Nenskra HPP

Location:

Georgia

Project number:

46778

Business sector:

Power and energy

Notice type:

Private

Environmental category:

A

Target board date:

31 Jan 2018

Status:

Board Approved

PSD disclosed:

24 Oct 2017

Translated version of this PSD: Georgian

Project Description

Provision of a senior secured loan of US$ 214 million to JSC Nenskra Hydro to finance the development and construction of a 280 MW Nenskra HPP on the Nenskra and Nakra rivers in the Svaneti region in north-western Georgia.

Project Objectives

The loan supports JSC Nenskra Hydro (the Borrower) in the development and construction of a hydro power plant with the total installed capacity of 280 MW on the Nenskra and Nakra rivers in the Svaneti region in north-western Georgia.

Transition Impact

The Project is in line with the Green Economy Transition (GET) initiative of the Bank as it will deliver on the objective of reducing greenhouse gas emissions from electricity generation, which is a key priority of Bank's GET approach.

Client Information

NENSKRA JSC

The Borrower is a special purpose vehicle established under laws of Georgia for the sole purpose of constructing the 280 MW Nenskra HPP. It is developed by Korea Water Resources Corporation (KWater).

K-Water, a 100% Korean state-owned company rated Aa3 (Moody's), A+ (S&P) and AA- (Fitch), was established in 1967. Since its establishment K-water has been implementing national water resources management policies regarding multi-purpose dams, water supply dams and regional water supply systems. In total K-Water operates 10 hydro power schemes with total installed capacity above 1,250 MW and produces more than 60% of total hydro generation in South Korea.

EBRD Finance Summary

USD  214,000,000

Total Project Cost

USD  1,083,000,000

Environmental and Social Summary

The Nenskra HPP Project has been Categorised A in line with EBRD's 2014 Environmental and Social Policy (ESP) thereby requiring a formalised and participatory Environmental and Social Impact Assessment (ESIA) to be prepared by the Project Sponsors in accordance with EBRD's Performance Requirements (PRs).  The proposed hydropower scheme includes the construction of a large dam which therefore triggered Category A requirements; in addition the project comprises a large and complex greenfield development with a number of significant environmental and social sensitivities. 

A detailed project description is provided in the ESIA and, as indicated, the Project includes a number of "large" (as per International Commission of Large Dams definitions) infrastructure components as well as extensive tunnelling for the transfer of water from a neighbouring catchment.  Project construction will also require a number of associated facilities such as roads, quarries and a transmission line.  The Project's catchment area is entirely within Georgia, however, it is highly sensitive from both social and environmental viewpoints.  The Project footprint is therefore relatively large and complex and has been carefully considered during the preparation of the ESIA by the Sponsors and resulting due diligence by EBRD.

Environmental and Social Due Diligence (ESDD) was supported by the appointment of an independent firm of international consultants with expert experience in the sector.  The consultants were in place for the entire ESDD process and will be retained for project monitoring.  Each step of the ESDD and monitoring has therefore been subject to independent review.

In 2015 an Environmental Impact Assessment (EIA) was prepared for national permitting needs.  The first stage of ESDD was to undertake a Gap Analysis of the EIA against the EBRD's PRs and to set out the requirements of a Supplementary Disclosure Package to ensure that the Project is structured to meet EBRD's ESP.  Furthermore, the capacity of the Sponsor and the EPC contractor to implement EBRD's requirements was assessed in detail throughout.

Initial findings of the ESDD indicated that the upper catchment area of the Project is home to a population with a strong identity, some of who oppose the project.  In addition, ESDD identified that there was ambiguity around the status of potentially protected areas in which the Project is to be located.  As a result the supplementary assessments paid detailed attention to issues associated with local populations and biodiversity.

Following the completion of the Gap Analysis the Sponsor retained an ESIA consultant to prepare the supplementary studies and a disclosure package.  ESDD included detailed review of the development and output of these studies which culminated in the disclose of the ESIA in March 2017, bringing together three years of detailed studies and input in order to ensure that the project is structured to meet EBRD's requirements.  In parallel the Sponsor assembled a strong team of experts to deliver upon the ESIA commitments.

The ESIA can be found here and ESDD completed by the Lender group and the independent consultants has confirmed that the ESIA meets the EBRD's ESP and PRs although it is recognised that this is a complex project with a number of E&S sensitivities.

Due to the complex and sensitive nature of the project it was concluded that it would be beneficial for all stakeholders if an independent panel of experts (IPoE) be convened to provide additional oversight and transparency into the project design and implementation arrangements.  The IPoE is at liberty to provide professional judgement of the Project E&S performance without influence from the Sponsor or any other stakeholder.  The IPoE has issued a number of reports on items such as dam safety and stakeholder engagement which have been disclosed alongside the ESIA package.

The IPoE is chaired by the vice-president of the International Hydropower Association and assisted by a pool of experts in geological and natural hazards, asphalt faced rock fill dams stability, seismic risks and social assessment. The IPoE has completed several reviews of the Project documents, and, all recommendations made by the IPoE were taken into account into the revised Project design.  The IPoE opined on the latest version of the technical documentation, and the Sponsor agreed to involve the IPoE into the next project stages, until Project operation commences.

A significant benefit of the IPoE's review of the Project has resulted in design changes which removed the requirement for physical resettlement of local communities which was anticipated under previous designs.  In addition, several recommendations regarding dam design and public safety have significantly mitigated risks associated with the project design and future operation.

The ESIA has been subject to public disclosure and the IPoE and lender's E&S consultant confirmed that meaningful consultation has been achieved.  A large number of comments have been addressed to the Sponsor, and the EBRD, from local populations and CSOs and an extensive explanation of how each and every enquiry has been addressed has been prepared, and disclosed, by the company in the form of a Public Consultation Report (PCR) which is disclosed alongside the ESIA package.  As a result of this public consultation and feedback mechanism several additions to ESIA chapters have been made during the consultation period and the Sponsor remains fully committed to continued dialogue and transparency when addressing stakeholder concerns.

Specific concerns raised by CSOs include issues associated with: adequacy of previous versions of the EIA; absence of the classification of local populations as "Indigenous Peoples"; construction of the Project in a potentially protected area; level of assessment of natural hazards; the way cumulative impacts have been assessed; and the way in which stakeholder engagement has been conducted.  Each of these concerns has been addressed by the Sponsor in the ESIA and the PCR.  A selection of pertinent issues are briefly summarised below although it should be noted that extensive information on these topics is presented in the ESIA and is not fully duplicated here:

  • Community safety, natural hazards i the area in which the Project is to be located is mountainous and natural hazards exist.  The ESIA and the Project's technical documentation have been reviewed by the IPoE and recommendations were made which resulted in further reducing such risks impacting the Project and therefore community safety.  The dam construction method, location, and foundation design have all been adapted to mitigate the risks of natural hazards impacting on dam integrity.
     
  • Physical Resettlement i physical resettlement of local populations has been avoided in entirety through mitigation by design. While significant land take is still required, the minimisation of resettlement related activities is an example of a positive outcome of the ESIA and ESDD process.
     
  • Indigenous Peoples i CSOs strongly believe that Svans meet the defined criteria of Indigenous People as stipulated by the EBRD's ESP and thus should be treated as such for the purposes of the Project's analysis. The ESIA provides detailed analysis of the identity of the Svans vis-a-vis lender policies which confirms that Performance Requirement 7 is not triggered.
     
  • Protected Areas - as further discussed below the Project area was formerly within a proposed protected area, the boundaries of which were later refined.  The Sponsor adopted a precautionary approach and has assessed the project both as if it is located within and outside a protected area.  The resulting studies demonstrate that the impacts can be appropriately mitigated under either scenario.
     
  • Regulatory environment and capacity of the Sponsor - EBRD has worked closely with the Sponsor throughout and indicated the need for a robust E&S governance and reporting structure to be developed.  This is now in place in readiness for project construction.

The Nenskra Project national EIA was prepared and approved in 2015. This was before the boundaries of the larger "Svaneti" candidate Emerald Sites were refined by the authorities, and the footprint of the permitted Project was partly inside the original "Svaneti" candidate Emerald Site. In 2016, the authorities completed the revision of boundaries of Candidate Emerald Sites at the country level, and "Svaneti" candidate Emerald Site was split in two smaller sites (Svaneti 1 and 2) that no longer included the modified habitats where the Project is planned to be constructed.

The sequencing of these events and the content of the national EIA, the ESIA and the permitting procedure has been questioned by CSOs and this issue is currently being discussed by the Bern Convention. 

To pre-empt this issue the Sponsor has treated Nenskra both as if it is inside a protected area and also as if it is outside and has carried out an Appropriate Assessment (Stage 1 – Screening) and a Critical Habitats Assessment in accordance with the EU Habitats Directive and EBRD PR6 for both scenarios.  Both assessments confirmed that, should the project be located inside or within cose proximity of a candidate Emerald site, Project related impacts could be sufficiently mitigated so that the conservation objectives of the potentially protected area would not be compromised.  These assessments further confirmed that the area to be directly affected by the Project, is considered to be highly modified habitat as a result of years of logging activity in the area. The methodology by which these assessments have been undertaken have been confirmed by independent consultants to meet the requirements of the applicable EU directives and the EBRD.

All elements of the Project will be closely monitored by EBRD and the Lender's independent E&S consultant.  This includes a fulltime presence of the LESC on-site and routine visits by EBRD.  Of particular focus will be the implementation of the Environmental and Social Action Plan (ESAP) that has resulted from the ESIA and ESDD against the various project milestones.

There is an Environmental and Social Impact Assessment available for this project.

Supplementary E&S Studies (zip file)

Technical Cooperation

None.

Company Contact Information

Young-Tak Choi
+995-322-43-0419
nenskra.ge
Floor 4-5, Green Building #6 Marjanishvili street 0102 Tbilisi, Georgia

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