Itezhi Tezhi Power Company

The Tata Power Company Limited (“Tata Power”) has approached MIGA seeking political risk insurance coverage for its equity investment in Itezhi Tezhi Power Corporation Limited (“ITPC”) in Zambia. ITPC is a joint venture between Tata Power and ZESCO, the national power utility in Zambia, which is wholly owned by the Government. ITPC was formed to develop the Itezhi Tezhi Project (the “Project”), which involves the construction and operation of a 120 MW hydropower station (“power house”) situated adjacent to the existing Itezhi Tezhi dam along the Kafue River. Project construction started in November 2011, and commercial operations commenced in January 2016. The Engineering, Procurement and Construction (“EPC”) contractor for the Project is Sinohydro. The Project will be operated by ITPC.

The Project does not involve the construction of a dam or reservoir nor does it affect existing water management regimes. It directs the flows that were previously released over the spillway to the power house, and then returns that water to the Kafue River approximately 300 m downstream of the dam. The Project utilizes the existing, but previously unused, southern diversion tunnel and intake to draw water from the base of the reservoir to feed the power plant. A new 330 m tunnel was constructed to divert water from the existing tunnel to the power house. The power house includes two 60 MW turbine generator units. The water discharged from the turbines is returned to the Kafue River, via a short tailrace channel. A switch yard and a surge shaft were also installed directly adjacent to the power house.

Power from the plant is evacuated to the national grid via a recently constructed 142 km single circuit 220 kV transmission line to a new sub-station in Mumbwa town and then onto Lusaka via another recently constructed 134 km 330 kV transmission line. The construction and operation of the transmission lines and the substation are the responsibility of ZESCO, and are considered associated facilities of the Project. At the time of the site visit in June 2016, both lines were fully operational, and construction of the sub-station was almost complete (a temporary transformer is being used in the meantime).

The Itezhi Tezhi Dam is located on the Kafue River, approximately 300 km upstream of the confluence of the Kafue River with the Lower Zambezi River. The Zambezi River is classified as an International Waterway, together with its tributaries (including the Kafue River). It was constructed in 1978 to regulate the flow for the Upper Kafue Gorge power station, which is located 260 km downstream of the dam). The project will utilize existing flow releases that are currently released for the Upper Kafue Gorge power station, and will not alter the existing downstream flow regime.

The town of Itezhi-Tezhi, which has approximately 5,000 people, is approximately two kilometers north of the Project site. There is also a town located approximately 20 km downstream.

The project was registered as a Clean Development Mechanism (CDM) project by CDM Executive Board under the United Nations Framework Convention on Climate Change on September 8, 2015. The African Development Bank, FMO, Proparco and the Development Bank of Southern Africa (DBSA) approved financing to the Project in 2014. During their due diligence and ongoing monitoring, the Lenders, with the help of a Lenders’ E&S Consultant, reviewed the Project against the IFC Performance Standards (2012, which are materially consistent with MIGA Performance Standards, 2013).

B.  Environmental and Social Categorization

This is a Category B project according to MIGA’s Policy on Environmental and Social Sustainability (2013) because the Project does not involve any new dam or reservoir and does not alter the existing flow regime downstream of the dam. As a result, the risk and impacts associated with this Project are expected to be few in number, generally site-specific, largely reversible and readily addressed through mitigation measures.

The key potential environmental and social issues associated with the Project during both construction and operation relate to impacts on water quality and associated impacts on downstream ecology and biodiversity, occupational health and safety risks, community health and safety, and solid and hazardous waste generation.

While all Performance Standards are applicable to this Project, based on our current information, the Project will have impacts which must be managed in a manner consistent with the following Performance Standards (PS):

• PS1:  Assessment and Management of Environmental and Social Risks and Impacts
• PS2:  Labor and Working Conditions
• PS3:  Resource Efficiency and Pollution Prevention
• PS4:  Community Health, Safety and Security
• PS5:  Land Acquisition and Involuntary Resettlement
• PS6:  Biodiversity Conservation and Sustainable Management of Living Natural Resource

No indigenous people were identified in the area affected by the project; therefore, PS7 does not apply. As no archaeological or historically important structures are present in the area, and, based on the findings of previous in-depth archaeological surveys, the probability of finding significant cultural resources in the Project area is low, therefore PS8 does not apply except for a chance finds procedure.

In addition, the World Bank Group Environment, Health and Safety (EHS) General Guidelines and Guidelines for Electric Power Transmission and Distribution apply to this Project.

An environmental and social due diligence site visit was conducted by a MIGA environmental and social specialist in June 2016. The visit included a tour of the Project site, and meetings with Tata Power, ITPC, Hatch (the Lenders Environmental and Social Consultant), ZESCO and Government representatives (including Zambia Department of National Parks and Wildlife and Zambia Environmental Management Agency (ZEMA)). The team also met with WWF Zambia to discuss their ongoing work in the Kafue River Basin and Kafue Flats. In addition to the site visit, the following documents were reviewed by MIGA:

• Land Restoration Management Plan and Rehabilitation Guidelines per Zone (ITPC, draft June 2016).
• ITPC Emergency Preparedness and Response Plan (ITPC, 31 May 2016).
• Water Management Statistics Update Period of 16/05/16 to 22/05/16 (ZESCO, 23 May 2016).
• Monthly Progress report – April 2016 (TZA Project Management, May 2016).
• Engineering Report, Independent Engineering Progress Report No. 4, Chapter 6 Safety Health and Environment (SHE) (Hatch, April 2016).
• Environmental and Social Monitoring Annual Report – January to December 2015 (ITPC, February 2016).
• Report on Annual Inspections Carried Out at Itezhi Tezhi Dam (ZESCO, April 2015).
• Resettlement and Compensation Action Plan Report for the Itezhi-Tezhi-Mumbwa-Lusaka West Transmission Line Project (ZESCO Environmental and Social Affairs Unit, January 2015).
• Environmental and Social Management Plan for the Itezhi Tezhi 120 MW Hydroelectric Project, Zambia (ITPC, July 2013).
• Itezhi-Tezhi HydroElectric Project Environmental and Social Impact Assessment (URS, November 2012).
• Itezhi-Tezhi HydroElectric Project Stakeholder Engagement Plan (URS, September 2012)
• Report on Itezhi Tezhi Dam Engineering Mission (SWECO, May 2012).
• Abbreviated Resettlement Action Plan for the Proposed Itezhi-Tezhi-Mumbwa-Lusaka West Transmission Line Project (ZESCO Environmental and Social Affairs Unit, November 2010).
• Feasibility Report for Itezhi Tezhi Hydro Electric Project (2 x 60 MW) (TCE, 2008).

PS1:  Assessment and Management of Environmental and Social Risks and Impacts

Environmental and Social Assessment:

Environmental Impact Assessments (which included consideration of social impacts) were undertaken by ZESCO for both the Project and the associated transmission lines. These EIAs were prepared in accordance with Zambian legislative requirements and standards and African Development Bank Guidelines. They also referred to World Bank requirements. The transmission line EIA was approved by ZEMA in December 2008 and the Project EIA was approved in January 2009. A summary of the EIA was publicly disclosed by the African Development Bank in April 2011.

In order to comply with the requirements of international development financing institutions (i.e. FMO and Proparco), in November 2011, an international consulting firm (URS) was engaged to undertake a gap analysis of the EIA against IFC Performance Standards (2012), and then to prepare an ESIA in line with Performance Standard requirements to address the identified gaps. This updated ESIA was completed in November 2012. 

Management Program and Monitoring:

ITPC has developed an Environmental and Social Management System (ESMS), and implementation is supported by an ESMS manual and procedures. ITPC is currently in the process of applying for ISO 140001 certification. An internal audit of ESMS implementation in 2015 indicated ‘Excellent’ compliance with PS1 ESMS requirements. For the construction phase, the EPC consortium applied its own ESMS, which included adherence to the procedures supporting the ITPC ESMS.

In July 2013, ITPC developed a detailed Environmental and Social Management Plan (ESMP) based on the general measures provided in the EIA and ESIA. The ESMP includes specific plans for management of water quality, air quality, waste, ecological resources, traffic, cultural resources and archaeology, and erosion and sediment control. The ESMP also covers both the construction and operations phases. A separate “Land Restoration Management Plan” with rehabilitation guidelines has been prepared for the decommissioning and restoration of construction sites.

The EPC contract required the EPC contractor to adhere to the Project ESMP, and the ESMP required the EPC contractor to prepare and implement: (i) Construction and Worker Camp Management Plan; (ii) Waste Management, House-keeping Plan; and (iii) Health and Safety Management Plan.  EPC contractors were also required to provide oversight of sub-contractors EHS performance.

During construction, monthly Health, Safety and Environmental (HSE) audits were undertaken by ITPC. Audit findings were documented and non-compliances with the ESMP were communicated to the EPC contractor. In addition, Hatch (Lenders Environmental and Social Consultant) undertook quarterly site visits during the construction period to review compliance with the ESMP. The findings of these visits were summarized in quarterly progress reports, which were submitted to the Lenders and ITPC. Government departments (ZEMA and local Environment Department from Ministry of Health) also undertake regular monitoring at the site. For the operations phase, ITPC will coordinate with ZESCO to will develop a detailed monitoring plan, which will focus largely on potential downstream impacts (water quality, flow, aquatic biodiversity).

ITPC currently prepares an ‘Annual Environmental and Social Monitoring Report’ for the lenders, which summarizes the performance of the Project against the Performance Standards. Annual monitoring reports will also be submitted to MIGA.

Organizational Capacity and Training:

ITPC established a Project Implementation Unit (“PIU”) for the construction of the Project. The PIU includes a Project Director, Deputy Project Director and Technical Manager. A Quality Assurance and Safety (QAS) Manager reports to the Deputy Project Director, and a Safety, Health, Environment and Quality (SHEQ) Officer reports to the QAS Manager. A SHEQ Engineer and SHEQ Officer have been assigned for the operations phase, and the SHEQ Engineer reports directly to the Project Manager. SHEQ Committees have also been established for construction and operations. ITPC is currently staffed, particularly at higher management levels, largely by secondments from Tata Power and ZESCO, and the seconded staff are sufficiently qualified for their roles. Tata Power has brought qualified SHE personnel from their other sites to the Project to supervise SHE implementation and provide capacity building to local staff.

Emergency Preparedness and Response:

A draft Emergency Preparedness and Response Plan (EPRP) has been prepared by ITPC with the support of Hatch. Hatch provided comment on the EPRP in April 2016, and ITPC is currently in the process of revising it. The EPRP specifies the roles of responsible parties for a range of emergencies including first aid emergencies, fire, natural hazards and dam failure. In 2015, employees received firefighting and first aid training.

PS2:  Labor and Working Conditions

ITPC has prepared a Human Resources Policies and Procedures Manual (HRPPM), which is consistent with the requirements of PS2 and local labor laws. The HRPPM addresses: (i) working conditions and terms of employment; (ii) non-discrimination and equal opportunity; (iii) training and development; and (iv) employee grievance mechanisms. ITPC requires all its contractors and sub-contractors to adhere to the HRPPM requirements and comply with Zambian labor laws, and have documented human resource policies.

ITPC currently employs approximately 25 people in the Project Implementation Unit for the completion of construction, and another approximately 50 people for operations and maintenance. The majority of employees are Zambian nationals. At peak construction, the EPC Contractor had approximately 900 workers on site.  As construction phase is now ending, at the end of April 2016, there were approximately 300 workers remaining on site. At peak, over 80% of the construction workforce were Zambian nationals.

In 2014, there were local media reports of issues on site regarding poor safety conditions and mistreatment of workers by the EPC contractor. As a result, the workers joined a labor union, and ITPC engaged a Human Resources expert to work with the EPC and the union to develop and sign a ‘Recognition Agreement’ and ‘Collective Agreement’. There have been no significant labor issues on site since the agreements were signed.

During construction, occupational health and safety (OHS) was managed by the EPC contractor under the supervision of ITPC. Early in the construction phase, ITPC put in place OHS policies, procedures and training programs. Implementation of these policies and procedures on site, however, remained a challenge throughout the construction phase. Recently monitoring reports indicate that OHS performance is improving. ITPC’s OHS policies and procedures include: (i) organizational structure and responsibilities, (ii) identification risks/ hazards associated with the different task, (iii) personal protection equipment (PPE), qualification, restriction and training requirements associated with each task, (iv) documenting and recording accidents and incidents, (v) follow-up and corrective measures, (vi) housekeeping at construction site, (vii) rules and safety procedures for traffic and vehicles at the construction site,(viii) working at heights and confined spaces, (ix) excavation and excavation support, (x) scaffolding, (xi) prevention of electrical risks, and (xii) welding and cutting torches. All staff are provided with an ‘Induction Training’ when they start at site. SHEQ committees, which hold monthly safety meetings, have been formed and toolbox talks are held every morning. Appropriate Personal Protective Equipment (PPE) is provided to all staff. Internal safety audits are undertaken regularly.

As outlined in the HRPPM, ITPC provides capacity building and skills training for facility workers. Training opportunities are identified for individual staff that are specific to their roles and responsibilities. ITPC also ensures that employees have appropriate health and safety training for their particular task.

PS3:  Resource Efficiency and Pollution Prevention

Resource Efficiency

As indicated above, the Project is a registered CDM project. It is estimated that the project will result in greenhouse gases emission reduction of 589,248 tCO2/year on average.

Pollution Prevention

Adverse pollution risks and impacts during the construction phase included solid and hazardous waste generation, air emissions, erosion and sedimentation. The ESMP includes standard pollution control measures to avoid, reduce or mitigate these risks and impacts in line with the Performance Standards and World Bank Group General EHS Guidelines. Monitoring during construction indicates that ESMP implementation was mostly satisfactory, however waste management has been a challenge. Large quantities of bulk, inert waste and hazardous waste materials, such as waste oil, remain stockpiled at site. A Site Restoration Plan has been prepared with the assistance of Hatch, which provides detailed measures for disposal of the waste remaining on site. The Restoration Plan also provides measures for management of spoil disposal areas and other areas that were disturbed by the construction of the project. MIGA will request that the guarantee holder provide a detailed timeline for implementation of the Site Restoration Plan and regular progress reports as a condition of the Contract of Guarantee.

During operations, the most significant adverse pollution risk is the potential discharge of poor quality water from the power house. Previously, the spillway released water from the uppermost layers of the reservoir, but the power house now draws water from the base of the reservoir and then releases this water back to the river. The water discharged from the tail race, then, may have different physico-chemical parameters compared to previous discharges. In particular, they may be colder, anoxic and contain elevated levels of nutrients and heavy metal concentrations. Studies based on the previous regular discharges from the northern diversion tunnel (which has its intake at the same level as the powerhouse intake) indicate that significant impact is unlikely. Where impact from the northern diversion tunnel was identified, it was primarily found to be related to flow of sediment downstream, which resulted in elevated heavy metal concentrations. As releases from the powerhouse will have low sediment content, this is not expected to be an issue. Further, should water quality concerns be identified, there are readily available mitigation measures, which can be implemented (e.g. aeration structure, multi-level intake, etc.). The Project will prepare and implement a detailed downstream monitoring plan, which includes monitoring of water quality and aquatic biodiversity downstream of the tailrace. Other potential impacts during operations, such as those associated with domestic water use, hazardous materials storage and disposal, and general solid waste disposal, will be managed as per the measures provided in the ESMP.

Adverse pollution risks and impacts during the construction of the associated transmission lines and substation include air, noise and dust pollution. During operations, the primary risk is associated with the use and storage of hazardous materials, such as transformer oil, at the substation. ITPC will work with ZESCO to encourage management of hazardous materials to be in line with World Bank Group EHS guidelines.

PS4:  Community Health, Safety and Security

During operations, key adverse risks and impacts to community health and safety are related to river flow (ramp-up and shut-down of Project operations), unauthorized access to Project facilities and emergency events. The risk impacts from variable flows due to plant operations is minimized by the fact that the closest downstream community is approximately 20 km from the dam. Fishing is undertaken downstream of the dam, but this activity takes place immediately below the dam upstream of the outlet of the tailrace and spillway release. Once the new bridge across the tailrace is constructed, a physical barrier will be installed to prevent access to the tailrace. Mitigation of the other two identified risks is discussed below.

Approximately 50 people will be employed by the Project during operations. The majority of employees will be local residents, but some (particularly secondees from Tata and ZESCO) may come from outside the area. A permanent worker accommodation camp has been established in Itezhi Tezhi town. As the town already has some resilience to in-migration and as the scale of in-migration is likely to be fairly minor given the number of jobs available, there is unlikely to be significant in-migration associated with the operations phase of the project.

Infrastructure and Equipment Design and Safety

The Itezhi Tezhi Dam with its associated appurtenant structures was completed in 1978. The dam is an earth rockfill dam having an earth core with a maximum height of 65m and a crest length of 1,800m. The total reservoir storage volume behind the dam is 6,005 mm3 at the reservoir full supply level of 1030.5 masl. The Project is located in an area that experiences frequent low intensity seismic activity and occasional larger intensity events. The safety status and proper functioning of the dam and it appurtenances has been continuously monitored since it was constructed. ZESCO undertakes an annual inspection, and an independent party undertakes an international standard engineering review at least every 5 years. The last ZESCO inspection was undertaken in April 2015, and the last independent review was undertaken by SWECO in 2012. SWECO was recently re-engaged to undertake another engineering review later this year. The findings of the last independent review indicate that monitoring data showed stable conditions of important parameters and that overall, the dam was in good condition. The latest ZESCO monitoring identified some upgrade of monitoring equipment that was required, as well as some general housekeeping, but no major issues. The Project will provide MIGA with the SWECO report when it is available and going forward on the five year cycle.

A Dam Break Study for the Zambezi Basin is currently being undertaken by the Zambezi River Authority (ZRA), with the support of the World Bank through the ‘Zambezi River Basin Development Program.’ This study covers the Kafue cascade, including the Itezhi Tezhi dam. The Terms of Reference for the study indicate that, based on the outcomes of this study, the ZRA will prepare an Emergency Preparedness and Response Plan (EPRP) for the Zambezi River Basin, which includes this Project.

Emergency Preparedness and Response:

As described above, draft Emergency Preparedness and Response Plan (EPRP) has been prepared by ITPC with the support of Hatch. While downstream emergency communication and evacuation is ultimately the responsibility of ZESCO (as the operator of the dam), the Project EPRP commits ITPC to public education in emergency preparedness and response, notification through issuing of warnings, providing access to information and providing general assistance in the case of an emergency. As stated in the Project EPRP, ITPC will collaborate with Zambezi River Authority and ZESCO (dam operator) in executing emergency preparedness and response programs for the downstream communities as per the EPRP for the basin.

Security Arrangements:

Unauthorized access to the site is prevented by security lighting, fencing around the facility with security guards stationed at entry points. ITPC also diverted the public road over the tailrace, instead of behind the power house and alongside the switchyard, to minimize the risk of unauthorized access to the powerhouse, switchyard, workshops and surge shaft.

PS5:  Land Acquisition and Involuntary Resettlement

The Project was constructed on vegetated land that had been acquired by ZESCO when the dam was being constructed, therefore no land acquisition or resettlement was required.

The physical displacement of 106 households was required for the construction of the associated transmission lines. All households were able to move within their existing plot of land or within the same geographic area, which minimized impacts on livelihoods. As the transmission lines and substation were funded by the African Development Bank (AfDB), resettlement was undertaken as per AfDB’s policies. Monitoring reports indicate that the resettlement was undertaken according to the agreed Resettlement Action Plan (RAP), and that the affected people were satisfied.

PS6:  Biodiversity Conservation and Sustainable Management of Living Natural Resource

The Project is located in the Nkala Game Management Area (GMA) and approximately 4 km from the Kafue National Park. Part of the transmission line corridor is also located in the Nkala GMA. The Nkala GMA is an area of 192 km2, which was established to provide a buffer around the Kafue National Park for sustainable wildlife management. The EIA found that 12 mammal species are commonly observed in close proximity to the power house site, including elephants, lions and leopards. Monitoring reports, as well as meetings with representatives from the Department of National Parks and Wildlife, indicated that the construction of the Project did not have a detrimental impact on Kafue National Park.

Downstream of the Itezhi-Tezhi dam the Kafue River meanders slowly through an expansive wetlands and floodplains known as the Kafue Flats. The Kafue Flats extend approximately 255 km along the course of the river and cover an area of around 6,500 km2. The wetland has extremely flat topography and is considered an important home for rare and endemic species such as Kafue Lechwe, (Kobus leche kafuensis), and Wattled Crane (Bugeranus carunculatus), both of which are listed as ‘Vulnerable’ on the IUCN Red List. Both species also rely on seasonal flood patterns for survival. The Kafue Flats, is classified by BirdLife International as an Important Bird Area, and contains two National Parks, Lochinvar and Blue Lagoon National Parks, both of which are also Ramsar sites. Lochinvar and Blue Lagoon National Parks, which are located approximately 120 km and 150 km downstream of the Project site, respectively, host approximately 400 species of birds. The Kafue River is also rich in fish species and fisheries are an important livelihood for people residing near the Kafue Flats. Twenty-three (23) fish species have been identified in the Kafue River, including three species of conservation significance: the endemic Kafue Killifish (Nothobranchius kafuensis), the threespot tilapia (Oreochromis andersonii) and the greenhead tilapia (Oreochromis macrochir), both of which are considered IUCN-Vulnerable. In addition to traditional fisheries, the Flats are important, in socio-economic terms, for local industries such as cattle grazing and floodplain agriculture. Despite their ecological and economic significance, the Kafue Flats ecosystem is considered to be the most ecologically disturbed wetland in Zambia.

As previously indicated, the Itezhi Tezhi dam was constructed in 1978, and any historical biodiversity impacts resulting from its construction and operation are therefore deemed irreversible. Prior to the construction of the Itezhi-Tezhi dam, the Kafue Flats was an important nesting site for water birds. Following the dam’s construction, significant changes have been observed in water bird populations, and it has been suggested that these changes are attributed to altered flood regimes and the expansion of invasive plant species (i.e. Mimosa pigra). The population of the Kafue Lechwe also significantly declined following the construction of the dam and changing land uses downstream.

The current operating conditions for the dam provide for a minimum flow release of 25 m3/s, and an annual release of an “ecological freshet” of 300 m3/s for a four week period (typically March). This annual release has occurred fairly consistently over the past decade, however it did not occur last year due to low rainfall conditions. WWF in partnership with ZESCO and the Zambian Water Resource Management Authority (WRMA) has undertaken extensive holistic modelling (which considered water requirements for energy, agriculture, human consumption and the environment) to develop an improved flow regime for the Flats. ZESCO implemented the improved flow regime in 2007-2008, but as there was a lack of data to determine whether the desired outcomes were being achieved, they reverted to the previous operating conditions. WWF in partnership with WRMA is currently collecting data and developing indicators to show the impacts of flow in the Flats. Once this is complete, a stakeholder group will be established to provide input developing a flow regime that will achieve the best possible outcome for all stakeholders. 

As previously indicated, the Project will not affect the existing flow regime, and therefore is not expected to detrimentally affect downstream environments. While the Project utilizes water from the Itezhi Tezhi dam to generate power, the timing and amount of releases is not driven by the Project, but is instead driven by the needs of the downstream Kafue Gorge Hydroelectric Project. The Project itself has no control over the releases. ITPC, however, will contribute to the planning of the new flow regime by participating in the stakeholder group, and through the collection of data as part of its downstream monitoring program, which will include monitoring of water quality, flow and aquatic biodiversity.

An Environmental Impact Assessment (EIA – the Zambian equivalent of an ESIA) was submitted to ZEMA and approval was granted in January 2009. As required by Zambian EIA legislation, two phases of consultation were undertaken as part of the EIA process: one early in the EIA process and another based on the findings of the EIA prior to submission to ZEMA. Documentation of the consultations undertaken during the EIA, however, is limited.

Stakeholder engagement activities were also undertaken as part of the updated ESIA prepared by URS in 2012, and these consultation activities were documented in the ESIA. The engagement activities undertaken in 2012 identified both positive and negative concerns. Expected benefits included employment and more reliable electricity, while issues raised were related to potential changes to water quality / quantity resulting in impacts on fish and ecosystems downstream; potential noise impacts associated with construction; and potential for in-migration. These concerns were largely addressed in the updated ESIA. A Stakeholder Engagement Plan was developed by URS as an appendix to the updated ESIA, and the 2015 Annual Monitoring Report indicated that the plan was implemented throughout the year.

• Itezhi-Tezhi HydroElectric Project Environmental and Social Impact Assessment (URS, November 2012).
• Itezhi-Tezhi HydroElectric Project Stakeholder Engagement Plan (URS, September 2012)
• Environmental and Social Management Plan for the Itezhi Tezhi 120 MW Hydroelectric Project, Zambia (ITPC, July 2013).
• Environmental and Social Action Plan for the Itezhi Tezhi Project (June 2016).