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Kenya

Tsavo Power Company Limited (Kipevu II)

$33.3 million
Power
ESRS
Proposed
plant

Project Facts

Project Facts

Project Facts

Kenya
Guarantee Holder
IPS Power Investment Limited
Cinergy Global Tsavo
CDC Financial Services
Tsavo Power International LLC c/o Wartsila
Investor Country
Cayman Islands
Kenya
Mauritius
Environmental Category
B
Date SPG Disclosed
December 21, 2018
Projected Board Date
March 01, 2019
Project Type
Non-SIP

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.

Country:                                  Kenya

Sector:                                     Energy

Project Enterprise:               Tsavo (Kipevu II) Power Plant

Environmental Category:  B

Date ESRS Disclosed:           December 21, 2018

Status:                                      Due Diligence

Industrial Promotion Services Power Investment Limited (IPS), Cinergy Global Tsavo, CDC Financial Services Limited and Tsavo Power International Limited Liability Company c/o Wärtsilä of Cayman Islands (the “Guarantee Holders” or “GH”) are seeking to acquire MIGA coverage for the existing Tsavo (Kipevu II) Power Plant, an operating Heavy Fuel Oil (HFO) fired power generation plant with a capacity of 74.5 megawatts (MW), located along Kipevu Road,  Mombasa County, Kenya (the “Project” or “power plant”). The power plant is currently in its 18th year of operation.

Construction of the power plant commenced in September 2000 and the commercial operation date was reached on September 4th, 2001. The power plant is comprised of: seven diesel generators; two HFO tanks; one water tank; two transformers; an engine room and various auxiliary and supporting components. The Project has a 20-year power purchase agreement (PPA) signed in January 2000, with the Kenya Power and Lighting Company Limited (Kenya Power), the national electric utility company. A Kenya Power sub-station is located adjacent to the plant.

The power plant is owned by the special-purpose company Tsavo Power Company Limited of Kenya (TPC), while operations and maintenance services are provided by Wärtsilä Eastern Africa Limited. Wärtsilä has 15.1% ownership in TPC. Other shareholders include: (i) Cinergy Global Power Limited (CGP) and IPS Kenya with 49.9% ownership through a 50-50 joint venture holding company; (ii) CDC Group, with a 30% ownership; (iii) and the International Finance Corporation (IFC), which has a 5% ownership in TPC.

The Project is located on 3.2 hectares (ha) of land, within an industrial zone overlooking the Mombasa Port Area and is adjacent to Kipevu I (63 MW) and Kipevu III (120 MW) power stations, as well as railway lines and port facilities. The three power plants are located within the same fenced area, with shared security. The nearest residential area, Changamwe, also includes commercial and industrial activities, and is approximately half a kilometer from the Project.

The Project is categorized as B under MIGA’s Policy on Environmental and Social Sustainability (2013), which is consistent with IFC’s categorization of the Project. The most significant potential E&S risks are related to: (i) cumulative impacts from the project and the adjacent Kipevu I and Kipevu III projects; (ii) air and greenhouse gas emissions; (iii) air emissions licensing; (iv) occupational health and safety; and (v) retrenchment.

While all Performance Standards (PSs) are applicable to this Project, our 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 site for the development of the Project is owned by the Government of Kenya (GoK) who leased the land to the Export Processing Zone Authority (EPZA) under a 99-year lease. EPZA thereafter leased the land to Kenya Power on a 92-year lease and on 18th May 2000, Kenya Power leased the land to TPC on a 21-year lease period. The acquisition of the land did not result in economic or physical displacement as the site was vacant industrial land, therefore PS5 Land Acquisition and Involuntary Resettlement. Significant impacts on biodiversity are not expected, hence PS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources is not applicable. 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. Relic structures found on the site were found to be of minor historic interest, these structures were documented by the Mombasa County Council who authorized their disposal. There is no further construction or land take expected as part of this project therefore PS8 Cultural Heritage does not apply.

In addition to the PSs, the World Bank Group (WBG) Environmental, Health and Safety (EHS) General Guidelines and Guidelines for Thermal Power Plants apply to this Project.

The following documents were reviewed by MIGA:

MIGA’s review also included a visit to the Project site in November 2018, as well as meetings with TPC, the O&M Contractor and IFC.

MIGA’s due diligence review considered the environmental and social management process and documentation for the Project, and identified gaps, if any, 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

Environmental and Social Assessment:

An Environmental Assessment Report for the Project was developed in July 1999, prior to the enactment of Kenyan environmental legislation. The Environmental Assessment was carried out by an international consultant to ensure compliance with: (i) World Bank Environmental and Social Safeguard Policies; (ii) World Bank Pollution and Abatement Handbook – Part III, Thermal Power Generation for New Plants (dated July 01, 1998); (iii) the World Bank Environmental, Health and Safety Guidelines for Engine Driven Power Plants (dated October 23, 1996); and (iv) Pollution Prevention and Abatement Handbook (1998). An Environmental Action Plan (EAP) was developed in February 2000, to be applied by TPC during the construction and operational phases. Specific mitigation measures included in the EAP related to: (i) monitoring of air quality and noise emissions; (ii) waste generation and disposal; (iii) traffic management; (iv) occupational health and safety hazards; and (v) employment and economic benefits.

The Environmental Assessment Report and corrective actions in the EAP provide a comprehensive review of the potential risks and impacts of the Project (construction, operation and decommissioning phases), and appropriate mitigation measures are recommended in line with MIGA’s requirements.

Management Program and Monitoring

The Project EAP was developed in 2000 and implemented during construction and operation of the power plant. An Environmental Management System (EMS) in line with the requirements of International Organization for Standardization (ISO) 14001:2015 has been established and implemented for the Project. The current ISO 14001:2015 certification will expire in March 2020.  Site observations in November 2018, show that management of E&S issues are consistent with the procedures set out in the EMS.

Organizational Capacity and Training

The GH (IFC and CDC) through the Africa Power Platform Company(APP)  has developed an Environmental and Social Governance (ESG) Committee, who’s main responsibilities at project-level include: (i) monitoring E&S compliance; (ii) ensuring that APP has in place adequate and robust systems for monitoring Environmental, Health and Safety (EHS) and social management, in accordance with applicable national legislation and Good International Industry Practice; and (iii) monitoring the implementation of project-level ESAPs

The Project has also appointed a suitably qualified Environmental, Health and Safety (EHS) Officer, who handles EHS issues and leads on reviews and updates of the EMS. The Officer reports directly to the Plant Manager and the Officer’s responsibilities with regard to E&S issues (including training) will be set out in the EMS documentation (ESAP action item #1).

Emergency Preparedness and Response

As part of the EMS, the Project implements an Emergency Response and Recovery Plan (ERRP) to ensure the safety and security of its personnel, contractors and visitors. The ERRP defines the actions to be taken, procedures to be followed and the roles and responsibilities of Project staff during and after accidents and emergencies (accidents, fire, oil leaks, explosions and equipment failure). A supplementary list of emergency contact details is also included in the EMS. The Project has a firefighting system comprising a fire water and foam injection system.

The Project conducts periodic internal and external drills to measure the plant’s capacity in responding to emergencies specifically related to: fire; first aid; and oil spill emergencies. The Project will however develop a procedure to notify the surrounding communities should an emergency incident at the plant put them at risk in line, as well as update the procedure to account for process/equipment changes, or changes in personnel within the Power Plant in line with PS 1 requirements (ESAP action #2).

Reporting

The Project compiles and submits the following annual statutory reports to the Kenya National Environment Management Authority (NEMA) in line with national legislation: (i) environmental audit reports; (ii) fire safety audit reports; and (iii) safety and health audit reports. All recommendations from these statutory audits are compiled into one spreadsheet and provided with a timeframe for implementation and the person responsible. Implementation of the recommendations are monitored by the EHS Officer. The Project will also provide MIGA with an Annual Monitoring Report (AMR) that contains copies of the reports provided to NEMA as well as a spreadsheet that tracks the implementation of the recommendations.

Stakeholder Engagement

Stakeholder engagement was not undertaken as part of the Project’s Environmental Assessment and consultation prior to construction was instead focused on national and local government authorities, as well as the scientific community. TPC also placed advertisements in national newspapers, notifying the public about the Project, indicating the detailed E&S information available for review and inviting comments and questions. Stakeholder engagement is currently limited to the neighboring Kipevu I and II power plants, as part of the statutory annual environmental audit. The Project will therefore develop and implement a Stakeholder Engagement Plan (SEP) to address stakeholder engagement during operations (ESAP action item #3). The SEP will include the following elements in line with PS 1 requirements: stakeholder identification, analysis and planning; disclosure and dissemination of information; consultation and participation; and ongoing reporting to affected communities. The Project will include stakeholder records in the AMR, such as records of engagement.

External Communications and Grievance Mechanism

The Project currently has various channels to allow for grievances to be received, which include: directly to the Plant and General Managers; NEMA; the local police; and the Area Chief. The Project will however develop and implement a procedure for external communication and a community grievance mechanism, in line with PS 1 requirements (ESAP action item #4) scaled to the risks and impacts of the Project and have the neighboring community of Changamwe as its primary user.

Cumulative Impacts

As part of the 1999 Environmental Assessment Report, computer modeling was undertaken to assess the cumulative impact on ground level concentrations of Sulphur Dioxide (SO2), Nitrogen Dioxide (NO2) and particulate matter, as a result of the simultaneous operation of the Project and the neighboring Kipevu I power plant. A cumulative impact assessment considering noise and emissions (air and effluent) from all three Kipevu power plants will therefore be undertaken by the Project (ESAP action item #5).  

PS2:  Labor and Working Conditions

The Project employs 42 permanent staff in administration, operation and maintenance.  There are an additional 28 sub-contracted staff (general cleaning staff and security service providers). There is no worker accommodation on site.

Human Resource Policy and Procedures:

The Project has developed and implements Human Resources (HR) Policies and Procedures, which includes are in line with the National Labor Code as well as the requirements of PS2.

Employee Grievance Mechanism

The Project has developed and implemented and internal grievance and disciplinary procedures, in line with PS2. The grievance mechanism also allows for anonymous submissions through suggestion boxes as well as confidential discussions with HR A grievance committee has also been established and meets on a quarterly basis to discuss any potential grievances. The Project will report on workplace grievances in the AMR.

Retrenchment Plan

As mentioned previously, the Project has a 20-year PPA with Kenya Power that was signed in January 2000 and will expire in January 2020. As there is currently no prospect for a potential PPA extension there is a potential of retrenchment for the current workforce in its entirety. The Project will develop and implement a Retrenchment Plan in line with PS 2 requirements, in consultation with workers, their organization and if appropriate, the Government (ESAP action item # 6).

Occupational Health and Safety (OHS)

The project has developed a Health and Safety (H&S) Policy Statement which includes management procedures for occupational health and safety in compliance with national legislation. The Policy will be updated to include contractors and third-party employees in its scope (ESAP action item #7). A Health and Safety (H&S) Committee comprising of representatives from all departments are in place, as required by national legislation. Management of OHS issues on site falls under the responsibilities of the EHS Officer.

Workers’ Organizations

There is no impediment to workers joining a union should they wish to do so. Workers from the power plant are part of the Kenya Electrical Trades and Allied Workers' Union which gives them leverage to bargain, especially as the PPA will not be extended and the power plant will be closed in 2021. Workers are also represented on the Health and Safety (H&S) Committee.

PS3:  Resource Efficiency and Pollution Prevention

Greenhouse Gases

As per PS3 requirements, and since the Project is emitting more than 25,000 tonnes of carbon dioxide-equivalents annually, the Project will introduce procedures to quantify the direct and indirect emissions (ESAP action item #8) and thereafter report on carbon dioxide (CO₂) emissions annually in the AMR.

Water Resource Use

The Project’s water supply is sourced from the local municipality and for the past operating year (September 2017 – August 2018), consumed approximately 7,555 tons of water, in line with its water use license.

Air Emissions

Annual stack emissions testing of particulates and gaseous emissions is undertaken on behalf of the Project by an external contractor, to compare the results with local regulations and WBG EHS Guidelines for thermal power plants. While concentrations of particulate matter, SO2, and oxides of nitrogen (NOx) are all within the WBG Guidelines for Thermal Power Plants, NOx and particulate matter emissions have exceeded the national legislation requirements (which are stricter than those of the WBG EHS Guidelines). The power plant is currently in discussions with NEMA on the way forward and necessary steps to reach compliance with the national requirements by March 2019 and will present a plan to address compliance to MIGA as part of the ESAP. (ESAP action # 9).

The Project, together with the other Kenyan Thermal IPPs are currently in negotiations as a sector with NEMA to waive the continuous (monthly) air emissions reporting requirement in national legislation. The National Air Quality Regulations (2014) were enforced in 2016 and the Thermal Power IPPs met NEMA in July 2017 to discuss the Regulations to find a common ground towards compliance. During the meeting, it was agreed that the IPPs would come up with a Proposed Emission Control System for review by NEMA, which would form the basis for the licensing of thermal power plants in terms of the Regulations. A memorandum in this regard was developed accordingly and submitted to NEMA in August 2017 and NEMA’s response is awaited. NEMA is in the process of issuing provisional emission licenses and the Project conducts stack emissions and ambient air quality monitoring and evaluates the measurements against the standards set out in the Regulations. The power plant is currently in discussions with NEMA on the way forward and necessary steps to reach compliance with the national requirements and will present a plan to address compliance to MIGA as part of the ESAP (ESAP action # 10).

Wastewater and Effluent

Treated effluent is tested quarterly by NEMA, as per the conditions of the Project’s effluent discharge license. Based on effluent quality monitoring data, no exceedances of the Kenyan liquid effluent standards or the WBG General EHS Guideline have been recorded to date, except for oil and grease measurements. Oil and grease values have consistently exceeded the stringent Kenyan standard of “nil” in the last few years (the Kenyan effluent quality standards are generally more stringent than that of the WBG EHS Guidelines). The Project reports that this was discussed with the NEMA, who agreed that the standard of “nil” is not feasible and that the WBG standard is considered more applicable.

 Noise

Ambient noise levels were monitored at various noise receptors in the area surrounding the Project by an external contractor. While there are institutions, schools or silence zones within the plant’s noise area of influence. Exceedances of the ambient noise standards against national legislation were recorded at various points. The Project will, in line with national legislation, report on emission limit exceedance to NEMA and apply for a provisional emission license (ESAP action item # 11). The Project will thereafter develop and implement mitigation measures to ensure that ambient noise levels remain within the national legislation limits and report on the emissions annually in the AMR.

Waste

The Project’s EMS includes procedures for the segregation, handling and ultimate disposal of hazardous and non-hazardous waste. As per national legislation, waste is removed and disposed of by contractors licensed by NEMA. The Project will track and report on hazardous and non-hazardous waste amounts annually in the AMR. Site observations revealed adequate bunding and monitoring provisions in place at fuel storage areas.

PS4:  Community Health, Safety and Security

As mentioned previously, the Project is located within the Mombasa Port area, with the nearest community (Changamwe) approximately 500 m. away. Community Health and Safety risks are limited since the Project lies within the area managed by the port, and mainly consists of exposure to project-related traffic. HFO is delivered to the Project via a 2km pipeline. The EMS will be updated to include a Traffic Control Management Plan (TCMP) to assign responsibility for traffic management measures and include requirements regarding driver training and awareness, as well as vehicle standards and maintenance.

Security Personnel

The Project has shared security services and lies within the same fenced area as Kipevu 1 and 3. The main entrance to the three power plants has armed security personnel from the Kenya police. The Project has 16 security guards, that are not armed. No security incidents have been reported so far. A Security Plan in line with PS4 will be developed to ensure that security will be provided in a manner that does not jeopardize the community’s safety or the Security Provider(s) relationship with the community and that is consistent with national requirements (ESAP action item #12).

While the Project was developed prior to the enactment of national environmental legislation, it compiles and submits annual statutory reports to NEMA in line with national legislation. The Project will comply with national legislation requirements for emissions of particulate matter and NOx (ESAP action item # 9) and present a plan to address compliance regarding the air emissions license applied for in terms of the Air Quality Regulations (ESAP action item # 10). The Project will also develop a SEP in line with PS1 requirements (ESAP action item # 3).

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:

Compliance Advisor/Ombudsman
International Finance Corporation
2121 Pennsylvania Avenue NW
Room F11K-232
Washington, DC 20433 USA
Tel: 1 202 458 1973
Fax: 1 202 522 7400
E-mail:
cao-compliance@ifc.org

 

The above listed documentation is available electronically as PDF attachments to this ESRS at www.miga.org.  It is also available for viewing at:

Nation Centre, 13th floor, Kimathi Street,

Nairobi, Kenya.

Telephone Number: + 254 722-205283

Or:

9th Floor, IPS Building, Kimathi Street,

Nairobi, Kenya.

Att:  Aleem Karmali