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MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more.

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Kenya

OrPower 4, Inc.

$134 million
Power
Environmental and Social Review Summary
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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.

Ormat Holding Corporation has requested MIGA to extend their coverage for the Olkaria III geothermal project to include an expansion contemplated under the Second Amended and Restated Power Purchase Agreement between OrPower 4 and Kenya Power and Lighting Company.  This proposed new investment of approximately US $200 million is to expand the geothermal power plant with an additional capacity of 36 MW (”Plant 2”) to the existing 48 MW facility (Phase 1 - 13MW and Phase 2 - 35MW, respectively, together: “Plant 1”). The Project will have a combined generation capacity of 84 MW once completed (consisting of Plant 1 and 2). 

The Project consists of an electrical power generation complex, a geothermal energy production field, a geothermal gathering piping system and a geothermal condensate re-injection system.  The expanded plant will be at a single dedicated site within the geothermal license area connected to the wells by pipelines conveying single or dual phase steam and water. The main generating units will consist of the 6 (six) existing OECs (Ormat Energy Converter) of Plant 1, which will undergo minor modifications, plus 3 (three) additional OEC units which are to be built at the same site and which conform Plant 2.  In addition, the expanded plant will include other required auxiliary systems, such as the compressed air system, motive fluid and fire protection systems.   Approximately, eight additional production wells will be connected (in addition to the wells to Plant 1), and additional pipelines will be added from the well pads to the separation station.  With Plant 1 already commissioned and operating, the basic project infrastructure has already been developed, including access roads and power and water supply, as well as the required transmission and electrical facilities to support Plant 2 facilities.  The development of the Olkaria III expansion project will be carried out by OrPower 4, Inc, which is a wholly owned subsidiary of Ormat. 

The project is located south of Lake Naivasha, about 90 km northwest of Nairobi off the main highway to Nakuru.  The Olkaria III project site is located within Hell’s Gate National Park in an area gazetted for geothermal power production before the park was established.  The park is divided into two sections: the western section in which geothermal production is permitted, and the eastern section in which hiking and recreational activities (primarily bird watching) are encouraged.  Geothermal field development and activities are closely coordinated with the Kenya Wildlife Service (KWS), which is responsible for park management and protection.  All geothermal operations within the park are required to enter into an Environmental Management Agreement with the KWS.

Background

MIGA has insured the Olkaria III project since 2000, first as part of the project's initial construction and operations, and then again for a subsequent interim expansion.  The EIA (2000) reviewed as part of the initial due diligence in 2000 covers this proposed additional expansion as the project was envisioned to be built in stages to 100 MW capacity.  Since the initial EIA report, other supplemental environmental and technical reports/findings have been developed both around geothermal development within the project area and the project itself.  These include:  a supplement to the initial EIA (2001), a revised environmental management plan, environmental audits of the existing Olkaria project operations.  MIGA’s environmental and social monitoring mission of February 2010 confirmed that the project sponsor is operating their project in a manner consistent with MIGA’s Performance Standards.

B.  Environmental and Social Categorization

The key environmental issues are: management of geothermal fluids, noise, and non-condensable gases (NCG); and location within a designated national park.  There are no significant social issues because the Kenya Wildlife Service has been managing human use of the park since it was established in 1984, ensuring that human use is limited to tourism in the eastern sector and predominantly geothermal development in the western sector (although tourism is permitted in the western sector), and habitat protection throughout.  The client’s environmental performance/compliance has been satisfactory throughout the implementation of the previous phases.  Recent environmental audits, MIGA’s site visit and the project design indicate that no significant adverse environmental or social impacts of the expansion that cannot be addressed by continuation of current practices are expected. Therefore, the project is a Category B under MIGA's environmental and social sustainability policy because the impacts are site-specific, limited in number, and mitigation measures are readily identifiable. 

While all Performance Standards are applicable to this project, current information indicates that the project will have impacts that must be managed in a manner consistent with the following Performance Standards:

  • PS1:  Social and Environmental Assessment and Management Systems
  • PS2:  Labor and Working Conditions
  • PS3:  Pollution Prevention and Abatement
  • PS4:  Community Health, Safety & Security
  • PS6:  Biodiversity Conservation & Sustainable Natural Resource Management

Performance Standards 5, 7, and 8 do not apply to this proposed expansion as no land acquisition is expected and indigenous peoples, and/or cultural heritage will not be directly impacted.  The designation of Hells Gate as a National Park in 1984 and the geothermal developments since 1971 has impacted the Maasai communities.  The creation of the park and its management has placed some constraints on their grazing within the Park, but they still able to herd animals along traditional migratory routes through the Park to other grazing areas.  The Maasai communities have benefited directly and indirectly from the project through OrPower 4’s community development programs.

The following documents were reviewed by MIGA:

  • Environmental Audit Report, Olkaria III Geothermal Power Plant 2010 prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya (January 2011)
  • Environmental Impact Assessment for Olkaria III Geothermal Power Plant, by M. P. Tole and Associates, June 2000 (EIA)
  • Supplementary report to the EIA of August 2000, regarding High Tension Transmission Lines and Well Pads for the Olkaria III Geothermal Development, by M. P. Tole and Associates, May 2001.
  • Environmental Management Plan prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya, August 2007
  • Environmental Audit Report, Olkaria III Geothermal Power Plant 2009 prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya, (November 2011)
  • OrPower 4 – Environmental Self-Audit Report, 2009
  • Olkaria III Geothermal Power Energy Project: Project Report, (May 2007)

MIGA carried out a monitoring site visit to the existing project in February 2010 and met with staff at OrPower 4, Kenya Electricity Generating Company (KenGen), Kenya Wildlife Service (KWS), the Park warden at Hell’s Gate National Park and with World Bank colleagues as part of the monitoring mission.

The following documents were reviewed by MIGA:

  • Environmental Audit Report, Olkaria III Geothermal Power Plant 2010 prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya (January 2011)
  • Environmental Impact Assessment for Olkaria III Geothermal Power Plant, by M. P. Tole and Associates, June 2000 (EIA)
  • Supplementary report to the EIA of August 2000, regarding High Tension Transmission Lines and Well Pads for the Olkaria III Geothermal Development, by M. P. Tole and Associates, May 2001.
  • Environmental Management Plan prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya, August 2007
  • Environmental Audit Report, Olkaria III Geothermal Power Plant 2009 prepared by Prof. Mwakio P. Tole and Colleagues, Pwani University College, Kilifi, Kenya, (November 2011)
  • OrPower 4 – Environmental Self-Audit Report, 2009
  • Olkaria III Geothermal Power Energy Project: Project Report, (May 2007)

MIGA carried out a monitoring site visit to the existing project in February 2010 and met with staff at OrPower 4, Kenya Electricity Generating Company (KenGen), Kenya Wildlife Service (KWS), the Park warden at Hell’s Gate National Park and with World Bank colleagues as part of the monitoring mission.

The Environmental Management and Coordination Act (1999) established the National Environmental Management Authority to manage all matters dealing with the Environment in Kenya, including the conduct of Environmental Impact Assessments and Environmental Audits for projects deemed to have potential adverse impacts on the environment. Geothermal Energy Projects are listed under subsection 4(d) of the Second Schedule, as among projects that are required to undergo Environmental Impact Assessment. The Environmental (Impact Assessment and Audit) Regulations (2003) have been gazetted to guide the conduct of Environmental Impact Assessments and Environmental Audits in Kenya. Other relevant regulations by NEMA include: The Environmental Management and Coordination (Conservation of Biological Diversity and Resources, Access to genetic Resources and Benefit Sharing) Regulations (2006); The Environmental Management and Coordination (Water Quality) Regulations (2006); and The Environmental Management and Coordination (Waste Management) Regulations (2006).

The Water Act (2002) established the Water Resources Management Authority with powers to conserve and allocate water resources. Discharge of trade effluents requires a permit from the licensed Water Services Provider for the given area. The Kenyan environmental authorities (NEMA) have on 21 May 2010 amended the 14 September 2007 EIA license to approve the final expansion to 100 MW, as originally proposed in the 2000 EIA.

The company holds regular consultations with the KWS, the Lake Naivasha Riparian Association, and the local community representatives to address issues of environmental and community concern. 

The following listed documentation is available electronically as PDF attachments to this ESRS at www.miga.org as well as Ormat’s website www.ormat.com

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