palmet - PALGAZ

PALMET
ENERJi A.~.
I :lrih:2i)(Ii'.20US
l<cf:O;-, !07
International Finance Corporation
2121 Pennsylvania Avenue NW
Washington, D. C. 20433
Attention: Rashad Kaldany, Director
Infrastructure Department
Environmental and Social Review Summary (ESRS) and Summary of Proposed
Investment (SPI) for the Palmet Enerii Project (the "Project"), 'Fe #27008
We hereby confirm that we reviewed the SPI and ESRS documents, dated August 7 and
19,2008 respectively, in relation to the above project, which is corporate loan to Palmet EneIji.
Please ta:.::cthis letter to confirm that:
•
we have no objection to the SPI, ESRS and the IFC approved relevant Environmental
and Social Action Plan (ESAP) being made available to interested parties (including
the general public) through its placement in the WorId Bank Group's InfoShop and
appropriate W orId Bank Group country offices.
•
if the ESRS needs to be updated to reflect the final understanding of
environmental and social issues with IFC, the revised text will be issued to us for
prior approval;
•
we will need to update the ESAP to reflect the final understanding of
environmental and social issues with IFC if necessary.
We confirm that we have reviewed the IFC Performance Standards on Social and
Environmental Sustainability available at www.ifc.org/enviro. We understand that the following
Performance Standards are applicable to this corporate investment.
Performance Standard 1: Social and Environmental Assesment and Management System
Performance Standerd 2: Labor and Working Conditions
Performance Standard 4: Community Health, Safety and Security
We also understand that the applicability of Performance Standards 3,5,6,7 and 8, below, will be
determined as part of the project-specified reviews and we will be required to demonstrate
compliance to them in due course.
Performance
Performance
Performance
Management
Performance
Performance
Standard 3: Pollution Prevention and Abatement
Standard 5: Land Acquisition and Involuntary Resettlement
Standard 6: Biodiversity Conservation and Sustainable Natural Resource
Standard 7: Indigenous Peoples
Standard 8: Cultural Heritage
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IIIFe
International
Finance
Corporation
ENVIRONMENTAL AND SOCIAL REVIEW
SUMMARY
World Bank Group
Disclaimer
This Environmental and Social Review Sununary is prepared and distributed in advance of the IFC Board of Directors ,
consideration of the proposed transaction. Its pwpose is to enhance the transparency ofIFC's activities, and this document
should not be construed .as presuming the. outcome of the Board of Director's decision. Board dates are estimates only.
Any documentation which is attached to tlUsEnvironmentaland
Social Review Summary has been prepared by the project
sponsor and authorization has been given for public ~lease. IFC has reviewed this documentation and considers that it is of
adequate quality to be released to the public but does not endorse the content.
Country:
Project Name:
PaImet Enerji
Turkey
Region:
EUROPE & CENTRAL ASIA
Dept./Div. :
Company Name:
CINUT - InfrastructurelUtiIities
Pa1met Enerji A.S.
Division
Project Business Sector: C-CA - Natural Gas Distribution
I
I
I
Project No.:
27008
Environment Category:
B - Limited
Project Status: Active
Parent Proiect Identification:
Parent ill:
Parent Short Name:
Parent Relationship:
No Relationship
Date ESRS sent to InfoShop
& posted on IFC Web site:
Date of revision (if
appropriate) :
Date of clearance by client
for factual accuracy
Local Disclosure Date
Local Disclosure Date of
revised ESRS
iew 0 IFe's sco eo review:
,
oposed IFC investment will extend a corporate loan to PaImet Enerji, a holding company established by the Palmet Group
WoJililnbul
in 1984 for its natural gas and electric power generation businesses. Palmet Enerji also owns Gazport, a natural gas
··.•·\IvIiolesale company, and Palmet-Terasen, a joint venture that undertakes project management and construction/contracting
for
Proiect ID 27008
Environmental and Social Review Summary
7/15/2008
Version 0.7
its projects. Palmet Enerji is an existing IFC client, through the financing of two of Pal met's gas distribution subsidiaries, Palen
and Palgaz, in 2005.
IFC's appraisal of this project consisted of a review of environmental, social, health and safety, and labor information provided
by Palmet EneIji, yearly supervision and review of the annual monitoring reports from existing loans, and meetings and site
visits to Palmet Enerji's facilities and operations by IFC's Environmental Specialists. Appraisal also included project-centered
reviews of the expansion plans for Palen and Palgaz, and of Delta Power, a 60 MW gas-fired power plant now under
construction.
»Palmet
EneIji's Health, Safety and Environmental Manual.
» Emergency Response Procedure for Palen and Palgaz.
»Palmet
Enerji's Hiring and Employment Procedures.
» BM Trada Certification Reports for the Health, Safety and Environmental Management System for Palen and Palgaz.
» Preliminary Environmental Impact Assessment Report for Delta Power. Dec, 2007 (prepared by Palmet Enerji)
» Project Description File including detailed relevant environmental impact information for Delta Power. March,
2008.(prepared by EN-CEC Consultant, and presented to the Ministry of Environment and Forestry)
» Delta Energy Environmental License, issued by the Ministry of Environmental and Forestry on April, 2008.
» Sample of contractor legal agreement.
» Sample of material teclmical specifications
» Procedures List of QEHS, Contents of several procedures and records
» Several reports/records related to accidents/incidents
» Employee training certificates
Project Description:
The project is a corporate-level investment to Palmet Enerji, to re-finance existing loans and fund the Company's capital
expenditures program (CAPEX), which will be used to fund the further expansion of the Palen and Palgaz distribution networks
in the coming years, and the construction of Delta Power, a new 60 MW combined cycle gas turbine power plant.
The total project cost is approximately US$ 87 million, of which the IFC has been requested to provide an A-loan of up to US$
15 million, and a C-Ioan ofUS$ 10 million.
The Palen distribution license is in Erzurum, the largest city in eastern Anatolia. The main demand for natural gas derives from
the household sector for public buildings, including military, education, hospitals and government/municipal buildings.
Currently Palen supplies natural gas to about 700 public and commercial customers and 39,436 residential customers. Palen
expects to extend the network to connect the city ofIlica in the near future. At present, the distribution network (not including
local service lines) includes 240 km of polyethylene mains and 35 km of steel pipelines and one city gate station that receives
gas from the BOT AS high pressure network. The gas distribution license for Palgaz covers an area between Istanbul and Izmit,
approximately 60 km outside of Istanbul. The Gebze region is one of the most industrialized in Turkey. Palgaz' distribution
network consists of the connected industrial customers is 239 of which 161 are actual users, 348 public and commercial
customers, 35,595 residential consumers, and includes about 320 km of polyethylene mains, 103 km of steel pipelines, and four
city gate stations.
The expansions involve the establishment of additional distribution systems, service pipeline connections and other related
~I'rent
required for this purpose. Palmet Enerji may also acquire new distribution concessions as they become available.
~'C:UflMl:fition,Palmet Enerji plans to invest in energy generation. Delta Power will be the first of the Company's power projects,
a new small (60 MW) combined cycle gas turbine power plant in an industrial zone near the town ofBiiyiikkaristiran in
the Thrace Region in northwest Turkey. Construction of the power plant started in early 2008, and is expected to begin simple
£~
Proiect ID 27008
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Confidential
cycle operation at the end of October 2008 and combined cycle operation in June 2009. Construction of Delta Power also
involves a new 154 kV, 4-km transmission line between the power plant and the Biiyiikkaristiran substation, and a I-km pipeline
to connect to the national BOT AS gas network.
Idelltified Applicable Perform alice Stalldards:
While all Performance Standards (PS) are applicable to this investment, IFC's review indicates that the investment will have
impacts that must be managed in a manner consistent with the following:
»PS
I: Social and Environmental Assessment and Management Systems,
»PS
2: Labor and Working Conditions, and
» PS 4: Community Health, Safety and Security.
The mitigation of the issues related to the "Pollution Prevention and Abatement" included in PS3 which is also applicable to
Palmet EneIji Operations, is described within the environmental assessment and management systems as part of the PS I section.
Applicability of other Performance Standards will be determined by the Company as part of the project-specific
discussed below.
reviews, as
E & S Categorization Rationale:
This corporate-level investment is a Category B project. It is for an existing IFC client with good track record in its
environmental performance. Most of the resources will finance CAPEX activities which essentially imply continuity and
expansion of service, and therefore new environmental, social, health and safety, and labor impacts and risks are limited. IFC
implemented its Sustainability Policy and Performance Standards (PS) after the two initial investments; therefore, prior to
financial closure the Company will present an Environmental, Social, Health and Safety Action Plan (ESAP), to include
compliance with IFC applicable PS into their Corporate Integrated ESHS Management System.
The only activity with potentially significant new environmental and social impacts and risks is the construction and operation
of Delta Power. At 60 MW of electrical capacity, Delta Power can be considered a small power plant. It is being developed on a
highly intervened agricultural-to-industrial transition zone, and the impacts associated with the construction and operation of
this new plant are limited and can be managed with standard pollution prevention and control practices.
In the unlikely eventuality that any ofIFC resources invested on Palmet Enerji's CAPEX are used to develop any project that
would qualify as Category A, the Company will request IFC's pre-approval. The IFC will reserve the right to decline finance of
any such project if compliance with IFC's Performance Standards cannot be assured.
Description ofk" Environmental and Social Issues and Mitigation:
IFC's appraisal reviewed the effectiveness of the Company's corporate environmental and social management activities and the
ability of the organiza60n to ensure compliance with Turkish regulatory requirements (e.g. state, municipal, etc) and IFC's
Performance Standards. The Performance Standards replaced IFC's Safeguard Policies that were used for IFC's earlier
investment in the Company's two natural gas distribution projects. As part of the ESAP, the IFC will assist Palmet to adapt its
internal procedures and reporting systems to include IFC's Performance Standards in its current and future operations. Specific
items evaluated include:
- Corporate environmental and social management systems, management performance in its existing operations, and their
extension to new projects;
It,ilMronmental
and social performance of existing projects financed by IFC, and their planned expansions;
~~~onmental
and social assessment process and documentation for the Delta Power plant; and
~~unity
engagement including public consultation and disclosure activities (see below).
Proiect ID 27008
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Palmet Enerji's planning of new facilities follows the Turkish national, municipal and/or local applicable environmental, social
and health and safety requirements as well as the Company's internal processes. The Company will ensure compliance with
IFC's Performance Standard I and other requirements applicable to its activities by updating its existing Company-wide
management system that addresses environment, social, health and safety, and quality performance. This update will include (a)
the development of a due diligence procedure to identify social and environmental risks and impacts associated with new
projects, (b) the development of a Public Consultation and Disclosure Strategy (PCDS) and procedures for engagement with
affected communities, and (c) reporting and monitoring of project performance to its senior management as well as to
government agencies and lenders.
At the Corporate Level, Palmet Enerji has a Quality Assurance and Health, Safety, and Environmental Management Coordinator
at the Istanbul headquarters, and field staff that have environmental and health and safety responsibilities.
The main responsibilities of this Coordinator and field staff are to: (a) develop, implement, and enforce Palrnet Enerji's
corporate policies, (b) identify and assess potential environmental, social, and health and safety impacts and risks associated to
Palrnet Enerji existing activities and proposed projects, (c) assure the presence of programs, procedures, and performance
measures to avoid, reduce, mitigate, remediate, and/or compensate all identified impacts and risks, (d) supervise and monitor
compliance with Turkish and lenders HSE requirements and with Palmet Enerji's QA&HSE programs, (e) establish appropriate
corrective actions in case of non-compliances, (f) provide training to all relevant people within the organization with
responsibilities for implementing these programs and measures, and (g) report on environmental, social, and health and safety
performance to upper management and other relevant stakeholders.
Palrnet Enerji has an integrated HSE management system that covers all Company functions, including engineering,
procurement, construction, operations and maintenance of gas distribution facilities, and natural gas sales and appliances.
Additionally the system also covers non-core functions such as training, licensing, and/or partnering with other firms to perform
activities such as the installation, servicing, and/or maintenance of house piping, conversion and/or repair of appliances, and fire
safety devices, among others.
The integrated HSE management systems for Palgaz and Palen have been certified by the British company BM- Trada
Certification Company (http://www.bmtrada.com)
under ISO 9001, ISO 14001 and OHSAS 18001. Since 2005 these systems
are audited on a yearly basis, and re-certification is being processed in August 2008 for another three years. These two Palmet
Gas subsidiaries are the first integrated management systems to hold these certifications in Turkey. Palen and Palgaz' field staff
professionals report directly to Palrnet's Corporate QA&HSE Coordinator. As Palmet Enerji continues to grow and develop
activities in new sectors (e.g. energy generation), it also expects to extend these good practices an EMS certification to new
businesses/projects.
Furthermore, the requested actions associated with the Palmet Enerji's Corporate ESHS Management System included in the
ESAP will reinforce (a) the need to strengthen its current organizational structure by hiring two additional professionals to
support the Corporate QAEHS Coordinator, one in-charged of supporting EHS management of current business and continuity
of service, and another one to support EHS management of new projects/business, (b) the immediate development of a specific
procedure to screen applicability ofPSs 5, 6, 7, and 8 in Palrnet Enerji's due diligence process for new projects, and (c) if the
relevant aspect is identified during screening (EIA) process, the progressive development of specific procedures to assure
compliance with applicable PS, such as Land Acquisition and Involuntary Resettlement (PS5), Biodiversity Conservation and
Sustainable Natural Resources Management (PS6), Indigenous Peoples (PS7), and Cultural Heritage (PS8), including a changefind procedure.
Regarding environmental compliance of Palen and Palgaz, (PS 3: Pollution Prevention and Abatement), the environmental
impacts associated with natural gas distribution activities are: (a) methane emissions from fugitive leaks and venting activities
from regular operation and maintenance, (b) noise, vibration, dust, increased erosion, and other construction related impacts
from earthworks and excavations as a result of pipeline installation associated to both, gas distribution network expansion
activities and maintenance and replacement of existing ones, and (c) impact on natural habitats during construction of gas
'it.~ution
systems in newly developed rural or peri-urban areas. Palrnet Enerji's corporate HSE management system and
~~ures
are compatible with IFC gas industry sector guidelines and compliant with Turkish legal requirements.
fi_e
~~s~mportant
to note, that Palen and Palgaz activities have significantly contributed to the use of natural gas as a residence
Proiect ID 27008
Environmental and Social Review Summary
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heating and cooking source. This has greatly reduce the use of coal and burning wood, which has notably improved air quality
on Palen and Palgaz area of operation, specially during the winter months. For instance, official values from air quality
monitoring stations established by the Ministry of Environmental and Forestry in Erzurum (Palen service area) show reductions
from 144 ug/ m3 to 45,2 ug/m3 for S02 and from 71 ug/ m3 to 42 ug/ m3 for particulate matter, from 2004 to present.
Natural gas distribution pipelines are normally installed along streets or other existing rights-of-way, and few occasions arise
where right-of-way acquisition is required. Should right-of-way access be needed (easement or land purchase), Palen and Palgaz
make formal requests through the local government for expropriation of the property and compensate the owner/occupants for
market price. Projects that displace people physically are infrequent. However, as previously stated, Palmet Enerji will ensure
that, going forward, its land and right-of-way acquisition procedures are consistent with PS 5 on Land Acquisition and
Involuntary Resettlement.
Regarding Biodiversity Conservation and Sustainable Natural Resource Management (PS 6), the Company's current projects
and service areas are not located in, or are expected to negatively impact any critical natural habitat or site. Nevertheless, Palmet
Enerji will ensure that, going forward, any new project developed is consistent with PS 6. Similarly, the Company's current
projects and service areas are not located near or are expected to negative impact any minority groups as defined in PS 7 on
Indigenous Peoples, however, Palmet Enerji will also ensure that, any new project developed is consistent with PS 7.
Furthermore, the presence of Cultural Heritage sites (PS 8) will be evaluated in project-specific assessments.
As stated above, the development of specific procedures to assure compliance with PS5-PS8 is especially relevant as Palmet
Enerji continues to grow its energy generation business, and may eventually engage in hydro, geothermal, and wind electricity
generation projects.
For the time being, Delta Power is the only concrete energy generation project that Palmet Enerji has started to execute.
However, it is actively engaged in other finding energy generation projects, with special focus on renewable and energy
efficiency. For instance, Delta Power considered from its design a combined cycle natural gas thermal energy generation, as
energy efficiency and clean fuel were a priority to Palmet Enerji.
For Delta Power project, the company prepared a preliminary environmental impact study for the power plant in December
2007, and in March 2008 finalized a more detailed environmental impact assessment as part of the Project Description File
presented to the authorities. This file identified the potential impacts and risks associated with the construction of the plant and
proposed appropriate environmental and social management procedures. The Turkish Ministry of Forestry and Environment
provided clearance for the construction and installation of the plant in April 2008. The plant will be located on a highly
intervened agricultural-to-industrial transition zone located on a 4 hectare site around 3 kilometers from Biiyiikkaristiran town,
Lulebugaz. No natural habitats, communities, or cultural sites are expected to be affected by the power plant, the transmission
lines, or the pipeline. The Company owns the site, and acquired the land on a commercial, willing buyer-willing seller basis. The
project's feasibility studies and EIA have determined that ground water supplies are adequate to operate the plant without
affecting the present and projected future water supplies of the closest towns or any other potential nearby users.
Construction of the plant will require a workforce of up to 150 workers during peak periods. The workforce is expected to be
recruited not only from the nearby cities Luleburgaz and Istanbul but also from other regions of Anatolia depending on their
level of experience. The expected impacts are those typically associated with construction activities including terrain and
landscape permanent alterations, permanent removal of vegetation cover (mostly grassland and low shrubs), increased noise, air
emissions, and dust generation, solid waste and wastewater generation, use and disposal of hazardous materials (e.g. fuels, oils,
lubricants), increased traffic from materials and construction trucks, and health and safety hazards from the operation of heavy
equipment and machinery, and the inflow of workers and the construction camp. All these impacts have been identified in the
environmental impact study, and the Environmental Management Plan (EMP) for Delta Power includes standard measures to
manage such impacts, including the adoption of best available proven control technologies and procedures, to ensure a
continuous monitoring, review, and proactive process, and consultation with local communities on a continuous basis. As part of
the ESAP, the Company will strengthen the strategic planning, and execution, reporting and supervision capacity of the QAEHS
Department, hiring EHS professional(s) to support the QAEHS Coordinator with the application of the EHS Policies and
Procedures in new projectslbusiness and oversee the appropriate implementation of the EMPs. Palmet Enerji's QAEHS
~tor
will develop and maintain the monitoring and supervision protocol to assure compliance with Turkish law, the
e
application
of the EMP, and IFC's environmental, social, health and safety and labor requirements.
,~i
nt.......:. t>n
f".'
FinlNKe
CO/PClI\1tiOn
···'·Dnring operation the plant will require a permanent staff ofapproxirnately
Proiect ID 27008
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20 people. The plant's major equipment is proven
technology from reputable suppliers. For instance, the gas turbine will be aero-derivative model LM6000 PC-SPRINT supplied
by General Electric. This model was first released in 1997 and there are over 500 units installed an operating worldwide; this
model is one of the most efficient gas turbines in operation, and if well maintained is considered to have a very low operating
risk. The plant will comply with EX-1M Bank's environmental policies and its guidelines for Thermal, Gas Turbine, and Diesel
Drive Power Plants (http:h;vww.exim.go,,!products/policies/environment).
The projects and plans have planned and designed in
according to the US EX-1M Bank Guidelines.
Furthermore, the plant is being designed to comply with World Bank's Pollution Prevention and Abatement Handbook Thermal
Power: Guidelines for New Plants, and with IFC's draft Guidelines for Thermal Power Plants
(http://www.ifc.org!ifcext/policyreview.l1sf!Col1tel1t!EHSGuidelinesLJpdate).
To assure compliance, the Company will monitor
on a regular basis stack emissions and in-door ambient air quality. Wastewater treatment and disposal facilities will be designed
and constructed in compliance with the local regulations as well as IFC requirements. The Company has proposed a detailed
supervision and monitoring plan for relevant environmental and social aspects of the operation, such as noise, site drainage,
cooling water discharge, ground water extraction, waste and wastewater disposal including treatment systems as well as
occupational health and safety.
Palmet Enerji will update its human resources policy and procedures as well as occupational health and safety policy and
procedures, to conform to IFC's PS 2. This update will include legally requiring all its contractors to apply the same standards.
The revised policy, procedures and details of its health and safety program will be submitted to IFC for review and approval by
IFC as part of the Environmental, Social and Health and Safety Action Plan (ESAP).
All labor and working condition issues are managed by Palmet Enerji's Human Resources Coordinator. Palmet Enerji currently
is compliant with all applicable Turkish labor laws and with the ILO Declaration on Fundamental Principles and Rights at
Work. As part of the ESAP associated with IFC's investment, Palmet Enerji has agreed to: (a) develop and disclose to all
employees a policy which includes written statements in accordance with PS2, (b) prepare a standard contract communicating
working conditions and terms of employment for all employees, and (c) develop grievance mechanisms to review and address
employee complaints.
Occupational Health and Safety of Pal met Enerji's operations are also managed by the QA&EHS Coordinator and field staff,
whose responsibilities include (a) clear identification of all potential occupational and health and safety hazards associated with
Palmet Enerji's activities, (b) development of procedures to minimize hazards and prevent accidents, incidents, injuries, and/or
work-related diseases, (c) implementation of corrective measures to avoid recurrence, and (d) training. Palmet developed two
EHS Manuals that are provided to all employees and sub-contractors, respectively, and that contain mandatory EHS
requirements. These have been closely enforced since their introduction in 2005, and the Company has taken actions (e.g.,
dismissal of employees, barring of contractors from further contracts) when standard procedures were not followed. The
Company will improve the mechanisms to detect, document, and report occupational accidents, incidents, and diseases both for
its own and contractor employees. So far no significant accident affecting any employee has been reported. However, in 2007,
an accident causing a third party fatality occurred out of the regular working hours, caused by the negligence of a sub-contractor
who left a heavy construction material in a public location in Gebze. Palmet had no responsibility in this accident, as it was
confirmed at the court case. The Company does not work anymore with that contractor firm and took a number of actions with
its actual contractors in order to prevent reoccurrence
Palgaz and Palen design and build all of their gas distribution facilities and networks in accordance to ASME and EPI standards,
including flow-base meters, automated gas stopped fittings, remote measuring system. All pressure reductions stations (ARMS)
are equipped with alarm and fire detection systems.
Palgaz and Palen only use internationally certified materials and equipment in all their works, and at every working front they
have a Palmet Enerji supervisor and a supervisor from the local Energy Market and Regulatory Agency (Enerji Piyasasi
~iI=cleme Kurumu- EPDK).
I?!.~~
~o~ey
concern related to community health, safety, and security regarding natural gas distribution activities is the exposure of
··•..·tornmunities to hazards from gas leaks and/or explosions. Accidents and pipeline ruptures can be caused by in-house staff,
Proiect ID 27008
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Palmet's contractors, third-party activities (outside contractors and the public), and natural events. Palmet Enerji applies
industry accepted international practices with regard to operational safety and has a comprehensive Contingency and Emergency
Preparedness Plan that includes involvement and communication with nearby communities and with third parties that commonly
perform construction work and excavations proximate to Palmet's pipelines, such as utility and other service companies,
municipalities, among others. In line with regulatory requirements, Palen and Palgaz are linked to an emergency hotline (Tel #
187) whereby the public can report a suspected leak or incident. Palen and Palgaz each have a continuously-staffed field office
that is equipped to handle emergency calls. Palen and Palgaz conduct community information and outreach programs within
their service territories, including the distribution of printer material with warning of risks associated to usage of gas in
household, preventive measures and emergency information in case of accidents or leaks.
Since beginning operations, both Palen and Palgaz reportedly have had limited number of accidental leaks, all within the
parameters of the nature of the gas distribution business and without any harm to local community health and safety. All these
accidents have been appropriately reported to the local authorities and to the IFC, emergency procedures have been followed,
and corrective and/or compensation measures have been implemented. In order to avoid accidents which can pose hazard to
labor or local communities during construction operations, the Company will strengthen its supervision mechanisms for its
construction contractors and will ensure that all construction sites are covered by All Risk Insurance.
Additionally, Palmet Enerji has agreed to (a) commission a gas safety inspection for all of its operations and take any additional
corrective/preventive action derived as if required, (b) develop a benchmarking strategy for best practices with global leaders on
gas distribution, and (c) strengthen the Public Relations department to communicate more effectively with nearby communities
and other stakeholders, with special emphasis on community health, safety and security issues.
Client's Community Engagement:
IFC's environmental and social reviews of with two ofPalmet Enerji's gas distribution subsidiaries, Palen (Project No. 23785)
and Palgaz (Project No. 22608), were disclosed in July 2004, by IFC on its website:
http://\vww.ifc.org/ifcext/spiwebsite
ument
1.nsf!2bc34fOl1 b50ff6e85256a550073ff1
http://www.ifc.org/ifcext/spiwebsitcl.nsf/2bc34ffi
ument
11b50ff6e85256a550073ff1
c/d57b916a248bc37385256ecc007590d3?opendoc
c/4d502c5bbd683b2185256ecc00752f43?opendoc
As part of the consultation and disclosure process fro Delta Power in accordance with the local regulatory and IFC's
requirements, the environmental reports and studies are available at www.palmet-terasen.com.
As stated above, Palen and Palgaz devote significant efforts toward effective communications with the communities they serve
and where Company infrastructure is located. Maintenance and expansion of natural gas distribution networks involves
continuous and ongoing interaction with the community. Going forward, the Company's dialogue and communication with
affected communities will be strengthened as part of its Public Consultation and Disclosure Strategy (PCDS), which will be
designed to meet established local regulatory legal requirements and IFC's Performance Standards I and 5. For each project,
public consultation and disclosure of the social and environmental impact assessment will occur through the procedures
established as part of the strategy.
access
0
ro ·ect documentation
.
of environmental and social impact assessments conducted for new projects will be made available for public view at
~~e't Enerji's headquarters, at publicly-accessible location in the vicinity of each project, and via the following website:
~~".palmet-tcrasen.com
Proiect ID 27008
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Ms. Nese Kemerdere
Quality Assurance and Environmental, Health and Safety Coordinator (QAEHS)
Telephone Number: ++ 90 (216) 325 7330
Fax Number: ++90(216)3399177
Email: n.kemerdere@palmet-terasen.com
Palmet EneIji A.S.
Bulgurlu Caddesi No: 60, Kiiciikcamlica 34696 Istanbul, Turkey
WW\\'.pa Imet-terasen .com
~IFC
IMem.Ulonal
flniHK~
Corpot>lltioft
<."'1.':, ..-
Proiect ID 27008
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IIIFe
International
Finance
Corporation
SUMMARY OF PROPOSED INVESTMENT
!SPIl,
World Bank Group
Disclaimer
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors'
consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document
should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Project Identification:
Country:
Turke
Region:
EUROPE & CENTRAL ASIA
Company Name:
Palmet Ene 'i A.S.
Project Business Sector:
C-CA - Natural Gas Distribution
Project No.:
27008
Environment Category:
B - Limited
Project Status:
Active
Parent Proiect Identification:
Parent 10:
Parent Short Name:
Parent Relationship:
No Relationship
Date Disclosed
Date Revised SPI Disclosed
(if appropriate)
Enter Projected Board Date
[or internal management
datel
Date of Clearance by client
for factual accuracy
Description ofthe Project:
The proposed IFC investment will extend a corporate loan to Palmet Enerji A.S. ("Palmet Enerji", "Palmet" or the "Company"),
a holding company established by Palrnet Group of Istanbul in 1984 for its natural gas and electric power generation businesses.
An existing IFC client, Palmet proposes to (i) expand its existing gas distribution networks in Gebze and Erzurum operated by
its subsidiaries Palgaz and Palen, respectively; (ii) set up a mid-size gas-fired power generation plant under its subsidiary Delta
JiQMIJi"yretirn ve Ticare~ A.S. ~"Delta Power"); and (iii) develop other opportunities in gas and power sectors including hydro
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power generatIon proJects.
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Proiect ID 27008
Summary of Proposed Investment
Palmet EneIji is majority owned (85%) by its founder and CEO, Mr. Doganay Samuray. The remaining shareholders include
Hilmi Sever (10%), Cengizhan Gungor (1%), Muzaffer Yucel (1%) and Paltur (3%), which is the real estate development
company of Palmet Group.
The total project cost is estimated at approximately US$ 87 million, of which IFC is expected to provide an A loan of up to
US$ 15 million, and a C loan ofUS$ 10 million.
Palmet Enerji is headquartered in Istanbul and operates throughout Turkey via its subsidiaries. Palgaz is operating the gas
distribution network in Gebze, one of Turkey's most industrialized regions, located approximately 60 km east ofIstanbul. Palen
is operating the gas distribution network in Erzurum, the largest city in eastern Anatolia. In addition, Delta Power, Company's
fIrst power project is located in an industrial zone near the town of Biiytikkaristiran in Thrace Region in northwest Turkey.
IFC's funding will allow Palmet and its operating subsidiaries: (i) to expand their high development impact through natural gas
distribution projects initiated in 2004; and (ii) to enter into Turkey's electricity market through the construction of its fIrst
thermal power plant and the development of future thermal, hydro, wind, biogas power projects. The thermal power project
would especially help in meeting Turkey's electricity deficit as the plant will come on line quickly, just before power shortages
are expected to resume. On the gas distribution side, continued expansion of service coverage in Gebze (by Palgaz) and Erzurum
(by Palen), and other distribution concessions awarded to the private sector will further contribute to the improvement of air
quality in those locations particularly through the displacement ofhigWy polluting lignite.
IFC's additionality in this Project comprises:
(i)
supporting the entry of an experienced but medium-sized gas distribution company, an existing IFC client, into
Turkey's electricity market that is in transition and in need of private sector investment;
(ii)
providing its expertise in terms of developing power generation assets and operating in deregulated power markets;
(iii)
increasing the financial viability of a growing company by providing a combination of loan and quasi-equity with
long maturity;
(iv)
providing mezzanine debt so that the Company could increase its debt capacity for the development of its future
power projects; and
(v)
ensuring the implementation of adequate environmental and social standards in line with WBG requirements.
~£C's
first investment in 2005, Palmet has successfully established itself in the gas distribution business with Palgaz and
~tJt"~U!MiFC's
participation to date has been very important to provide not only long-term financial support but also creditability
~~tively
small company with experience mainly in telecommunications when it entered into the newly-privatized natural
gas sector. IFe now extends its support when Palmet moves into power generation business.
S'7"
Proiect ID 27008
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This corporate-level investment is a Category B project. It is for an eXlstmg IFC client with good track record in its
environmental performance. Most of the resources will finance CAPEX activities which essentially imply continuity and
expansion of service, and therefore new environmental, social, health and safety, and labor impacts and risks are limited. IFC
implemented its Sustainability Policy and Performance Standards (PS) after the two initial investments; therefore, prior to
financial closure the Company will present an Environmental, Social, Health and Safety Action Plan ("ESAP"), to include
compliance with IFC applicable PS into their Corporate Integrated ESHS Management System.
The only activity with potentially significant new environmental and social impacts and risks is the construction and operation
of Delta Power. At 60 MW of electrical capacity, Delta Power can be considered a small power plant. It is being developed on a
highly intervened agricultural-to-industrial transition zone, and the impacts associated with the construction and operation of
this new plant are limited and can be managed with standard pollution prevention and control practices.
It is unlikely that any of IFC resources invested on Palmet Enerji's CAPEX will be used to develop any project that would
qualify as Category A. The Company will request IFC's pre-approval prior to developing any project that would qualify as
Category A, and will follow the requirements for Category A projects under IFC's Performance Standards. IFC will reserve the
right to decline financing of any such project if compliance with IFC's Performance Standards cannot be assured.
Mr. Doganay Samuray
General Manager
Telephone Number: ++ 90 (216) 325 7330
Fax Number: ++ 90 (216) 3399177
E-mail: d.samuray@palmet.com
Pahnet Enerji A.S.
Bulgurlu Caddesi No: 60, Kucukcamlica 34696 Istanbul, Turkey
www.palmet.com
Local access of project documentation:
Copies of environmental and social impact assessments conducted for new projects will be made available for public view at
Pahnet Enerji's headquarters and at publicly-accessible location in the vicinity of each project.
For inquiries and comments about IFC:
General IFC Inquiries
IFC Corporate Relations
sYIvaniaAvenue, NW
1 ton DC 20433
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~~ne:
202-473-3800
'Fax:"202-974-4384
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Action
1. Corporate Environmental,
Social, Health and Safety
Management System (ESMS)
1.1
1.2
1.3
1.4
2. Health and Safety (OHS)
Procedures
2.1
2.2
2.3
3. Contingency, Emergency
Preparedness and Response
Plans and Practices.
I Currently,
3.1
Description
Appointment of two additional QAEHS professionals to
support the Corporate QAEHS Coordinatorl especially to
provide continuous supervision and reporting; one in charge
of all current business and continuity of service, and another
in charge of new proiectslbusiness.
Review existing procedure for appraisal of new projects to
adequately screen the applicability of all IFC's Performance
Standards, with special emphasis on PS5, PS6, PS7 and PS8.
(As if relevant potential aspects are identified, specific
procedures will be developed).
Complete actions regarding EMRA audit findings
Develop a benchmarking strategy for sharing best practices,
learning experiences and statistics in safe gas distribution and
energy generation.
Start Date
01.09.2008
Due Date
30.11.2008
Responsible
Palmet Companies
Management
01.09.2008
30.09.2008
QARHS Department
01.09.2008
01.01.2009
30.06.2009
30.03.2009
Palmet Gas Departments
QAEHS Department
Develop a specific procedure for the installation of worker
labor camps following acceptable international standard
practices, review current procedure about occupational health
in order to ensure adequate medical resources in place for
routine work and emergency cases. (e.g. provision of
agreements with near-by hospitals). (as available, to be applied
fIrst for Delta Power construction site)
Revise current daily task monitoring forms for contractors to
explicitly include specifIc safety rules and their inspection
records for tasks requiring safety work permits. Include
explicitly into the contractor legal agreement violation of health
and safety rules as a reason for annulment of the contract.
Carry out network leakage survey at intervals of no greater than
six months to comply with EMRA regulation.
01.09.2008
30.10.2008
QAEHS Department/Delta
Site Management
01.09.2008
30.10.2008
QAEHS Department
01.09.2008
30.12.2009
Gas Operation Department
Review practices on Emergency Preparedness and Response
Plans in order to ensure that all emergency and evacuation
drills are performed and reported as required and planned
including also current office buildings. (All office buildings to
be systematically inspected and reported by the authorities
about earthquake, life and fIre safety)
01.09.2008
30.12.2009
QAEHS Department and
Site Managements
the same person is the Head ofIndustrial Marketing and of the QA&EHS Group.
11/
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4. Environmental, Social,
Health and Safety
Management Plan (ESMP)
for Delta Power
5- Public Consultation and
Disclosure Strategy (PCDS)
6- Human Resources
Procedures and Practices
Review according to IFC's
PS2.
4.1 Review indicators to report on the environmental performance of
the Power Plant to ensure that all relevant environmental aspects
such as noise, air and water quality baseline values are included.
(e.g. from government/municipality air quality monitoring
stations in Bfiyiikkaristiran or else).
4.2 Prepare specific EHS procedures and an Emergency
Preparedness and Response Plan for the operation of Delta
Enerji. (QAEHS management sytem certifications will be
extended to cover Delta by end 2009)
01.09.2008
30.09.2008
QAEHS Department
01.11.2008
30.12.2008
QAHSE Department / Site
Management
5.1. Review organizational structure for Public Consultation and
Disclosure. Present a map of stakeholders, the communication
strategy associated with each type of stakeholder and a timeline
for implementation of the PCDS.
5.2 Review current communication procedure to ensure public
consultation and disclosure associated with new projects
(disclosure ofElA or other environmental/social impact
assessment studies performed including Delta project).
5.3 Present the content and timeline for communications to nearby
schools, community centers, publications, website updates, etc
01.09.2008
30.12.2008
QAEHS / Project Managers
/ Public Relation
Departments
01.09.2008
30.12.2008
Project ManagerslPublic
Relation Departments
01.09.2008
30.12.2008
Project Managers/Public
Relation Departments
6.1 Develop and disclose to all employees a documented HR policy
in accordance with IFe's PS2.
6.2 Prepare a standard contract communicating working conditions
and terms of employment, including rights and duties for each
employee.
6.3 Develop a grievance mechanism to record, review, and
appropriately address employee complaints. Review conflict
resolution process.
6.4 Develop a series ofHR indicators to report to upper management
and to the IFC the effective implementation of the HR policy
and procedures (e.g. percentage distribution of gender,
hierarchy, ages; number of complaints, and terms/time for
complaint/conflict resolution, etc).
01.09.2008.
30.12.2008
01.09.2008
30.12.2008
Human Resources
Department
Human Resources
Department
01.09.2008
30.12.2008
Human Resources
Department
01.09.2008
30.12.2008
Human Resources
Department