KaXu Solar One
This Environmental and Social Review Summary (ESRS) is prepared by MIGA staff and disclosed prior to the date on which MIGA’s Board of Directors considers the proposed issuance of a Contract of Guarantee. Its purpose is to enhance the transparency of MIGA’s activities. This document should not be construed as presuming the outcome of the decision by MIGA’s Board of Directors. Board dates are estimates only.
Any documentation that is attached to this ESRS has been prepared by the project sponsor, and authorization has been given for public release. MIGA has reviewed the attached documentation as provided by the applicant, and considers it of adequate quality to be released to the public, but does not endorse the content.
Status: Due Diligence
Atlantica Yield PLC (Atlantica) is seeking MIGA guarantees for its equity and shareholder loan investments in the KaXu Solar One power plant (”the Project”) in South Africa. Atlantica, based in the United Kingdom, owns and manages a portfolio of assets in the energy sector, including solar, wind, and hydro power projects, and transmission lines in Latin America and Africa. The Project is a part of the first round of South Africa Renewable Energy Independent Power Producer Procurement program (REIPPP), a program designed to introduce renewables into the country’s energy system through a bidding process.
The Project is an operational concentrated solar power (CSP) plant of 100 MW installed capacity, located 50 km north-east of Pofadder, in a desert location adjacent to the Orange River, in the Northern Cape Province, close to the border with Namibia. The plant involves a field of pivoting concave mirrors tracking the sun and concentrating the reflected sunlight onto a closed-circuit network of piping that contains synthetic oil as the heat transfer fluid. The heated oil cycles through a heat exchanger creating steam from water drawn from the Orange River, to drive a steam turbine. The electricity generated is transmitted through a high voltage substation for dispatch to the grid. The plant design also includes a molten salt thermal energy storage system that allows for extended electricity generation of up to 3 hours at full capacity for controlled dispatch during cloud cover or to meet evening electricity demand.
Plant infrastructure also includes an on-site substation, maintenance areas, offices and an access road. The power plant has a direct connection to the Eskom power grid, 5km away, via a 132kV overhead transmission line from the onsite sub-station.
The plants are located in a remote location and there are no residences or residential areas within the vicinity. The site lies adjacent another concentrated solar power project, the 100 MW Xina Power Plant.
The Project is operated by an affiliate of Abengoa S.A (the O&M Contractor).The Xina plant is also operated by Abengoa. Although the sites are completely separated and secured, there are some shared resources involving fire protection and emergency response.
IFC issued a loan to the Project in 2014. The ESRS disclosed by IFC is available here.
According to MIGA’s Environmental and Social Sustainability Policy, the Project has been categorized to Category B as the expected risks and impacts are site specific and can be managed through the appropriate application of internationally recognized practices and measures for this type of Project. Key environmental and social (E&S) issues are expected to include implementation of environmental and social management system and procedures; appropriate human resources (HR) policies and procedures, and occupational health and safety (OHS) provisions for all operations personnel and contractors.
While all Performance Standards are applicable to this Project, current information indicates that the Project will have impacts which must be managed in a manner consistent with the following Performance Standards:
- 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
The project site was acquired from a single land owner under a willing seller-willing buyer agreement. The developer did not have the right to expropriate land for the Projects, and PS5 Land Acquisition and Involuntary Resettlement does therefore not apply.
The Project is located on existing farmland and there are no significant impacts related to biodiversity, thus PS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources does not apply.
There is no indication or evidence of indigenous people residing in or having cultural ties to the Project area, thus PS7 Indigenous Peoples does not apply.
An archaeological survey was conducted as part of the impact assessment study. No sites of cultural or historical value were identified within the boundaries of the project area, and no resources of heritage value was identified. PS 8 Cultural Heritage does therefore not apply.
In addition to the Performance Standards, the World Bank Group (WBG) Environmental, Health and Safety (EHS) General Guidelines; and sector specific guidelines for Electricity Transmission and Distribution apply to this Project.
The following documents were reviewed by MIGA:
- EIA Report – Proposed Pofadder Solar Thermal Plant. Savannah Environmental. Arup, December, 2010
- Kaxu One Solar Plant, Lender’s Technical Due Diligence Report. MottMacDonald, November 2012.
- Kaxu Solar Plant, Annual Environmental Report. MottMacDonald, April 2018.
- Proposed Pofadder Solar Thermal Plant, Construction and Operation Environmental Management Plan. Savannah Environmental, May 2012.
- Owner’s Report: 1st semi-annual report to Lenders 2017, August 2017
- Owner’s Report: 2nd semi-annual report to Lenders 2017, January 2018
In addition to the Project-specific documents above, MIGA conducted a site visit to the Project area in January 2019.
MIGA’s due diligence review considered the environmental and social management procedures and documentation for the Project and identified gaps between these and MIGA’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period, are summarized in the paragraphs that follow and in the Environmental and Social Action Plan (ESAP) attached to this ESRS. Through the implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
Atlantica has a corporate Sustainability Policy which describes the company’s commitment to the protection of the environment and people, and the safety of its employees. The policy requires compliance with applicable laws and relevant health, safety and environmental standards, and is communicated to employees and other stakeholders.
Environmental and Social Management System: The O&M Contractor implements an Operations Environmental and Social Management Plan (OEMP) to manage impacts and risks associated with O&M activities at the plants. The components of the OEMP consist of policy and legislative requirements, objectives, mitigation and control measures, and performance indicators. The OEMP also includes an organizational structure for environmental and social management.
The OEMP also cover environmental aspects such as protection of flora and fauna, maintenance of rehabilitated areas, water management, waste and hazardous materials management. The Project is currently updating the OEMP, in line with the Performance Standards and WBG EHS Guidelines and the recommendations of the third-party monitoring consultant, and will submit the updated version to MIGA as part of the ESAP.
Environmental and Social Assessment: An environmental impact assessment (EIA) study was carried out for the plants in 2010 and was granted authorization from the Department of Environmental Affairs (DEA) in April 2011. It was conducted by an independent consultant company, in line with South Africa regulatory requirements and Performance Standard 1. The EIA report contains risk analyses and an assessment of impacts pertinent to the Project including terrain and geotechnical, ecological, cultural heritage, economic development, visual aspects, impacts on agricultural activity, accessibility, soil erosion, land use and property process. The EIA also contains a comprehensive socio-economic profile of the areas and consideration of both negative and positive impacts, including cumulative impacts, and a full record of public consultation and comments.
Organizational Capacity and Training: Atlantica has appointed a full-time Environmental Manager for the Project to oversee the O&M Contractor’s implementation of the OEMP and the associated procedures for the operations phase. In addition, there is an Environmental Officer on-site, employed by the O&M Contractor. The Health & Safety team consists of a safety manger, and a safety officer.
Commitment to training during operations is included in the OEMP. A locally based Community Liaison Officer (CLO) is also in place for the plant, responsible for overseeing interaction with the nearby communities and other stakeholders.
Emergency Preparedness and Response: Emergency response procedures are a part of the OEMP and operational guidelines for the plant. The procedures and responsibilities for emergency response actions and communication are clearly defined and are available on-site. Emergency response flowcharts with contact numbers are posted on-site. Fire-fighting equipment and fire alarms are up-to-date and are regularly tested. The Project has employed two paramedics, and there is an ambulance owned and shared between the Project and the Xina Solar Plant. Both the O&M Contractor and Atlantica has defined communication lines with the closest landowner and Eskom in case of an emergency. Following recommendations by the project’s insurance company, improvements have been made to the plant’s fire-fighting system. These mostly relate to ensuring the reliability and availability of the various systems such as the fire-fighting system pumps, hydrants and monitors as well as the automatic sprinkler systems and its foam components. Stricter inspection, test and maintenance regimes have been developed and implemented and are being monitored by the insurer as well as the owner.
Monitoring and review: The O&M Contractor submits standalone HSE reports to Atlantica on a monthly, quarterly and annual basis. A third-party monitoring consultant (Mott MacDonald) conducts annual visits to the plant.
Regional branches of the DEA also conduct monitoring activities in line with the National Environmental Management Act (NEMA).
PS2: Labor and Working Conditions
The plant employs 65 staff hired by the O&M Contractor, and 7 employed by Atlantica. This excludes security personnel.
Human Resources Policies and Procedures: The Project follows the South Africa Basic Conditions of Employment Act (1997), the Employment Equity Act (1998), and SA Labor Relations Act (1995). Atlantica has a global Human Resources Policy in place which has been adjusted for the Project to reflect the requirements of the SA legislation. It includes the recruitment, dismissal, performance appraisal, equal opportunity and non-discrimination, rights to collective bargaining, commitment to health & safety at work and compensation systems. Individual job contracts for Project staff incorporate the requirements of local HR-regulations as well as the requirements of PS2.
Workers’ Organization: The Project follows the requirements of the SA Labor Relations Act (1995) that protects employees’ rights to freedom of association and collective bargaining in line with the requirements of PS2. The share of employees that are covered by formal collective bargaining agreements is approximately 30%.
Non-Discrimination and Equal Opportunity: Atlantica is committed to the principles of employment equity, equal opportunities and empowerment, regardless of gender, race, color or creed. Based on their HR Policies and Procedures for the operations, Atlantica has in place a formal policy on non-discrimination and equal opportunity to cover all aspects of the Project, and such requirement is also contractually passed down to all third-parties, including contractors.
Grievance Mechanism: A staff grievance mechanism for operations stage is a part of the Environmental Management System. This procedure is compliant with the South African labor legislation and the requirements of PS2, and available to employees of both Atlantica and the O&M.
Occupational Health and Safety: The Project has established an Occupational Health and Safety (OHS) Management System, reported to be developed in line with the requirements of OHSAS 18001, which contains procedures for site-specific risk assessment. OHSAS 18001 certification is expected to take place in 2019. The findings of the MIGA site visit confirmed that the system is properly implemented and that a permit-to-work system is in place. It includes a permit application and pre-work risk assessment which has to be cleared by the site supervisor. Atlantica ensures that OHS documentation is available on site and that the site staff are trained on the full range of OHS procedures. The O&M Contractor submits regular OHS reports to Atlantica. The plant operates to high safety standards with 328 days since the last LTI.
There is a system for reporting incidents and near misses. This goes in line with the requirements of the South African Occupational Health and Safety Act (1993). Major incidents are reported to the Department of Labor and the Department of Environmental Affairs, and there is a procedure for accident/ incident investigation. Investigation results are used for learning and training purposes. OHS statistics are also part of the Key Performance Indicators which are reviewed and reported to Atlantica on a monthly basis.
Visitors and employees are given a HSE induction briefing and induction log is available. Site employees and visitors are provided with appropriate protective equipment.
OHS responsibility on-site lies with the plant supervisors. Atlantica has a Health and Safety Manager, and there is an Health and Safety Manger and OHS Officer on site from the O&M Contractor. The OHS Officer is responsible for coordinating health and safety audits, identify potential hazards and risks, participate in accidents/ incidents investigations, make recommendations regarding health and safety, conduct safety inductions, organize health and safety meetings, ensure regular reporting and management of documentation.
Workers Engaged by Third Parties: Contractors and third parties involved during the operations include security personnel, sanitation services, and waste management and collection companies. The Project has procedures in place as well as standard contractual obligations to ensure that contractors’ labor and working conditions comply with the requirements of this Performance Standard and South African laws, including consideration for grievance mechanisms for third party workers and fair working conditions.
Worker’s Accommodation: Housing of workers on site is limited to temporary accommodation for expats. All national staff, including the security personnel, live in the nearby communities and leave for home at the end of their shifts.
PS3: Resource Efficiency and Pollution Prevention
During operations, the main issues relate to water use and management, and waste management. Mitigation measures are included in the EMP.
Greenhouse Gases: As this is a solar project, the greenhouse gas (GHG) emissions associated with the operations phase of the project are minimal. The project is not required to quantify and report the CO2-equivalent emissions as required under this Performance Standard. Based on estimations at design stage, the Project offsets approximately 315,000 tCO2 emissions per year, through production of renewable energy.
Water management and consumption: The Project is sourcing water from the Orange River, in line with its Water Extraction Permit. The permit allows for using 600,000 cubic meters per year, but operations only requires approximately 160,000. Water is stored in an on-site lined reservoir. Water is used in a circulating system in the cooling tower, in the steam turbines, and for cleaning of the solar collectors. Approximately two-thirds of the water is reused. Water management procedures are part of the OEMP and the Project is monitoring its water use. Process water is condensed and sent to evaporation ponds, and no effluent is produced from operations except for the normal sewage from operations staff.
Pollution Prevention: Pollution prevention procedures are included in the OEMP, and include the use of proper equipment, vehicle and roads maintenance, timely dust suppression measures, speed restrictions and others. The project has developed a monitoring program which covers all emissions.
Waste Management: Operation of the plant involves limited generation of waste, including solid waste and hazardous waste. Site-specific waste management procedures have been established and includes description of sources, targets for minimizing waste generation and waste control measures. Domestic waste, inert waste (rubble, spoil), recyclables (plastics, paper, metals) are sorted on site and collected by a licensed waste collector for recycling and disposal as required by local regulation.
There is a small amount of hazardous waste generated, primarily oils from the heat transfer system but also including fuels, (diesel and petrol), lubricants and paints. These materials are stored in a secured cabinet, locked to prevent an unauthorized access. The necessary prohibition and warning signs are posted. The material safety datasheets are available for all materials present on-site. Hazardous waste is picked up by a licensed contractor. HTF contaminated soil is treated in an on-site bioremediation facility and then returned to the point of origin.
PS4: Community Health, Safety and Security
The plant is located in an isolated position with no communities or settlements in the vicinity of the plant. The closest settlement is Onseepkans which is located approximately 31 km from the plant (41 km by road) and Pofadder which is located approximately 33 km from the plant (68km by road).
Community Health and Safety: Since the project site is in a rural area with no communities in the vicinity, the potential impacts on community health and safety are limited. Daily traffic is limited to the transport of personnel to and from the site but the intensity is low due to a low number of employees, which primarily travel in buses provided by the Project.
Hazardous Materials Management and Safety: As discussed under Performance Standard 3, the quantities of hazardous materials are limited, and the materials are managed in a suitable manner to avoid community exposure to these materials.
Community Exposure to Disease: The community exposure to disease around the plant is limited as the site is located away from any settlements, the number of employees and contractors on site is small and the nature of operations does not imply potential impacts to areas outside the plant. The Project implements worker’s health programs to screen the health of workers. Such information is not used, however, for exclusion from employment or other form of discrimination. A HIV/AIDS Awareness and Prevention Plan is implemented as part of the OEMP.
Emergency Preparedness and Response: As indicated under Performance Standard 1, the Project has developed and implemented an Emergency Preparedness and Response Plan which covers the procedures for informing stakeholders and responding to emergencies.
Security Arrangements: Site security is managed by a professional private security firm who provides trained, unarmed security personnel. Atlantica ensures that the security contractor operates in a manner which meets the requirements of local regulation and this Performance Standard. The site territory is fenced and public access to the solar plant is prevented. The Project is guided by the principles good international practice in relation to hiring, rules of conduct, training, equipping, and monitoring of security workers, and by applicable law.
The KaXu plant was granted Environmental Authorization by the Department of Environmental Affairs in February April 2011. Other licenses and permits granted to the Projects include registration as hazardous waste generating facility, and water use licenses.
The project makes use of a work group that has been established by Abengoa South Africa in South Africa under the name SEED to implement the project’s economic development obligations under the implementation agreement and in particular enterprise and social economic development activities. Community meetings are held on a monthly basis. The project is fulfilling its obligations relating to localization of hiring and purchasing requirements.
The KaXu project is part owned by a Local community trust 20%, established through South Africa’s Industrial Development Corporation. Dividends from the project are expected to be used to fund projects identified by the trustees.
MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring them to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities.
In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.
Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.
Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:
International Finance Corporation
2121 Pennsylvania Avenue NW
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400