From an environmental perspective, Peru signed and ratified the Kyoto Protocol (KP) in an effortto reduce its Greenhouse Gas (GHGs) emissions. It has recently strengthen its capacity in climatechange issues and is an active participant in the carbon market. The present project will be thefirst Carbon transaction for Peru.
Please see Technical Annex 16 for a full description of the Energy Sector and its Institutionalarrangements in Peru.
3. Sector issues to be addressed by the project and strategic choices:
The project will assist Peru in conquering the following objectives:1) stimulating and accelerating the commercialization of renewable energy applications andmarkets at the grid-connected level and under private ownership and operation2) catalyzing local and foreign investment in energy generation to respond to increasingenergy demand and energy diversification3) reducing GHG and other emissions both in Peru and globally4) increasing the competitivity of Peru in the international carbon market
C. Project Description Summary
1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):
The project will support the following components:
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a) Poechos, entails the addition of hydropower generation of 15.4 MW to the existing 48m-highPoechos Dam. Total project costs are estimated at US$ 16.43 million (including VAT of 18%).Due to be commissioned in March 2004, the main civil works to be built by the project are theintake and forced pipes, the machine house, the discharge canal, 100 m of access roads, and 38km of transmission lines. The project is expected to generate about 60 GWh of electrical energyper year, which will be sold to Electronoroeste, S.A. (i.e. the concessionary for energydistribution in north-western Peru), under a Power Purchase Agreement contract (PPA). O&Mcosts are estimated at $225.1 thousand US$ per year.
b) Carbon Purchases. NCDMF will purchase an average of 33,300 tCO2 for each of the first 9years of project operation for a total 300,000 TCO2e purchased at EUROS 4.1 (USD 4.92) perton, with total CER purchases of EUROS 1,033.200,00 (US$1,239,840). This total includesrecovery of project preparation expenses such as those related to baseline establishment,validation, monitoring, verification and certification. The purchases by NCDMF represent 100%of the potential CERs produced in an average year, until year 2012. Some more CERs may beoptioned to purchase beyond that date.
For a more detailed description of the components see Annex 2.
Indicative Bank % of PCF % ofComponent Costs % of financing Bank financing PCF
2. Key policy and institutional reforms supported by the project:
N.A.
3. Benefits and target population:
Target Population: The Poechos project will contribute to the development of one of the mostimpoverished areas of Peru through a reliable supply of clean electrical energy, which will sustainproductive activities of locals that are currently inhibited by the lack of energy. The district ofLancones will be the direct beneficiary and welcomes the project. This district consists of morethan 14 villages whose communities show poor education and labour levels as reflected in thefollowing tables:
Benefits:The direct beneficial effects resulting from the Poechos project include:
* Supply of a clean source of energy;
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* Training to locals on the adequate uses of electricity;. Tax collections in the project area will boost the availability of funds for the developmentof local communities at an estimated annual average of 500,000 USD;* Creation of more than 200 jobs during the construction phase, employing exclusivelylocals impacting positively more than 200 families;* Contribution to the domestic capacity building efforts in environmentally soundtechnologies (EST) promoting the participation of local companies in the projecactivity including the manufacturing, for the first time in Peru, of Kaplan turbines locally.* Creation of around 30 perrnanent positions for the operation of the hydroelectric planttransferring know how in operation, maintenance and control of hydroelectric equipmentand systems. These positions will utilize locally hired staff who will be trained during theconstruction phase;* Development of the poorest zones of the country, which using electricity will have theopportunity to start productive activities. Initially these will be promoted through themaximum use of local supplies;* First project in the Ecuadorian - Peruvian border, which will serve as a good referenceprojects for future initiatives for the sustainable development of this area with lowhuman development indexes (HDI);* Mitigate the migration of peasants to the coastal cities of Peru;* SINERSA has expressed its commitment to education and local technical training;* Improvement and reduction of operating costs of the Poechos dam including theelimination of diesel based generators currently supplying electricity to the dam;* Direct investment in the Project's area of around 5 Million USD; and* Investment in Peru of nearly 16.5 Million USD
For a more detailed description of the target population and the benefits see summary analysis.
4. Institutional and implementation arrangements:
Executing agency: The project will be executed by SINERSA as project sponsor. Country'sinvolvement is secured by a Letter of Autorization issued by CONAM (Consejo Nacional delAmbiente), which is the government official Designated National Authority (DNA). Other actorsare: the Executive Board (EB) of CDM (the International Regulator), and the governmentagencies in charged of permits and concessions (MEM, OSINERG, COES) as described in annex16.
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Institutional Arrangements for CF Projects
(Int'l Regulator)
Fr mP Ratification a o CF pgistration p
Manual inthproectilMEM
= - N C D ?l F / ~~~~~~~OSINERG
b enter odE w b pe oncess ons aw Authorization b t C and Pevnits c
\ SINERSA /t(Paec roject
Sponsor)
For more about institutional arrangements of CF projects please see Annex 16 CFU OperatingManual in the project files.
Payment and Flow of Funds: At the time of the signing of each ERPA, an anticipated schedule
of payments based on the delivery of ERs will be prepared. The project sponsors shall make
requests fth qant o e forld Bank Carbon Funds under the ERPA. The first payment fromthe Carbon Funds to each eligible renewable energy project will be agreed to in the ERPA and
will occur upon declaration by the Carbon Funds that relevant conditions have been met.Thereafter, the Carbon Funds will only pay each eligible project upon successful transfer of ERs.The involvement of the World Bank Carbon Finance Unit will expire after ERs up to the total
contract amount of tC02e have been delivered. In the event that the project sponsor fails to
deliver the quantity of ERs for any given calendar year as set forth in the ERPA, the project
sponsor will be required to make-up the shortfall over the course of the following calendar year or
as other period agreed with NCDMF. Apart from the CFU's support, the project does not
include any World Bank or IFC financing. Payments are made directly to the sponsors' bankaccount from ENVCF's VROM Trust Fund. The procedures are monitored and authorized byWB's Trust Fund Unit under OPCS's supervision. For more information, please see Annex 15 inthe project files.
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Direct Financial and Reporting Flows
FundParticipatsp A Goverments
Reporting Payments
& ~ ERs>ss~
SINE RSA 1L±U
D. Project Rationale
1. Project alternatives considered and reasons for rejection:
The project was selected because of the level of commitment and preparation of the private sectorsponsors, the relatively low level of technical and financial risk associated with adding smallhydropower generation to pre-existing dam facilities, and the existence of a practical privatepower regulatory framework in Peru. The project will replace additional generation capacity thatwould otherwise be procured by the Peruvian electrical sector from conventional generationsources. The project team considered a portafolio of 10 other run-of-river hydro projects.Although future purchases of carbon credits are not ruled out on those projects, Poechos was thefirst one getting private sector financing as a pre-requisite for CFU's involvement.
Repeater Projects: a fair amount of hydropower projects, and CF projects in general, isexpected to develop for the next few years, in Peru. A Carbon Finance-Adapted Repeater ProjectEligibility Procedure is proposed in Annex 17. Some of the hydropower project candidatesalready analyzed by the task tearn are: Tunel Graton (5 Mw), Cerro Mulato (8 Mw), Moche I (12Mw), Moche II (8 Mw), Tanguche 11 (20 Mw), Tanguche III (30 Mw), El Sauce (9 Mw),Poechos 11 (12 Mw), Corona (26 Mw), Tarucani (49 Mw), Quitaracsa (115 Mw), Santa Rita (200Mw), San Gaban (170 Mw), among others.The simplicity of Carbon Finance projects along with the reduced amounts of funds availablecompared to regular WB lending program projects advice us to streamline approval procedures.
2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).
For a detailed description of the major related projects see Annex 14.
l __________ l |________ I (Bank-financed projects only)Implementation Development
Bank-financed Progress (IP) Objective (DO)
PCF/Electric power and other energy Chile: Chacabuquito S SHydropower project
PCF/Electric Power and other energy PCF Minas Gerais PlantarProject
PCF/Electric Power and other energy Costa Rica Umbrella Project for S SRenewable Energy Resources
PCF/Electric Power and other energy Colombia Jepirachi Carbon Off HS SSet Project
PCF/Electric Power and other energy Colombia Rio Amoya S SEnvironmental Services Project
Other development agencies
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)
3. Lessons learned and reflected in the project design:
The project is the first CDM project in Peru. Nevertheless, it has benefited from the emergingexperience with other CF projects that are being conducted in different Latin American nations(e.g. Jepirachi Carbon Off-set in Colombia, Chacabuquito in Chile, Umbrella Project forRenewable Energy Sources in Costa Rica). Main lessons learned gravitate around ability ofproject developers to get financing, baselining and additionality issues, and the challenges oflaunching a new commodity market. For an explanation on lessons learned and the experience onparticular existing CF projects in Latin America, please see Annex 14.
4. Indications of borrower and recipient commitment and ownership:
N.A.
5. Value added of Bank and Global support in this project:
The KP to the United Nations Framework Convention on Climate Change (UNFCCC), when itenters into force, will commit industrialized countries to reduce their carbon emissions by anaverage of 5.2% below their 1990 levels in the period 2008-2012. The Protocol provides for twoflexibility mechanisms for meeting these obligations - the Clean Development Mechanism (CDM)and Joint Implementation (JI). The CDM enables industrialized countries to meet some of theirobligations through projects generating emission reductions in developing countries.
The Carbon Finance Unit (CFU) of the World Bank was created to demonstrate howmarket-based transactions could mitigate climate change and pioneer emission reduction purchasetransactions, while opening up a significant new source of financing for projects in developingcountries. The Unit supports projects generating high quality Certified Emission Reductions
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(CERs) suitable for registration with the UNFCCC as meeting targets for the KP. The objectiveis to develop project-based experience for this relatively new international commodity throughClean Development Mechanism (CDM) and Joint Implementation (JI) processes detailed underKyoto.
The CFU purchases high quality Emission Reductions (ERs) that could be registered with theUNFCCC for the purposes of the KP. CFU enters into irrevocable Emission Reduction PurchaseAgreement (ERPA) and accompanying Monitoring Protocol (MP) with eligible projects sponsors.Each ERPA will include, inter alia, the quantity, price and other delivery conditions of the ERs,and will define institutional roles and responsibilities for project implementation, as well as themonitoring and verification obligations. The CFU shall only acquire ERs rights for those GHGsdefined in Annex A of the KP. Eligible projects must, at a minimum, demonstrate that theirproject is additional, as defined under the KP, and that the ERs are measurable and verifiablefollowing a protocol acceptable to the rules of the CDM or other UNFCCC bodies as necessary.The ERPAs will define the minimum amount of ERs in metric tons of carbon dioxide equivalentthat the eligible renewable energy projects will deliver to the CFU. Generation and delivery of theERs shall be carried out in accordance to schedule set forth in the project ERPA and becompleted on or prior to a date agreed upon between the CFU and each eligible project.
The overarching objective of the proposed project is to help mitigate global climate change byfacilitating the use of market-based mechanisms sanctioned under the KP through support to cleanenergy projects in Peru. To this end, the project will generate ERs in the Peruvian power sector,where these will be sold to the World Bank's CFU when they are verified and certified.
No World Bank lending is associated with the overall project. The Carbon Funds will purchasecarbon emission reductions as they are created as a by-product of electricity generation, under acontract analogous to a power purchase agreement (further details are included in Section B-I onProject Components and Section C-1 on Implementation).
The World Bank's strategy on Carbon Finance:WB's involvement in carbon finance helps ensure consistency between the individual projects itsupports and international dialogue on climate change, while providing the ability to mobilizeglobal experts with experience in the field, technical support for project preparation, supervisioncapacity, and development of linkages with other sources of expertise and funding. By mobilizingthe private and public sectors on an important new source of project finance, the CFU isdeveloping an important knowledge base and is demonstrating how insights and experience fromboth sectors can be pooled to mobilize additional resources for sustainable development andaddress global environmental concerns. CFU currently manages more than $400M for carbonpurchases in the developing countries or economies in transition on behalf of a number of publicand private corporations from the developed world. More explanation on the WB CF strategy canbe found in Annex 15 in the project files.
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E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (see Annex 4):O Cost benefit NPV=US$ million; ERR = % (see Annex 4)O Cost effectivenessO Incremental Cost* Other (specify)1. Economic Analysis an Additionality
The Emission Reduction estimates are based on the findings of a baseline study, validated byindependent experts. The baseline study also certifies project's 'environmental additionality', asthe KP requires that "reductions in emissions are additional to any that would occur in theabsence of the certified project activity". Both the Baseline Study and the Monitoring Protocolhave been finalized, and are included as Annexes 1 and 2 in the project files.
Summary of Emissions Baseline Analysis: To ensure that the carbon emission reductionspurchased by the NCDMF are recognized under international convention and retain as much oftheir inherent value as possible, a baseline study was commissioned to define (i) the baseline for
the GHG emissions of the Peruvian Electric System which conform the boundary of the Project,and (ii) the estimate of emissions reduction (ER) that is expected to achieve with the Projectimplementation. This report concludes that the boundary of projects under the proposed one isthe National Interconnected Electric System (SEIN) including its expansion. The referenceconfiguration of the SEIN is based on the existing system and the least cost generation expansionplan expected to be used in Peru.
The Peru Sectoral Baseline Study report submits the results of the calculations of the Baseline ofanthropogenic emissions by sources of GHG and the emissions reductions generated by theactivities of a group of hydroelectric projects in Peru that are being evaluated by the NCDMF forthe purchase of Emission Reduction (ER).
The baseline of GHG emissions for the boundary of the SEIN was calculated by indexes of C02emissions (Tons of C02/GWh) calculated for each plant starting from the values of standardemission, corrected by efficiency (heat rate) and the electric power production obtained by plantby plant dispatch simulations for 2003-2017 period.
For the year 2002, using real values of electric production, a total emission of 1.91 millions ofTons of C02 is calculated. This volume is expected to increase due to greater contributions bynatural gas-fired thermal plants, with emissions reaching 6.8 million tones by the year 2017.
The emission reductions have been calculated by means of simulations of the SEIN operation"without" the Projects and "with" the Projects. The difference between both simulationsdetermines the reduction in the thermal plants electric production and therefore the reductionemissions of GHG in the SEIN. No leakages have been identified for the Projects and the indirectemissions are negligible.
The Poechos project qualifies as 'additional' as it is not included in the expansion plan of the
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I 1'1 I I
SEIN system. This determination was based on comparison of the levelized generation cost ofPoechos against the lower Long Run Marginal Cost (LRMC) of the system in $/MWh terms.Likewise it has been verified that given the small magnitude of the projects proposed, comparedwith the total power of the SEIN and the requirements of new plants for the period 2003-2017(calculated in 2000 MW), they will not alter the Least-Cost Expansion Plan and in general theycan be considered as marginal.
Details on levelized generation costs for Poechos and additional potential future projects stillbeing screened for inclusion in the Carbon Finance program are provided below:
| Units POECHOS
Capacity M 15.40Cost US$/Kw 1 097
Total Investment US$ M 16.90Annual CostCapital US$ M 2.379O&M US$ M 0.225
Total annual cost US$ M 2.604Plant factor % 43.4%Generation GWh 58.5Levelized cost USS/MWh 44.52LRMC USS/MWh 27.24
This baseline analysis will be applied in a similar manner for additional projects in Peru, withdetermination of 'additionality' made on a case-by-case basis.
2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)SINERSA (Sindicato Energetico S.A.) is a limited private company created in Peru in June 2nd,1994 with 99.96196% ownership by Chaimon Corporation N.V., and (external investor). It haspreviously developed one hydropower plant, Curumuy, for which it acquired bank and supplierloans of about US$ 13.3 million in 1999 at attractive rates. SINERSA has maintained satisfactoryEBITDAs over 60% and Operational Profits of about 40% in the three years 2000, 2001, and2002, even in 2002 when the Company suffered a 17% reduction in FY'02 sales due to droughtconditions affecting Curumuy.
In January 4th, 2001 the Company acquired from the Peruvian Government the rights forconcession and operation of the Hydroelectric Plant of Poechos, which is expected to startoperation in the first quarter of 2004. For this project, SINERSA has acquired loans totaling US$14.5 million, with US$ 6 million from Deutsche Investitions und Entwicklungsgesellschaft (DEG),and US$ 8.5 million from Corporacion Interamericana de Inversiones (CII) which is partiallyparticipated by the German KfW Group, IDB and Spain's CajaMadrid. This debt, in the absenceof revenues from Poechos, which are not expected to flow until 2004, has temporarily negativelyimpacted the company's ratios. An equity injection of US$ 5.5 million in 2001 positivelyimpacted its financial expenses in 2002, which was reduced by 57%. As consequence SINERSA'sEBT increased by 75%, reaching US$ 0.6 million. The Company expects that income statement
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impacts will be reduced in 2004 with receipt of revenues from Poechos. Despite the high leveragelevel, SINERSA presents a good liquidity situation, with a current ratio 2002 remaining above 2.Liquidity is also supported by grace periods and the long-term profile of the new loans from CIIand DEG, and cash and securities available in the current assets account.
The Poechos project is financed within SINERSA's Balance Sheet.The Project's total cost is estimated at US$ 16.43 million, already including the VAT of 18%,leaving the project with less than US$ 2 million in equity. Financial evaluation was performed onthe basis for a project life of 30 years, with special attention given to the period until 2012, whichrepresents the tenor of the ERPA contract. The Poechos project presents a satisfactoryprofitability, with a constant EBITDA of 88%. Net Income is highly impacted by interest costs inearly years but is favorable over time.
A sensitivity analysis considered potential impacts of tariff reduction (energy + power) of 25%, anincrease in the investments of 25%; a scenario with non-recovery of the VAT, and an absence ofthe streams coming from the emission reductions until 2012. Both IRRs and NPVs wereanalyzed, excluding the effect of loans and excluding the effect of the carbon credits. Due to therelative low amount of ERs being acquired in the project, without the ERs, Poechos' IRR falls byonly 1.845% (i.e. from 29.88% to 28.04%) and the NPV at 15% discount rate is reduced by US$0.27 million, falling from US$ 2.59 million in the base case scenario to US$ 2.32 million. Theproject's NPV was presented at different discount rates (10%, 12%, 15%, 18%, 20%) to cover abroad spectrum of cash opportunities and interest base rates expected to be found in the Country.
The Poechos project analyzed is a sound investment, designed with very conservative parametersand assumptions. The small hydro technology is widely proven and accepted. The fact that theseprojects are built on existing World Bank-financed irrigation infrastructure and withwell-established hydrologic data, adds to the profitability of the operations while considerablyreducing the risks involved.
Please see Annex 4 for a further Financial Analysis.
Fiscal Impact:
3. Technical:The Hydroelectric Plant of Poechos will use a portion of the discharged water from the PoechosDam, which is part of the irrigation system called "Chira-Piura." The water is currentlydischarged into the Escobar Canal, the Chira River and the Miguel Checa Canal. The machinehouse will be built at the base of the dam, in the discharge channel to the Chira River and theMiguel Checa Canal.
The project will be located downstream from the existing Poechos dam, in the district of Piurathat is in the northern Peruvian province of Sullana approximately 30 km from the border withEcuador. There is a 40m-altitude difference between the water mirror of the Poechos Dam and
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* ~ ~~~~~ ~ ~ ~ ~~~~~ - -! I I
the Miguel Checa channel outflow. The project will obtain 45m3/s of water from the 930,000million-m3 Poechos dam (dimensions: 48 m height, 8 m crest and 1000 m length) that wascompleted in 1979 to provide irrigation for 110,000 ha in the Chira and Piura valleys. The projectwill rely on flows of water dictated by irrigation demands and as such is expected to generateabout 60 GWh of electrical energy per year. The project proponents propose to build a confinedflow concrete pipe to lead the 45 m3/s from one of the water outputs of the dam through a pair of7.7 MW Kaplan turbines hosted in a power house generating 15.4 MW of clean electrical powerand then returning the turbined waters into the irrigation system through a output channel made ofconcrete.
The energy produced will be fed into the national electric grid through a 34 km transmission linefrom the power-plant to the city of Sullana. The energy generated (estimated at an annual averageof 60 GWh) will be sold to Electronoroeste, S.A., the concessionary for energy distribution innorthwestem Peru, under a Power Purchase Agreement. The plant will be connected to theNational Interconnected System (SEIN) and will contribute to the goals of the Peruviangovernment to accomplish a 90% national electrification level of the country by the year 2010 byusing a zero emission energy source.
In the absence of POECHOS, the 15.4 MW would be produced by thermo generators (which areGHG sources and air polluters) as revealed by official records and demonstrated in the BaselineStudy.
Please see Annex 1 and Feasibility Study in project files for further technical explanationsincluding hydrology issues.
4. Institutional:
4.1 Executing agencies:
The project will be executed by SINERSA as project sponsor. Country's involvement is securedby a Letter of Autorization issued by CONAM (Consejo Nacional del Ambiente), which is thegovernment official Designated National Authority (DNA). Other actors are: the Executive Board(EB) of CDM (the International Regulator), and the government agencies in charged of permitsand concessions (MEM, OSINERG, COES), as described in Annex 16.
4.2 Project management:
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Institutional Arrangements for CF Projects
4.3 Po(Int'l Regulator)
4.4 Fnancilma Agrement issues5.~~~~ Eniometl Envicton l |D.Ronenitalrategoryn Prilseset
T Letter of grEehu g emissions toc Authorization inentoa and Peonits
\ SINERSA /( . A(Project w
Sponsor)
4.3 Procurement issues:
N.A.
4.4 Financial management issues:
N.A.
5. Environmental: Envirolnrental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) all sub-projectsatohaveeposnd their treatment emerging from this analysis.
The project promotes the mitigation of greenhouse gas emissions that contribute to global climate
change through the development and international sale of High Quality Emission Reductions
(ERs). At the national level, the project will contribute to improved air quality by displacing
development of new fossil-based energy systems, particularly diesel engines and heavy fuel oil
plants, with enviroBnentally sustainable renewable energy (e.g., wind energy, geothermal, landfill
methane, biomass, run-of-river or hourly storage hydro). The project fully meets UNFCCC and
CFU criteria requiring all sub-projects to have positive, or at least not negative, enviroEnental
extemalities.
The project used the environmental framework developed by the Bank to evaluate the Poechos
hydropower plant. The framework: (i) proposes screening criteria and procedures for ensuring
compliance with Bank safeguard policies for small renewable energy projects; (ii) outlines the
main environmental and social issues that would have to be discussed in EA reports; and, (iii)
outlines the procedures for review and clearance of safeguard policies. Specifically, EAs for
hydropower should address pertinent environmental and social issues including impacts due to
design, construction and operation: i) on river basin management, including impacts on hydrology,
water rights, possible international water issues; ii) on aquatic flora and fauna; iii) on terrestrial
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ecosystems; and iv) cultural heritage. Further, the EA includes: i) a vulnerability assessment
(seismic and volcanic activity, landslides, soil liquefaction, earthquakes, etc.); and ii) a descriptionof public consultation and development of adequate compensation measures.
The Poechos project was screened using the framework, and summary EA documents wereprepared which outline key issues such as project location, social and environmental baseline data,site sensitivity, need for ancillary infrastructure, policies triggered, identification of possibleenvironmental and social impacts, description of mitigation measures and their respectiveindicators, and public consultation undertaken during the EA process. These summary EAs arealso presented in Annex 12. As the site sensitivity is low, no significant negative impacts areexpected. The simple Environmental Management Plans which were developed during theframework application call for proper environmental management of construction and operation.
5.2 What are the main features of the EMP and are they adequate?
The EMP addresses all of the relevant environmental and social issues identified in the EA. Itfollows a prescribed format, which will ensure comprehensiveness and identification of adequatemonitoring indicators
5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: 05/30/2003
An EA has been completed for Poechos Project; this has been cleared on the 28th of february,2003.
5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?
As part of the EA process, stakeholders in local areas were consulted. The summary EA reportsinclude a section on the public consultation process, wherein the groups consulted and theircomments are detailed.
5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?
The Bank confirmed that construction and operation of the hydropower plant complied with theEMP. Environmental indicators will be monitored by the sponsors and reported to the Bank andthe third-party validators. The projects, through their agreement with the CFU, will have tosubmit environmental and social reports to the CFU on a semi-annual basis. The third partymonitoring which will be responsible for emissions reductions certifications will also be chargedwith monitoring the implementation of environmental and social activities. In addition, the Bankwill undertake supervision, specifically reporting on the various environmental and social aspectsof each individual subproject.
6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.
Social screening and assessment criteria have been built into the environmental assessment
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methodology outlined in Annex 10 in the project files. These include: (i) required publicconsultation during the EA process as well as setting up mechanisms for public input in operation;(ii) screening for projects which may cause resettlement (including water rights loss); and, (iii)screening for projects that may involve Indigenous Peoples, and subsequent rejection (if negativeeffects or affecting indigenous lands) or actions (in the case of affected populations).
Poechos: The Poechos project will contribute to the development of one of the mostimpoverished areas of Peru through a reliable supply of clean electrical energy, which will sustainproductive activities of locals that are currently inhibited by the lack of energy. The district ofLancones will be the direct beneficiary and welcomes the project. This district consists of morethan 14 villages whose communities show poor education and labour levels as reflected in thefollowing tables:
Social and labour Indicators for the Lancones District 1996
16.7 154.9 F17.3
151.7 F88.~4 8.7 195.3 1l5.~6 F23.5
Source: INEI: Compendio Estadistico 1997/1996 - Mapa de Necesidades Basicas Insatisfechas 1994-Censo de Poblaci6n y Vivienda 1993, Direcci6n Regional de Salud y Direcci6n Regional de Educaci6n.
Further, SINERSA, the sponsor and project developer, will implement a social investmentprogram to develop the project in alliance with the community. The following social prioritieswere undertaken during design, construction and operation:
* Consolidate the good relationship with the locals and keep close communication with thecommunity of Lancones;* Hire and train local manpower for construction and operation;* Develop local technical capabilities;* Maximum use of local products, supplies and materials for the project;* Contract Peruvian companies to perform the planned activities, including themanufacturing of the first Kaplan turbines to be made in Peru;* Prioritize the target of the social investment with the community;* Promote the improvement of the educational level;
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* Address World Bank Safeguard Policies
The direct beneficial effects resulting from the Poechos project include:
* Supply of a clean source of energy;* Training to locals on the adequate uses of electricity;* Tax collections in the project area will boost the availability of funds for the developmentof local communities at an estimated annual average of 500,000 USD;* Creation of more than 200 jobs during the construction phase, employing exclusivelylocals impacting positively more than 200 families;* Contribution to the domestic capacity building efforts in environmentally soundtechnologies (EST) promoting the participation of local companies in the projec tactivity including the manufacturing, for the first time in Peru, of Kaplan turbines locally.* Creation of around 30 permanent positions for the operation of the hydroelectric planttransferring know how in operation, maintenance and control of hydroelectric equipmentand systems. These positions will utilize locally hired staff who will be trained during theconstruction phase;* Development of the poorest zones of the country, which using electricity will have theopportunity to start productive activities. Initially these will be promoted through themaximum use of local supplies;* First project in the Ecuadorian - Peruvian border, which will serve as a good referenceprojects for future initiatives for the sustainable development of this area with lowhuman development indexes (HDI);* Mitigate the migration of peasants to the coastal cities of Peru;* SINERSA has expressed its commitment to education and local technical training;* Improvement and reduction of operating costs of the Poechos dam including theelimination of diesel based generators currently supplying electricity to the dam;* Direct investment in the Project's area of around 5 Million USD; and* Investment in Peru of nearly 16.5 Million USD
In addition, Poechos will cooperate with an ambitious MEM-funded Rural Electrification Planthat will bring electricity to 166,000 people, by creating four new "small electric systems" orsub-grids from the SINERSA's financed transmission lines. The impact of electricity supply in thisunderdeveloped area close to the border with Ecuador (and once considered a security zone) isinstrumental for the development of the area.
6.2 Participatory Approach: How are key stakeholders participating in the project?
Poechos is encouraged to ensure that the locally affected populations are also beneficiaries of theproject.
6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?
The EA was consulted with affected groups, and are available for comment to NGOs through theenvironmental agency. During the design of the project, local communities have been consultedregularly. I
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6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?
The Bank will supervise the implementation of social activities. The long-term implementation ofthe activities agreed with the local groups will also be part of the third-party monitoring scheme.
6.5 How will the project monitor performance in terms of social development outcomes?
The project will show social indicators in the Monitoring Plan, which will be part of the ERPA.
7. Safeguard Policies:7.1 Are any of the following safeguard policies triggered by the proe ct?
Policy TriggeredEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 No
Natural Habitats (OP 4.04, IP 4.04, GP 4.04) 0 Yes 0 No
Forestry (OP 4.36, GP 4.36) 0 Yes 0 No
Pest Management (OP 4.09) 0 Yes 0 No
Cultural Property (OPN 11.03) * Yes 0 No
Indigenous Peoples (OD 4.20) 0 Yes 0 No
Involuntary Resettlement (OP/BP 4.12) 0 Yes 0 No
Safety of Dams (OP 4.37, BP 4.37) * Yes 0 No
Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 No
Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes 0 No
7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.
Please see summarized EA report in Annex 12.
Compliance with World Bank Safeguard Policies: (only ones triggered follow)
O.P. 4.01 - Environmental AssessmentNumerous environmental assessment documents were completed during preparation of thisproject. An EIA was completed for the hydropower project specifically, which analyzed impactsduring construction and operation. In part due to the highly intervened-surroundings, no majorimpacts were identified. Construction impacts were well managed through proper environmentalpractices, as enumerated in the Environmental Management Plan. Consideration of an ecologicalflow is not required, per the discussion above. A separate EIA was completed for thetransmission lines, with, again, no major impacts identified.
O.P. 4.37 - Safety of DamsDue to the proximity of the project to the Poechos Dam, and the reliance of the hydropower planton the proper functioning of the Dam, O.P. 4.37 is triggered. A relatively recent Dam SafetyAssessment (supported by the Bank) was updated in 2003 by the project sponsor. The mainproblem identified was scouring of the outlet area downstream of the penstock. The Bank teamadvised the developers on the need to take corrective measures and develop a contingency plan.As a result, during the construction process of the new power plant, the developers reinforced theeroded structures and implemented the proposed mitigation measures. Some of the recommendedmeasures were determined to be optional, as confirmed by the Bank's Dam Safety Specialist, andtherefore are not considered conditions of PCF financing. The Dam Safety Assessment is in
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I~~~~~~~~~~~~~~~~~~~~~~~~~~~~IU
Annex 12 in the project files.
Safeguards issues are fully explained in the summnary analysis.
Potential environmental and social impacts of the project:
Environmental Magnitude Comments(High,
Medium,Low)
Increased erosion Low No destruction of the vegetative cover wascaused, therefore this impact was minor.
Deterioration of the Low All works are overshadowed by the existing civillandscape works of the dam, therefore no deterioration of
the landscape is expected.
Air emissions Low Very little impact, caused only from the dieselgenerators to be used during construction.
High (+)The project will result in the reductions of localpollution and carbon emissions to the atmosphere,which will have a positive effect both locally andglobally.
Loss of vegetation and Low No impact, since the density within the projectbiodiversity area is low, and the river is highly intervened.
Loss of agricultural area Low The project will not cause any loss of agriculturalareas.
Lack of water for biological Low Sponsor is working with authorities to ensure thatfunctions in the river the minimum ecological flow of 10 m3/s is
maintained at all times.
Social
Employment generation High (+) Many local companies and people were or arebeneficiaries of the construction and operation.
Rural electrification High (+) Communities along the trajectory of the newtransmission line (35 km) that are not now
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connected to the grid will eventually be given theopportunity to connect.
F. Sustainability and Risks
1. Sustainability:
The project contributes to diversification and sustainable energy development in Peru, and will
help build experience in legal, regulatory, policy, and institutional aspects of private powerdevelopment in the electricity sector while diversifying potential financing for clean energyprojects.
Ia. Replicability:
The project is the first CDM project in Peru. It will provide a basis for future CDM projects in Peru.
2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):
Critical risks for the project are described below:
A complete Risk Matrix Assessment can be found in Annex 8.
Risk Risk Rating Risk Mitigation MeasureFrom Outputs to ObjectiveBaseline risk M Baseline and monitoring methodologies used in
the current projects have been approved by theCDM Executive Board.
Kyoto Protocol Risk N NCDMF assumes KP Risk and will pay for theErs despite the treaty's entry or not into force.
From Components to OutputsProject risk: Technical and market M Sponsors are experienced developers and have
purchase contracts with the established regionaldistribution companies. The project is alreadybuilt so there are no construction risks.
Carbon Funds purchase risk N The World Bank would pay only for delivery ofERs, which would be associated with powergeneration
Off-taker Risk H SINERSA already has well-defined PPAcontracts in place, however, current droughtconditions in Peru may hider distributioncompanies' profitability.
Country risks M Peru has been financially stable for the lastyears despite the Latin American recession. Thisstability is not granted in the future.
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Regulatory risks M The Peruvian market has made significantprogress in privatization, and the regulatoryenvironment is well established. Reversability ofpolicies may be an issue in the long run, both `orenergy privatization and climate change Ipolicies.
Hydrological risks H Financial analysis has considered average runoffvalues on the basis of the available historicaldata from hydrological and meteorologicalstudies. Required flows for projected generafionare well within volumes already discharged forirrigation. However, existing drought iscurrently showing decreases of 3040% inpower generation. -
Overall Risk Rating M
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)A complete Risk Matrix Assessment can be found in Annex 8 in the project files.
3. Possible Controversial Aspects:
There are no controversial aspects foreseen in the project. It is expected that most hydropowerprojects under the Carbon Finance program for Peru, and LCR in general, will operate off ofexisting small dams and will have almost no discernable changes in system operation affectinglocal populations or water use. Poechos' business risks are normal for small hydro projects of thistype, and the Carbon Funds have no obligation to pay if power, hence ERs, are not produced.
G. Main Conditions
1. Effectiveness Condition
2. Other
Carbon Finance is not part of the World Bank's lending program. There will not be regular loandisbursements, hence, but payments for due to ERPAs that the World Bank will make acting as aTrustee of the NCDMF.
H. Readiness for Implementation
D 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.
1 1. b) Not applicable.
O 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.
O 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.
O 4. The following items are lacking and are discussed under loan conditions (Section G):
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1. Compliance with Bank Policies
1 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approval. The project complies with
all other applicable Bank policies.
Francisco Femandez-Asin Susan G. -(dmark .-- Iarcelo Giug4 eTeam Leader SectorMW!ager/Director - Country Manager/Director
2/ \
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Annex 1: Project Design Summary
PERU: PERU - Poechos Hydropower Project
BackgroundIn 1979 the construction of the Poechos Dam, located in Northwest Peru, was finished withWorld Bank's financing. The dam is the largest in Peru and its equally large reservoir is usedexclusively for irrigation of the Chira-Piura system. In year 1999, SINERSA, a Peruvian privatecompany, built a run-of-river hydropower plant in one of the irrigation canals served by theChira-Piura system, the Curumuy plant. In year 2001, SINERSA planned to build a newhydropower plant, this time on the slopes of the very same Poechos Dam. The name for the new15.4 MW plant is the Poechos Hydropower plant (from now on Poechos). The project sponsorseeks carbon finance help from the WB's CFU, which is the subject of the present PAD.
Project descriptionThe Hydroelectric Plant of Poechos I will use a portion of the some of the discharged water fromthe Poechos Dam, which is part of the irrigation system called "Chira-Piura." The water iscurrently discharged into the derivation canal, the Chira River and the Miguel Checa Canal. In thefirst phase, one machine house will be built at the base of the dam, affecting the flow to the ChiraRiver and the Miguel Checa Canal.
The Feasibility Study is in the project files as Annex 9.
The project will be located downstream from the Poechos dam, in the district of Piura that is inthe northem Peruvian province of Sullana approximately 30 km from the border with Ecuador.There is a 40m-altitude difference between the water mirror of the Poechos dam and the MiguelCheca channel outflow. The project will obtain 45m3/s of water from the 930,000 million-m3Poechos dam (dimensions: 48 m height, 8 m crest and 1000 m length) that was completed in 1979to provide irrigation for 110,000 ha in the Chira and Piura valleys. The project will rely on flowsof water dictated by irrigation demands and as such is expected to generate about 60 GWh ofelectrical energy per year. The project proponents propose to build a confined flow concrete pipeto lead the 45 m3/s from one of the water outputs of the dam through a couple of 7.7 MW Kaplanturbines hosted in a power house generating 15.4 MW of clean electrical power and thenreturning the turbined waters into the irrigation system through a output channel made ofconcrete. The energy produced will be fed into the national electric grid through a 34 kmtransmission line from the power plant to the city of Sullana.
This USD 16.5 million Project consists of a 15.4 MW hydroelectric plant that utilises the wateroutflow from the Poechos dam. The energy will be sold to Electronoroeste, S.A., theconcessionary for energy distribution in northwestern Peru, under a Power Purchase Agreement.The plant will be connected to the National Interconnected System (SEIN) and will contribute tothe goals of the Peruvian government to accomplish a 90% national electrification level of thecountry by the year 2010 by using a zero emission energy source.
The project developer and operator (SINERSA) has proven in depth expertise in hydropowerprojects in design, construction and operation, and is already the operator of the CURUMUYhydroelectric plant located in the same region. The technology to be employed is based on
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conventional Kaplan turbines and generators that are widely used all over the world. SINERSAhas the concession to use the water. A hydrological and meteorological study is available, andshows the low risk related to the availability of water flows for generation is well within levelsalready available for irrigation discharges. Further, if drought conditions applied, the tariffreflecting short-term marginal costs of the national grid increases. This price mechanismcompensates the project operator of hydro projects to some extent.
In addition to its very limited footprint (1 Ha), and its global environmental benefits (350,400Tons C02 Reduction in 10 years), the project offers local environrmental benefits derived fromgenerating electricity without the accompanying emissions of nitrogen oxides or sulphur dioxideassociated with fossil fuel power generation. In the absence of POECHOS I, the 15.4 MW wouldbe produced by thermo generators (which are GHG sources and air polluters) as revealed byofficial records and the baseline study.
The power plant project will consist of the following components:
* A steel penstock connected to an existing steel discharge pipe at the base of the dam;* A powerhouse equipped with two Kaplan turbines which drive two 7.7MW generators;* A switchyard located near to the powerhouse to transform 10 kV to 60 kV; and* A 34 km of 60 kV high voltage transmission line from the switchyard to the Sullanasubstation of the national electrical grid.
The powerhouse will host two Kaplan turbines with vertical axis. Technical estimates for theminimum and maximum water flow and water fall altitude have deternined that the system willoffer a maximum output power of 7.7 MW per turbine working at around 400 rpm. The turbineswill have a 1.82 m diameter and a spiral diameter of 2.2m. The mechanical equipment will have asmain elements 2 units (turbine plus generator) with the following technical features:
Installed flow 22,5 m3/sNet fall altitude 38 mFall Oscillations 30 m a 43 mInstalled Power (103 limit) 7,7 MW
A crane (L= 10,5 m and 30 tons capacity.) will be installed to be used for transporting, assemblingand repairing powerhouse equipment.
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Annex 2: Detailed Project Description
PERU: PERU - Poechos Hydropower Project
By Component:
Project Component I - USS millionPoechos, entails the addition of hydropower generation of 15.4 MW to the existing 48m-highPoechos Dam. Total project costs are estimated at US$ 16.43 million (including VAT of 18%).Due to be commissioned in March 2004, the main civil works to be built by the project are theintake and forced pipes, the machine house, the discharge canal, 100 m of access roads, and 38km of transmission lines. The project is expected to generate about 60 GWh of electrical energyper year, which will be sold to Electronoroeste, S.A. (i.e. the concessionary for energydistribution in north-western Peru), under a Power Purchase Agreement contract (PPA). O&Mcosts are estimated at $225.1 thousand US$ per year.
The project sponsor is SINERSA (Sindicato Energetico S.A.), a private company created in Peruin June 2nd, 1994. The Group is a limited Company with 99.96196% ownership by the ChaimonCorporation N.V., an external investor.
The project will use water discharged from the existing Poechos Dam, located in the north coastdepartment of Piura within the Chira irrigation system. The project will take advantage of heightdifference between the level of the water in the reservoir and the level of water in the discharge onthe Chira River. Although the reservoir allows a multi-year regulation of the water, the control ofthe discharges are managed by the agricultural sector and are programmed according to theirrigation needs; thus the project will use available flows and will not have facilities to regulate itsenergy production. The water is currently discharged into the derivation canal, the Chira Riverand the Miguel Checa Canal. In the first phase, one machine house will be built at the base of thedam, affecting the flow to the Chira River and the Miguel Checa Canal. A second phase of theproject (5 years hence) will construct a machine house near the intake of the derivation(irrigation) canal Daniel Escobar. This second phase is not contemplated within the presentproject but as a candidate for future purchases.
Carbon Purchases. NCDMF will purchase an average of 33,300 tCO2 for each of the first 9 yearsof project operation for a total 300,000 TCO2e purchased at US$3.50 per ton, with total CERpurchases of US$1,050,000. This total includes recovery of project preparation expenses such asthose related to baseline establishment, validation, monitoring, verification and certification. Thepurchases by NCDMF represent 100% of the potential CERs produced in an average year, untilyear 2012. Some more CERs may be optioned to purchase beyond that date.
The project will use a broadly available resource that is now currently under-utilized, providingthe additional product of energy from water that is already impounded and released for irrigationpurposes. Analogous to a Power Purchase Agreement (PPA), NCDMF will pay for theseemission reductions as they occur, and this purchase of a previously unrecognized commodityoutput from the project will provide an additional dollar-denominated revenue stream for adefined 9 year period, improving the cash flows and internal returns from the project and
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facilitating attraction of other financing.
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it 'I 1 I I I
Annex 3: Estimated Project CostsPERU: PERU - Poechos Hydropower Project
N.A.
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Annex 4 Financial Analysis
PERU: PERU - Poechos Hydropower ProjectPoechos Project: SINERSA (Sindicato Energetico S.A.) is a private company created in Peru in
June 2nd, 1994, but it was in 2002, with the construction of the hydroelectric plant of Curumuythat the Company faced its largest headcount's growth, growing from 19 employees to 43
employees in that year.
The two administrative offices of SINERSA are located in the municipalities of San Isidro and
Sullana. The latter office is located inside the site of the above-mentioned hydroelectric plant,which is the sole plant of the Group so far. For the investment in Curumuy, SINERSA had
already acquired bank and supplier loans of about US$ 13.3 million in 1999 at attractive rates.
In January 4th, 2001 the Company acquired from the Peruvian Government the rights for
concession and operation of the Hydroelectric Plant of Poechos, which is expected to start
operation in the first quarter of 2004. For this project, SINERSA had acquired already loanstotaling US$ 14.5 million. US$ 8.5 million comes from Corporacion Interamericana de
Inversiones (CII) and US$ 6 million from Deutsche Investitions - und Entwicklungsgesellschaft(DEG), which is partially owned by the German KfNW Group.
The Group is a limited Company with the following ownership distribution:Chaimon Corporation N.V. 99.96196% (extemal investor)Jorge Grueberg 0.01970% (local investor)Ivo Ucovich 0.00893% (local investor)Violet Property LLC 0.00475% (external investor)Manfred Ferber 0.00466% (local investor)
The following SINERSA figures refer to the Group's consolidated financial statements of 2000,
2001 and 2002, audited by local independent auditors. All reports presented unqualified opinions
from the auditors, assuring the accuracy and accordance of those figures with the best accounting
practices.
The consolidated financial statements of SINERSA in the fiscal years of 2000, 2001 and 2002 are
shown in the following 3 tables, followed by a brief overview on the results. In order to simplifythe financial evolution of the Company, some compilation and reconciliation were made.
As shown in the table 1.1, SINERSA statements kept satisfactory EBITDAs over 60% and
Operational Profits of about 40% in the whole period, even in 2002, when the Company suffereda 17% reduction in FY'02 sales. This retraction in the revenues was exclusively due to thedraught year in the region of the hydroelectric plant of Curumuy, which led to a lower energygeneration in that power plant.
The equity injection of US$ 5.5 million in 2001 (please refer to the Cash flow table), fully drivento reduce the Company's indebtedness, positively impacted its financial expenses in 2002, whichwas reduced by 57%. As consequence, the Company's reduction on sales was totally reverted andSINERSA's EBT increased by 75%, reaching US$ 0.6 million.
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Nevertheless, the operational profits were not sufficient to match Poechos' pre-operationalexpenses in 2002 and SINERSA ended the FY'02 with its third negative result in a row (in US$terms). Important to notice that the accumulated losses in the P&L are allowing the Company todefer its income tax payment. According to the Company's expectative, in 2004 the results willbe fully reverted and SINERSA will restart to present positive Net Income figures.
Table 1.1: Consolidated Profit & Loss of SINERSA for the FY'00, FY'01 and FY'02
EBITDA $1,636 $2,018 $1,620(Percentage of Net Sales) 63.9% 64.2% 61.8%
D/D/A ($665) ($665) ($578)
Operating Profit (EBIT) $971 $1,353 39.3% $1,042 -23.0%(Percentage of Net Sales) 37.9% 43.0% 39.8%
Net Financial Result ($1,471) ($1,003) ($431)
Profit before Taxation (EBT) ($500) $350 170.0% $611 74.6%
Exceptional Income $1 $45 $3Exceptional Expenses $20 $438 $816
Exceptional Result ($19) ($393) ($813)
Result before Taxation ($519) ($43) 91.7% ($202) 369.8%
Taxation i (deferred) ($39) $16 ($79)
Net Income ($480) ($59) 87.7% ($123) 108.5%(Percentage of Net Sales) -18.8% -1.9% -4.7%
By checking SINERSA's cash flow in 2001 (please refer to the following table 1.2), its liquidityin 2002 suffered a material reduction if compared to the previous year.
Despite the already mentioned retraction in sales in 2002, which would be expected to reduceCompany's commercial pressures from the account payables in that year, the significant increasein the account receivables All data may be found in the financial statements of SINERSA and in the auditor'sreport, available in the files of the project at request. led to a boost in the working capital requirement ofthe Company and the consequent squeeze in SINERSA's free cash flow (i.e. US$ - 0.056 millionin 2002 vs. US$ + 1.4 million in 2001). It is important to notice that the increase in acc.receivables does not represent a risk issue since those figures are inflated with non commercialcredits, such as tax credits and loans with the shareholders. The operational account receivablesremain at reasonable low levels.
The Company kept the positive bottom line in the FY'02 cash flow through an opposite way thanin the previous year when the shareholders injected new equity in the Company. In 2002
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SINERSA acquired US$8 million in new loans, being US$ 3.5 million as a local short-term bridge
loan and US$5.5 million with CII and DEG for 10 years and at an average rate of L+4.5%.
As a direct consequence of the Company's new loans, we can expect that SINERSA will have
another increase in finance expenses, impacting their next Profit & Loss and cash flow statement.
Table 1.2: Consolidated Cash flow of SINERSA for the FY'00, FY'01 and FY'02Cash flow (000'USS)
TOTAL UAB. AND SHS' EQUITY $18,364 $16,520 -10.0% $24,510 48.4%
Project Evaluation
The Project's total cost is estimated at US$ 16.43 million, already including the VAT of 18% isexpected to generate about 67 GWh of electrical energy per year. With 15,400 KW of installedcapacity, the energy generated by Poechos will be sold to Electronoroeste, S.A. (i.e. theconcessionary for energy distribution in north-western Peru), under a Power Purchase Agreementcontract (PPA). Electronoroeste is a credit worthy and financially sound distribution company.Its financial statements are available in the project files.
As already mentioned in the shareholders analysis the project will account with the underlyingfinance from CII and DEG mainly. Total loans must reach US$14.5 million, leaving the projectwith less than US$ 2 million in equity. Since the due diligence process from the above mentionedlenders have been done and part of the money have been disbursed already, the project has astrong chance of start operations and consequently, start delivering ERs on the expected time.
Among some of the aspects included in the Electricity Concessions Law in Peru, it can bementioned the free price regime for supplies that exceed 1,000 KW was made on a competitionbasis and prices for small users are regulated. The contract between the parties is in an advancedstage and must be ready before the start-up of the plant.
The prices reflect the marginal costs and are established to promote the sector efficiency.According to the rules in force, the following services are subject to price regulation: the sales tothe electricity public service customers, the transference of power and energy between the
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generators, the sales of generators energy to distribution concessionaires designated to the
electricity public sector, and the compensations of the transmission system holders.
The project financial evaluation will be done based on the results obtained in the financial
projections made for the project life of 30 years. Special attention will be given however, to the
period until 2012, which represents the tenor of the ERPA contract being signed between the
Carbon Finance of the World Bank and the project sponsors for the emission reductions
acquisition.
As already mentioned, the VAT (Value Added Tax) or IVA of 18% has been added to all
expenses in the construction phase. This tax amount is recovered along with Company's sales at
the same 18% rate. The IVA payments and its recovery schedule is presented in the table 2.1:
Table 2.1: IVA Payment and Recovery Schedule:z mm mm n z 2o xi zM 2
In order to have a more accurate and impartial sense of the project's viability, all commercialassumptions were based on public historical data. The tariffs used for the base case scenario were
officially published by OSINERG on 10/20/2001 in El Peruano (Normas Legales) as follow:
Energy tariff of US$ 0.0376 / KWh for peak hours (19.8% of the timing dispatched);Energy tariff of US$ 0.0258 / KWh for off peak (80.2% of the timing dispatched);
* Power tariff of US$ 5.36 / kW / month;
The remaining economic and financial assumptions used in the project financial projection are
shown in the Assumptions table 2.2:
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i I l l
Table 2.2: Assumptions for the Poechos Hydroelectric Power Station Plant
ERs in 2004 39,530ERs in 2005 39.530ERs in 2006 39,530ERs in 2007 39.530ERs in 2008 39,530ERs in 2009 39,530ERs in 2010 39.530ERs in 2011 39,530ERs in 2012 39,530Total ERs 1,245,195
Financing comPonents for the cashfiowTotal Investment $16,427,479.74% of the investment povided by loan 88.3% 1 Owner IRRLoan interest rate 8.33%Loan Tern 9grace period 2Payments 7Discount rate (cost of oportunity for the investors) 15%Imcome tax 27%l
CAPEX 2003 2004 2005
Civil works $4,470,416 S4.470,416 $0 $0Years of depreciation 33Machinery and equipment $11,201,864 $11,201,864 $0 $0
Years of depreciation 10Intangible $755,200 $755,200 $0 $0
Years of deoreciation 5 l
Total Investment $16,427,484
Prices / Sales assumptions Average TariffPrice per KWh Spot Market (Energy) $0.0281 PEPBO 3.76 2.811Price per KWh Free maket $0.0281 IPEPFO 12.58 1
% of sales in free market 100%% of reduction of Tariff (Due natural Gas 2005) 0%Total GWh per year 67.00Price per KW(Power) Month 5.36Total net Power (MW) 15.4
Costs & ExpensesToll for conection KW(Power) Month main system (euros) 0.00Repairs and spare parts per year $20,000Insurance per year $100,000 Fixed CostsSecondary toll $0Contribution to OSINERG, MEM, GART,COES and others 1.0%O&M Expenses per year $200,000 Fixed CostsContribution to CEDAPAL (water usage) $30,000Participation of the workers 0%Dividends 25%IGV (IVA) 18%
Perpetuity cashflowInvestment in year 31 for renovations $116,427,480Cash flow for the next 30 years in average $1,800,000Cash flow term 30l
Following the same procedure adopted in the former projects in Peru, the financial model is not
considering neither inflation or currency devaluation over the projection period since the PPAcontracts in Peru have a clause of automatic tariff readjustment based on both local inflation as
local currency devaluation. In the same way, the ERPA streams are also paid in hard currency,
-33 -
eliminating the currency risk in the project. The sole remaining risk would be an inflation muchhigher than the local currency devaluation, which would led to an increase in the costs, not beingmatched by the revenues. However, this scenario is very unlikely to happen and therefore, it is notconsider relevant. All figures are presented in American US Dollars.
Based on the previous assumptions, we expect to face the following Income Statement table forthe Poechos project:
Table 2.3: Income Statement Projection for the Poechos Hydroelectric ProjectPoechos + Ers
Since all tariffs and O&M costs are being kept constant as well as the depreciation of the Plantassets, the income statement does not present any change up to the Operating Result line (EBIT)over the years. The first changes appear below that point and due to both loan interest expensesand interest income over the previous year cash surplus (if applicable).
As already expected, the project presents a satisfactory profitability, with a constant EBITDA of88%. The Net Income is highly impacted by the loans' interest due in the first years but steadilyincreases over the period, as direct consequence of the cumulative cash surplus in the Company'soperations.
In order to check the project's resistance to bad conditions, four variables have been sensitized infive different scenarios as follow:
Tariff reduction (energy + power) by 25% ($ 0.021/KWh and $ 4.02/KW/month);
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I 111 I I
. 25% increase in the investments (from US$ 16.43 million to US$ 20.53 million);* Non-recovery of the IVA (value Added Tax) of 18%;* The absence of the streams coming from the emission reductions until 2012;* Tariff reduction (energy + power) by 50% ($ 0.014/KWh and $ 2.68/Kw/month);
Additionally, both IRRs and NPVs have been analyzed, excluding the effect of loans (hypotheticscenario, assuming 100% equity) and excluding the effect of the carbon credits. The resultswithout loans has been defined as "Project", while the real scenario was called "Owner" since itrepresents the shareholder's perspective. The results of this analysis is shown in the right side
RRP 1 e RR OmwI r 4 I E
12.64%1 1236% | 29WJ 2Ž04%NPV IN VOw
Discr rate at 10% 3,512 3,149 5,663 5,302Disc. rateat 12% 752 432 4,125 3,808Discr rat at 15%/6 (222) (2,559) 2,587 2322Disr.atr 6 at 180 (44 (4,702) 1,612 1,389
table: Discrate at 200/o (65) (,817) 1,157 957
Due to the relative low amount of ERs being acquired in the project, without the ERs, Poechos'IRR falls by 1.845% (i.e. from 29.88% to 28.04%) and the NPV at 15% discount rate is reducedby US$ 0.27 million, falling from US$ 2.59 million in the base case scenario to US$ 2.32 million.The project's NPV was presented at different discount rates (10%, 12%, 15%, 18%, 20%) tocompensate the omission of currency devaluation and inflation in the projections and to cover abroad spectrum of cash opportunities and interest base rates expected to be found in the Country.
The results of the sensitivity analysis (please refer to the Sensitivity Analysis in the Appendix 1)show that the project is more negatively affected by the 25% reduction in the tariffs than by the25% increase in the investments. In those scenarios, the base case IRR drops to 12.08% and13.71%, respectively. The NPV also drops from the US$ 2.59 million to US$ - 0.84 million andUS$ - 0.64 million, respectively.
As a worst-case scenario, a 50% reduction was applied to the most sensitive variable (i.e. energyand power tariffs). In this scenario the project's Free Cash Flow remains negative until 2012 andproject's IRR falls down to 2.56%, while NPV drops to US$ - 4.9 million. These are shown in theAppendix 1.
In order to remain viable at the scenarios with reduced electricity tariffs the project will requireadditional equity injection until 2012. For the scenario with 25% reduction in the tariffs, theproject requires additional US$ 3.1 million over the years, while for the scenario with 50%reduction in tariffs, the project requires additional US$ 9.3 million.Summarizing the main risks and mitigants seen in this project:
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* The loans have been approved and partially disbursed, almost eliminating the completion
risk for this project;* The nature of both the PPA and the ERPA, both paid in hard currency, represents a strong
hedge against potential local currency devaluation; in the event of such devaluation, this would
facilitate repayment of the bank loans;* The low O&M costs, bring to the project a strong cushion against bad economic scenarios
and commercial conditions;
Appendix 1: Sensitivity Analysis for the Poechos Hydroelectric Project
tmRtb lS 05 3 0 0 03 03 4U5 275 269 268 268N?bh/TcMT_ 1 1% 11% 1% m 21 A 4
I NV I St
Audited financial statements for SINERSA are kept in the Project Files.
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Annex 5: Financial Summary
PERU: PERU - Poechos Hydropower Project
N.A.
- 38 -
Annex 6: Procurement and Disbursement Arrangements
PERU: PERU - Poechos Hydropower Project[This annex is not required for PCF projects as they do not follow Bank procurement and disbursementguidelines.]
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Annex 7: Project Processing Schedule
PERU: PERU - Poechos Hydropower Project
Project Schedule Planned Actual
Time taken to prepare the project (months) 12 15
First Bank mission (identification) 04/01/2003 04/01/2003
Appraisal mission departure 05/26/2004 05/26/2004
Negotiations 05/31/2004 05/31/2004
Planned Date of Effectiveness 12/01/2004 12/01/2004
Prepared by:
Preparation assistance:
Bank staff who worked on the project included:Name Speciality
Task Team Members:Francisco Femandez-Asin Task Team Leader(ENVCF):Eduardo Zolezzi (LCSFE): Energy Specialist
Demetrios Papathanassiou (LCSFE): Energy Specialist
Alexandre Kossoy (ENVCF): Financial Specialist
Kirsten Oleson (LCSEN): Environmental Specialist
Ted Kennedy (ENV): Renewable Energy Specialist
Charlotte Streck (ENVCF): Legal Counsel
Manabu Hirano (ENVCF): Deal Manager
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I 'I1
Annex 8: Documents in the Project File*
PERU: PERU - Poechos Hydropower Project
A. Project Implementation Plan
B. Bank Staff Assessments
C. Other
Annex 1: Peru Sectorial Baseline StudyAnnex 2: Peru Sectorial Monitoring ProtocolAnnex 3: Poechos Draft PDDAnnex 4: Poechos PINAnnex 5: Poechos PCNAnnex 6: Poechos Letter of IntentionAnnex 7: Poechos Letter of ApprovalAnnex 8: Poechos Risk MatrixAnnex 9: Poechos Feasibility StudyAnnex 10: Poechos EIAAnnex 11: Poechos Term SheetAnnex 12: Poechos Dam Safety AssessmentAnnex 13: Peru Umbrella QAT commentsAnnex 14: Peru Umbrella ISDSAnnex 15: World Bank Carbon Finance Strategy Paper
Annex 16: Carbon Finance Unit Operating Manual*Including electronic files
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Annex 9: Statement of Loans and Credits
PERU: PERU - Poechos Hydropower Project19-Jul-2004
Difference between expectedand actual
Original Amount in US$ Millions disbursements
Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd
Population (%) 1.5 1.5 0.9Labor force (%) 2.8 2.1 1.2 GNI Gross
per primary
Most recent estimate (latest year available, 1997-03) capita enrollment
Poverty (% of population below national poverty line) 49Urban population (% of total population) 74 77 50Life expectancy at birtht7years) 70 71 69Infant mortality (per 1,000 live births) 30 28 32Child malnutrition (% of children under 5) 7 1. 1 Access to improved water source
Access to an improved water source (% of population) 80 86 81Illiteracy (% of population age 15+) 15 11 10Gross primary enrollment (% ofschool-age population) 121 129 112 Pen
Male 122 131 113 --- Lower-middle-income group
Female 121 126 111
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1983 1993 2002 2003Economic ratlos
GDP (US$ billions) 19.1 34.8 56.5 60.6
Gross domestic investment/GDP 24.3 19.3 18.8 18.8 TradeExports of goods and services/GDP 19.7 12.5 16.5 17.7Gross domestic savings/GDP 24.5 15.4 18.0 18.9Gross national savingslGDP 12.9 17.2 17.5
Current account balance/GDP -6.8 -6.6 -2.0 -1.8 Domestic InvestmentInterest payments/GDP 2.4 2.2 2.0 2.1 savingsTotal debtVGDP 59.3 67.7 49.8 49.3Total debt service/exports 34.0 59.4 32.5 23.8Present value of debtGDP 52.7Present value of debVexports 286.4 Indebtedness
World Bank programCommitments 211 392 100 474 A -IBRD E -BilateralDisbursements 77 975 146 344 B - iDA D -Other multlateral F -PnvatePrincipal repayments 28 574 163 163 C -IMF G -Short-termNetflows 49 401 -17 181Interest payments 40 483 141 115Net transfers 9 -82 -158 66
Uevelopment tconomics 9sUIU4
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Additional Annex 11: Environmental AnalysisPERU: PERU - Poechos Hydropower Project
Compliance with Environmental Agency: EIA report approval by Environmental Agency,if required (status and date): March 13, 2003 (project by CONAM), March 31, 2003 (EIA by
MEM)
This hydropower project consists of the construction and operation of a small hydroelectric plant
built at the base of an existing dam, near the discharge to the Chira River and the Miguel Checa
Canal. Commissioned in March, 2004, the main civil works built by the project include the intake
and penstock, machine house, discharge canal, 100 meters of access roads, and 38 km of
transmission lines. The plant is located within the property of the dam. For thirty years, this area
has been secured and maintained, therefore nobody lives around the site and no natural vegetation
is present. The hydroelectric plant was financed by IDB and German bilateral funds.
Environmental impact assessments of the plant and transmission lines, and the environmentalmanagement plans, were reviewed and approved by the funding agencies.
The hydroelectric plant will operate using the current and future water requirements for irrigation,potable water and ecological flow. The total flow is determined by the Agricultural Authority of
the region, and not by the project sponsor. The water concession is based upon the use of the
flow required for agriculture, downstream of the dam. The project sponsors have no direct
control over the flows emitted to either the Chira River or irrigation canal.
Environmental Baseline. Poechos: The indirect area of influence defined in the EA is
approximately 6 hectares. The topography is generally flat and primarily used for agriculture and
limited livestock raising. Sparse, mixed leafy "forests," including Algarrobo, Sapote, Bichayo and
Nuchi trees, populate the indirect area of influence. There is no vegetation in the direct area of
influence of the hydroelectric plant, as this area was regularly cleared during maintenance of the
dam. According to the EA, the most important fauna in the area include 46 species of birds, 4
species of mammals, and 5 species of reptiles. Only very occasionally have any of these been
observed in the direct area of influence of the project. No species which are threatened or
endangered are in or near the area of influence of the project, nor are there any parks or reserves.
The water quality at the plant is quite good, but the quality quickly deteriorates downstream of
the hydropower plant. Return flow from the agricultural activities carry salt, agrochemicals,human waste, and other pollutants into the canal and river. The canal and river serve as sourcesof drinking water for most of the population. Downstream urban centers, such as Sullana, rely
upon the nutrient-rich, contaminated water that reaches the regulation dam for their drinking
water supply.
Unfortunately, due to the long-term negligence of the minimum ecological flow, the 50 km of
river has very little, if any, natural habitat. The pressure from the sponsor and PCF to finally
implement best practice standards for maintenance of ecological flows could have a direct,
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positive impact on the Chira River's ecosystem and human water users. In April, 2004, theTechnical Administrator of the Chira Irrigation District sent a technical report to the Attendant ofWater Resources of the Ministry of Agriculture, stressing the need to vigilantly monitor the flowsin the Chira and nearby rivers to ensure that the environmental services the rivers provide aresafeguarded. This situation will be closely monitored by the sponsor and Bank team, as it is theintent of both to fully respect the spirit of international best practices regarding ecological flows.
Approximately 38 km of transmission lines that were built as part of the project pass throughdesert landscape with sparse vegetation. The impact of the transmission lines was thoroughlystudied in a separate EIA. The EIA concluded that the lines follow an existing right-of-way, donot cross or negatively affect any populated or cultivated areas, nor areas with cultural heritagesites. As required by national law, an architect was part of the EIA team, and the NationalCultural Institute certified the EIA. The area is not a migratory bird habitat, and no impact isexpected on birds.
The EA identifies some minor potential environmental and social impacts of the project, including:erosion, landscape deterioration, air emissions, vegetation destruction, biodiversity loss,agricultural impacts, lack of water for biological functions in the river. These have all beenmitigated through proper design, construction and operation; specific mitigatory measures areincluded in the Environmental Management Plan.
Many positive effects are anticipated for employment generation, and, as described in the socialsection, the possible rural electrification plan.
The Environmental Management Plan is detailed in the summary analysis. A Summary EA isshown in the Annex 12. The full EIA is attached in Annex 10 of the project files.
Location (map attached): 30 krn from Sullana, Piura District, Peru
Energy technology Hydro(hydro/solar/biomasslwind):
If hydro, run of river or reservoir (size of Dan (existing dam 48 m)dam):
(Additional) power installed in the project: 15.4 MW
Likely date of commissioning of the project: March 24, 2004
Environmental Category B
Compliance with Environmental Agency:
EIA report approval by Environmental March 13, 2003 (project by CONAM)Agency, if required (status and date):
. March 31, 2003 (EIA by MEM)
Other permits (e.g. protected areas, Water concessionindigenous reserves):
Existing environmental and social conditions (1 page max):
This EA Summary draws upon various analyses conducted prior to and during projectpreparation, including an EIA for the hydropower plant, an EIA for the transmission line, a dam
safety assessment for the existing dam, a technical feasibility study and a hydrological survey,
documentation provided by the project sponsors, such as letters explaining the minimum
ecological flow established by the authorities and the estimated number of beneficiaries of rural
electrification, and information gathered in the field by Bank staff during preparation missions.
The project will use some of the discharged water from the Poechos Dam, which is part of the
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"Chira-Piura" irrigation system . The Poechos Dam was constructed between 1971 and 1974with World Bank financing. The reservoir has a capacity of 1 billion cubic meters; the earth damhas a maximum height of 60 meters. The environmental impacts of the dam are not relevant tothis hydropower project and therefore were not studied during the preparation of this project, butit is important to note that the impacts of the dam completely overshadow the relatively minorimpacts of the hydropower plant. The hydropower project sponsors are not the operators of thedam or irrigation system. The sponsors have a concession from the Ministry of Energy and Minesto generate electricity at the site, and were granted the rights to use the water, ultimately destinedfor irrigation, from the Ministry of Agriculture.
The dam has two outlets, the first discharges into the Chira River and the "Miguel Checa" Canal,and the second, discharges into the derivation canal "Daniel Escobar," eventually reaching thePiura River. The first phase of this hydropower project consists of the construction and operationof a small hydroelectric plant built at the base of the dam, near the discharge to the Chira Riverand the Miguel Checa Canal. The second phase of the project (5 years hence) will construct amachine house near the intake of the derivation canal, and is not considered in this summary.
Commissioned in March, 2004, the main civil works built by the project include the intake andpenstock, machine house, discharge canal, 100 meters of access roads, and 38 km of transmissionlines. The plant is located within the property of the dam. For thirty years, this area has beensecured and maintained, therefore nobody lives around the site and no natural vegetation ispresent. The hydroelectric plant was financed by IDB and German bilateral funds. Environmentalimpact assessments of the plant and transmission lines, and the environmental management plans,were reviewed and approved by the funding agencies.
Hydrological Baseline. The hydroelectric plant will operate using the current and future waterrequirements for irrgation, potable water and ecological flow. The total flow is determined by theAgricultural Authority of the region, and not by the project sponsor. The water concession isbased upon the use of the flow required for agriculture, downstream of the dam. The projectsponsors have no direct control over the flows emitted to either the Chira River or irrigationcanal.
No absolute changes in the current hydrological balance are contemplated by the generation ofelectricity. In the cases when available flow is lower than power plant installed capacity (45 m3/s),there is a possibility to concentrate part of available water during peak generation hours, while aminimum flow will at all times be present, as determined by the Agricultural Authority.Furthermore, the effect of the altered flow will not be evident to most downstream users,generally located downstream of Sullana dam and reservoir, due to the functioning of thatregulating reservoir, located about 50 km downstream. The users located along the 50 km stretchof river, between the plant and regulation reservoir, are very few and will always have the flowthey need for their uses, as their use has priority over generation.
The minimum ecological flow (MEF) of the Chira River was established in 1975 as part of thefeasibility study of the dam. The value was set at 10% of average annual flow, or 10 m3/s.
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Peruvian law does not contemplate MEF for rivers. For the thirty years of operation of the dam,the MEF established by the feasibility study has not always been respected. During this time,other users, such as aquaculture, have applied for permits to use part of the flows. These permitsrequire return flows to respect the biological and ecological needs of the river, but, again, theyhave not. Monitoring of all flows is the responsibility of the Technical Administrator of the ChiraIrrigation District. The sponsors are working with the Irrigation Authority to change the practicein the region, with the intent of rehabilitating the Chira River and increasing flow available forelectricity generation. The process, however, is a slow one, with many competing economicinterests in the area. It is important to stress that the sponsor is not able to directly control theflows, therefore cannot guarantee a minimum ecological flow.
Environmental -Baseline. The indirect area of influence defined in the EA is approximately 6hectares. The topography is generally flat and primarily used for agriculture and limited livestockraising. Sparse, mixed leafy "forests," including Algarrobo, Sapote, Bichayo and Nuchi trees,populate the indirect area of influence. There is no vegetation in the direct area of influence of thehydroelectric plant, as this area was regularly cleared during maintenance of the dam. Accordingto the EA, the most important fauna in the area include 46 species of birds, 4 species of mammals,and 5 species of reptiles. Only very occasionally have any of these been observed in the direct areaof influence of the project. No species which are threatened or endangered are in or near the areaof influence of the project, nor are there any parks or reserves.
The water quality at the plant is quite good, but the quality quickly deteriorates downstream ofthe hydropower plant. Return flow from the agricultural activities carry salt, agrochemicals,human waste, and other pollutants into the canal and river. The canal and river serve as sourcesof drinking water for most of the population. Downstream urban centers, such as Sullana, relyupon the nutrient-rich, contaminated water that reaches the regulation dam for their drinkingwater supply.
Unfortunately, due to the long-term negligence of the minimum ecological flow, the 50 km ofriver has very little, if any, natural habitat. The pressure from the sponsor and PCF to finallyimplement best practice standards for maintenance of ecological flows could have a direct,positive impact on the Chira River's ecosystem and human water users. In April, 2004, theTechnical Administrator of the Chira Irrigation District sent a technical report to the Attendant ofWater Resources of the Ministry of Agriculture, stressing the need to vigilantly monitor the flowsin the Chira and nearby rivers to ensure that the environmental services the rivers provide aresafeguarded. This situation will be closely monitored by the sponsor and Bank team, as it is theintent of both to fully respect the spirit of international best practices regarding ecological flows.
Approximately 38 km of transmission lines that were built as part of the project pass throughdesert landscape with sparse vegetation. The impact of the transmission lines was thoroughlystudied in a separate EIA. The EIA concluded that the lines follow an existing right-of-way, donot cross or negatively affect any populated or cultivated areas, nor areas with cultural heritagesites. As required by national law, an architect was part of the EIA team, and the NationalCultural Institute certified the EIA. The area is not a migratory bird habitat, and no impact is
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expected on birds.
Social Baseline. No negative social impacts are predicted due to the remote location of theproject, and the requirement to respect all existing water user rights. The area of influence of theproject, including its ancillary infrastructure, is not in or near an indigenous reserve or populatedarea. The only people near the site are part of the national police post for the guards of the dam.No other people live near the project site or under the transmission line. As discussed above, allwater user rights will be respected, as energy generation receives a lower priority than agriculturaluse.
The area is extremely poor. The population downstream of the plant are small landowner farmers.The main crops-are rice, plantains, vegetables and coconuts. The plant utilizes the existing accessroad for the dam, which passes through many of the small villages. Social impacts of constructionwere minimized by good construction practices such as traffic control, noise reduction, andproper waste disposal. Many jobs were created during construction and now during operation.Once the plant become profitable, the sponsor hopes to establish a small scholarship fund for localchildren to attend university.
A broader social program involves providing the local communities with access to electricity,something most of the nearby communities live without. The presence of the new transmissionline has opened up the possibility of electrification. The distribution of electricity is the sole rightand responsibility of the Ministry of Energy and Mines; the sponsor is not allowed to undertake asocial electrification program themselves. However, the sponsor is working with the Ministry topromote this program in the area. Should the program move forward with electrification of allcommunities in the area, the sponsor estimates that more than 20,000 people would receiveservice.
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Additional Annex 13: Social AnalysisPERU: PERU - Poechos Hydropower Project
Summary of Public consultation (groups consulted, meetings, issues): The EA for the projectwas consulted in 1997 during the process of concessioning. Announcements were posted in localnewspapers. The EIA for the transmission line was consulted publicly on July 23, 2003 inSullana. The EAs are available for public review at the Ministry of Energy and Mining (MEM),and are available locally.
The project includes only the addition of generation facilities to an existing dam, with minimalchanges to discharge patterns and no reduction of minimum downstream flows. No other peoplelive near the project site or along the transmission line. All water user rights will be respected.No negative social impacts are predicted due to the remote location of the project, and therequirement to respect all existing water user rights.
Social Baseline. No negative social impacts are predicted due to the remote location of theproject, and the requirement to respect all existing water user rights. The area of influence of theproject, including its ancillary infrastructure, is not in or near an indigenous reserve or populatedarea. The only people near the site are part of the national police post for the guards of the dam.No other people live near the project site or under the transmission line. As discussed above, allwater user rights will be respected, as energy generation receives a lower priority than agriculturaluse.
The area is extremely poor. The population downstream of the plant are small landowner farmers.The main crops are rice, plantains, vegetables and coconuts. The plant utilizes the existing accessroad for the dam, which passes through many of the small villages. Social impacts of constructionwere minimized by good construction practices such as traffic control, noise reduction, andproper waste disposal. Many jobs were created during construction and now during operation.Once the plant become profitable, the sponsor hopes to establish a small scholarship fund for localchildren to attend university.
A broader social program involves providing the local communities with access to electricity,something most of the nearby communities live without. The presence of the new transmissionline has opened up the possibility of electrification. The distribution of electricity is the sole rightand responsibility of the Ministry of Energy and Mines; the sponsor is not allowed to undertake asocial electrification program themselves. However, the sponsor is working with the Ministry topromote this program in the area. Should the program move forward with electrification of allcommunities in the area, the sponsor estimates that more than 20,000 people would receiveservice.
Further information on the social plan for the project is included in the summary analysis.
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Additional Annex 14: Major related projectsPERU: PERU - Poechos Hydropower Project
Currently, there are close to twenty World Bank Carbon Finance projects in the LAC Region thatare under preparation. Of these, most utilize hydro or wind power, although cogeneration,biomass, geothermal, solid waste management, and gas flaring reduction technologies are alsorepresented.
The first CF project in LAC to reach the stage of a negotiated Emissions Reductions PurchaseAgreement (ERPA), and the third such project in NCDCF's history, is the ChacabuquitoHydropower project in Chile. Chacabuquito is a 25 MW run-of-river hydro power plant. It willgenerate 175 GWh to replace coal/gas energy that would otherwise produce greenhouse gasemissions. The project entails the largest purchase of CERs for the NCDCF so far with $6.7million over the next 14 years.
Brazil Plantar project is the second one in the Region that was recently negotiated, and involvesthe purchase of $5.3 million in CERs. The project will substitute coal as fuel in pig ironproduction. The new fuel will be high energy-content charcoal from biomass that will bespecifically planted for that purpose. The project is unique in that it also involves additionalforestry activities that will offset carbon.
The Costa Rica Umbrella Project for Renewable Energy Resources is under advancedpreparation, and currently includes three small-scale Sub-projects - two windfarms and one hydropower plant. They will result in over $2 million in CERs.
Colombia Jepirachi Wind Farm is a 20 MW wind project in the North East of Colombia. It willdisplace 68.3 GWh of coal and gas energy for a purchase of $3.5 million CERs while bringingnumerous economic and social benefits to the local indigenous people.
Colombia Rio Amoya Environmental Services Project, is a recently-approved project that usespart of the carbon credit revenues from a new 80 MW run-of-river hydro plant to protect aprotected natural area and to promote social plans for the local communities.
Mexico INELEC Umbrella of Hydro Projects, also recently presented for PAD approval, featuresa bundle of small run-of-river hydro plants developed by private sponsors in Mexico as afirst-of-a-kind experience in the country.
Other projects in NCDCF's LAC pipeline include: wind and hydro power plants in Honduras;geothermal and bagasse cogeneration in El Salvador; hydro and geothermal in Guatemala; windpower, gas flaring reduction and sugarcane bagasse cogeneration in Mexico; biomass and solidwaste management in Brazil; bagasse cogeneration in Guyana; and wind farms in Argentina andJamaica. New project ideas from the Region are being received by the NCDCF nearly everyweek.
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Chile ChacabuquitoThe Chacabuquito Project consists of a run-of-the-river power plant of 26 MW capacity thatutilizes the waters of the Aconcagua river and will produce an average gross annual generation of175 GWh (160 GWh net). The project was developed by Obras y Desarrallo (OyD) a subsidiaryof Hidroelectrica Guardia Vieja (HGV) and is located in the 5th Region administrative divisionnear Los Andes, about 100 km Northeast from Santiago. This plant is in cascade with twoexisting other upstream hydropower plants (Los Quilos and Aconcagua). Upstream from thesethree plants a future project, Hornitos, will complete the river hydropower development.Chacabuquito will be connected to the 5th Region's 110 KV sub-system within the SIC and willgenerate power for industrial and residential consumers in the 5th Region. Its design uses asimple layout and technologies well proven in Chile and consists of a diversion weir, a system ofchannels and tunnels a penstock and a powerhouse. The project construction costs amount toabout US$ 37.0 million including contingencies but without financing charges. Of this, US$ 34.0corresponds to the cost associated with the hydro electric plant and related equipment and US$3.0 is required for the expansion of the current 110 KV transmission lines that connects LosQuilos and Aconcagua plants. Construction started in the July 2001; PAD was approved inNovember 2001 and the plant was commissioned in May 2002. In June 2003 it was the first CDMproject in History receiving its first ER payment.
Colombia JepirachiThe project consists of the development of an aeolic generation facility with a nominal powercapacity rated at 19.5 MW, supplied by a total of 15 wind generators with a rated capacity of 1.3MW each. The wind generators will be delivers their output to the Colombian interconnectedelectricity system under a preferential dispatching scheme. The grid connection to the site willhave a length of 8 km.The project will be located in Wayuu Indian Territory in the Northeastern region of the AtlanticColombian coast, in the area between Cabo de la Vela and Puerto Bolivar, within the region ofUribia in the Department of Guajira. In terms of geodesic coordinates the site is located 12o 15'4" North latitude, 72o 4' 1" to the East, 5 Km west from Puerto Bolivar.The average wind velocity at the site is 7.29 m/sec (at 10 m height) to 9.15 m/sec (at 50 m height)and its topographic characteristics provide the necessary conditions to maximize the powergeneration potential of the wind farm.The PAD was approved in the summer of 2002. The project started construction shortly after andwas commissioned in January 2004. First verification of Ers is expected by January 2005.
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Additional Annex 15: Monitoring and evaluation of results/outcomesPERU: PERU - Poechos Hydropower Project
Carbon finance projects are initially evaluated on the basis of an ex-ante analysis of the emissionsbaseline (conventional generation and emissions that would have occurred in the absence of the 1project) and determination of project additionality. Project performance - and payment for ERs -is then monitored as per a MP annexed to the ERPA and evaluated on the basis of achieving theexpected ERs. Monitoring and Evaluation of ERs is implicit in the project as a function ofelectricity generation as it occurs, with payment based on Megawatt hours (MWh) of generationas invoiced to the customer purchasing the electricity.To increase the likelihood that ERs acquired via ERPAs will satisfy the requirements of theUNFCCC and the KP, the NCDMF will retain the services of internationally-recognized, fullyindependent third parties to: a) provide Validation of the sector-wide Baseline; b) provideValidation of the project design, project specific Baseline Study (test of additionality against thesector-wide baseline), and MP. This independent third party will also undertake periodicverification and certification of the ER generated by each project and issue a Verification andCertification Report that includes:
* A statement of the amount of verified and certified ERs the projects have generated in therelevant period,* Other matters as may be required by the UNFCCC or KP, and* Verification of compliance with Bank Safeguard Policies.
The validator, then, presents a PDD (Project Design Document), see Annex 3 in the project filesfor Poechos' PDD, along with a description of the methodology chosen to measure the ERs andto demonstrate additionality, to the Executive Board of CDM, for its approval and registry underinternational rules.The project was reviewed by the Bank during the construction phase of Project to address areasof implementation weaknesses, especially concerning the Environmental Management Plan andsocial mitigation measures; accommodate changes in priorities, and ensure compliance withrelevant policies and procedures.
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Additional Annex 16: Country and sector or program backgroundPERU: PERU - Poechos Hydropower Project
Power Sector Background: Peru has a well-developed electric industry and a modem legal andregulatory framework. The electric service covers the whole national territory and it reaches to75,3% of the population. The Government's efforts in the last years have been guided to increasethe degree of electrification of the country and to integrate a greater part of the population to thenational network, named National Electric Interconnected System (SEIN). The power installednationwide for the public service is 5686 MW, from which almost 50% are hydroelectric plantsand 50% thermoelectric. In 2002, the national production was of 20,149 GWh: 86,4%hydroelectric and 13,6% thermoelectric. Almost the entire population of the coast and thehighlands are interconnected to the SEIN. The population of the jungle is still isolated due to theirremoteness and the geographical difficulties to construct transmission lines.
Although traditionally the main energy source has been hydropower, the exploitation of thenatural gas deposits of Camisea, in development process, will mark a new stage in the use ofenergy in Peru and will turn into the most economic resource to generate electricity during thepresent and next decades.
Institutional Framework: Electricity service in Peru was in the hands of private utilitycompanies until the 1970's, when it was nationalized. Until 1992, the planning, the investmentsand the operation of the electric sector were exclusively in charge of the State. In 1993, theGovernment sought to restructure the sector and introduced a new Electricity Concession Law(ECL) and started a privatization process of state-owned enterprises under special PrivateInvestment Promotion Laws. As a result, a new legal, regulatory and institutional framework forthe sector was established, including:
i) Ministry of Energv and Mines (MEM): (General Directorate of Electricity, or DGE),represents the State, which is responsible for granting concessions and authorizations, allowingthe participation in the electrical business as well as its promotion, enacting regulations andsupervising the electricity service.ii) Energy Investment Supervisory Agency fOSINERG): an independent regulatory agency incharge of price, product and service quality regulations of electricity and natural gas, andmonitoring of compliance with sector laws and regulations.iii) Committee for the Economic Operation of the System (COESS: in charge of short-termplanning and real-time system operation and power market transactions.iv) Competition and Consumer Advocacy Institute (INDECOPI): a multi-sector competitionagency authorizing vertical and horizontal integration
The sector was vertically segmented, where different companies are in charge of generation,transmission and distribution/commercialization businesses. The sector structure established wasvery close in design to a wholesale power pool and a spot market. The Electricity ConcessionLaw allows the generation, transmission, distribution and sale of electricity as a commercialbusiness, without any restrictions or intervention by the State. The Peruvian power market isstructured as follows:
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i) The "Free "(unregulated) Contract Market: for transactions between major customers(with demand greater than 1000 kW) and electricity supply companies.ii) The Inter Generator Market (Spot Market of Energy): for transactions made at"instantaneous" marginal cost between electricity generating companies belonging to theCommittee for Economic Operation of the System (COES).iii) The Public Service (regulated) Market: for customers with contracted demand of less than1000 kW, with maximum tariffs fixed by the Energy Tariffs Commission (CTE)
Current organization is described in the following graphic:
The COES SEIN has the function of coordinate the operation of the SEIN at minimum cost,guarantee the security of the electric power supply and the best use of energy resources. TheCOES carries out the programming and operation of the network for the short and medium term.It coordinates and supervises the real time operation. It evaluates the results of the operation andthe energy and power transfers among generators. It is conformed by the holders of thegeneration companies and of the Main Transmission System. The requirement for a generationcompany to belong to the COES is that its power generation should be grater than 1% of theeffective power generation of the SEIN and that it markets over than 15% of its produced energy.All the connected companies to the SEIN are forced to accept the dispositions of the COES.
Services and Concessions: Three main types of service companies can participate in the powermarket: generation, transmission and distribution companies. Although "commercialization"(supply) is not explicitly defined in the electricity law, distribution includes the supply/retailbusiness (commercialization). The law establishes a clear unbundling of the three services withsome specific provisions. According to the ECL, companies need to obtain concessions and/orauthorizations to operate in the sector. The Ministry of Energy and Mines manages theconcession and authorization procedures and approval. A concession granted by the MEM is
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required for the following operations:
* Generation: Generating electricity with hydro or geothermal resources, with an installedcapacity greater than 10 MW.* Transmission: Transmission of electricity when installations will affect property belongingto the State, or when rights-of-ways are required from the State.* Distribution: Distribution for public service (use) when demand exceeds 500 kW. Theconcessionaire is granted has exclusive rights to a geographical market
The Law also sets forth a regime of concessions, granted by the Ministry of Energy and Mines(MEM), to develop activities of electric generation that uses hydraulic and geothermal resourceswhen the power is over 10 MW; the electric power transmission that affects possessions of theState and/or requires imposition of rights and the electric power distribution for Electricity PublicService when the demand is over 500 kW. Concessions for any of the activities indicated abovemay be temporary or permanent. A temporary concession is for study purposes (potential hydrosites, for economic feasibility, etc.), for a maximum period of two years. Permanent concessionsare for construction and operation of electrical systems. They are granted for an indefinite periodthrough a signed contract with the State, represented by the Ministry of Energy and Mines.
Dispatch: The Peruvian Electric Sector operates under an incremental cost system. At any givenlevel of demand, the generating plant with the lowest variable cost is the first to deliver energy tothe system without consideration for which company it belongs to or for any contractualarrangements between the generator and the consumer. Additional plants start delivering energyin ascending order based on declared variable cost until all the demand is met. The transactionsare set at the incremental cost (determined by the variable cost) of the last company to deliver.This is an incentive to the generating companies to have the lowest possible production coststructure so as to be among the first to be called on and thus have the greatest possible salesvolume at the highest possible sales margin.
The generating rates may be regulated or not, depending on who the buyers are. Generators arefree to enter into rate contracts for peak hours and off-peak hours (both for energy and capacity).Contract quantities and prices agreed in bilateral contracts are not part of transactions in COESand large users and distribution companies do not participate directly in the spot market. Thespot market is basically an inter-generators transaction market. Distributors and large userscontract directly with generators and pay in accordance with these contracts. The wholesalemarket has capacity (power) payments and a system of two-part time-of-day pricing (energy andpower, during peak and off-peak hours.)
Since the opening of the electricity market in 1993, Osinerg (former "Comisi6n de TarifasElectricas") has been responsible to set every six months the regulated electricity prices. The ratepaid for generation is broken down into two parts: energy (kWh) and capacity (MW). Thegeneration rates can be of the following two types:
Non-regulated - Private ContractsFree Clients (whose annual demand is equal or greater than 1 MW, except electric distribution
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companies) can negotiate their rates freely with the generation and distribution companiesaccording to supply and demand in the marketplace and the conditions thereof are negotiatedindividually.
Regulated - Bus Bar PricesThe regulated rate is used for those clients that consume less than 1 MW per year (regulatedcustomer) and the electric distribution companies. This rate is reviewed every six months (therenewal dates are in May and November each year) and cannot be 10% over or under the freemarket price.
In the spot market, the purchase and sale of energy is on real time basis. The generatingcompanies operate as buyers and sellers, depending on the moment at which their Plantdelivers to the National Interconnected System. In this market COES establishes the rateaccording to the incremental cost of energy production.
Tariffs/Prices: The supply of electricity for public service (regulated users) has a tariff systemestablished by law/regulations (OSINERG-GART), based on marginal cost pricing, the efficiencyof the transmission and distribution systems, a reasonable return on investments (at presentestablished at 12%) and the level of the "free" market (non-regulated) prices. At present, theun-regulated market (large consumers with demands over 1,000 kW) represents 45% of themarket.
Electricity tariffs for regulated users have three components: generation prices, transmission tariffand distribution tariffs based on replacement value as new. Regulated bus-bar rates, which covergeneration and transmission tariffs, should not differ by more than ten percent (10%) from theweighted average price paid by unregulated customers. Generation prices are based on short-runmarginal costs to promote efficient utilization of resources. It is based on an "economicallyoptimal expansion and operation of the system" where marginal costs should balance theinvestment (fixed) and system operation (variable) costs. Transmission tariffs are based on theannuity to recover the average total transmission costs of an economically efficient transmissionsystem.
The transactions of the energy wholesale market are made by means of supply contracts amonggenerators, generators and distributors, and generators with clients of the. free market. Thetransactions among generators that result from the economic dispatch are made under spot prices(short term marginal costs). An annual charge is fixed for the use of the Main TransmissionSystem, which is paid by the generators in proportion to their firm power, but which cost istransferred to the users in the final electricity price.
The subject of the present note is to propose a streamline procedure for Repeater Projects thatare similar to the Poechos Hydropower Carbon Finance Project. The idea is to process eachRepeater Project individually, with its own PAD to ensure quality of the appraisal, but reducethe bureaucratic burden and transaction costs associated with such individual approach.
a) EligibilityRun-of-river or off-existing-dam hydro projects in Peru that will comply the followingrequisites, compatible with World Bank Operational Policy 4.37 and taking into accountfurther guidance from the World Bank Latin America Region:
* Reservoir capacity smaller than 1 million cubic meters* Spillway capacity less than 2000 cubic meters* Crest length smaller than 500 meters* Public or private sector sponsorship and financing* Initial qualification as Environmental and Safeguards Category B or C* Acceptable PPA-Off-taker risk* Approved by CFU at the CFD level (formerly CF-PCN)* Acceptable risk factors* Current or future possibility of national grid-connection
b) Procedure for Approval* After obtaining a positive ISDS feedback from QAT, the Task Team Leader will notify theSector Manager and Sector Leader the possibility of a Carbon Finance Hydropower RepeatProject in Peru that is eligible as per the above prerequisites.* The Task Team will prepare a PAD plus annexes, following the approved PoechosHydropower Carbon Finance PAD as template. The new PAD will use all common features whenapplicable, but will perform an individual due diligence on the technical, financial, social andenvironmental aspects.* The Task Team will submit the document, along with the updated QAT safeguards memoand the comments from at least two peer reviewers to LCR Energy Cluster and the FPSI andESSD Sector Leaders for a virtual PAD review.* Once cleared by the FPSI Sector Manager, the revised document will be submitted to theCMU for approval review if the CD so authorizes after receiving a positive recommendation fromboth Sector Leaders and the Sector Manager. No involvement from regional financialmanagement, procurement and/or legal is ever needed in CF projects.* The CD will sign the PAD after comments from the virtual review has been added to thefinal text. The project will be cleared for appraisal and ready for ERPA signature after duedisclosure period .
c) Good faith expected pipelineThe Task Team has already identified an number of projects that may meet the eligibilitycriteria for Hydropower Repeat Projects in Peru. The candidates are:
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* Poechos 11 (12 Mw)* Tunel Graton (5 Mw)* Cerro Mulato (8 Mw)* Moche I (12 Mw)* Moche II (8 Mw)* Tanguche II (20 Mw)* Tanguche III (30 Mw)
* El Sauce (9 Mw)* Tarucani (49 Mw)
* Quitaracsa (1 15 Mw)* Santa Rita (200 Mw)* San Gaban (120 Mw)* Corona (26 Mw)* La Virgen (60 Mw)
