ENVIRONMENTAL & SOCIAL REVIEW SUMMARY

This Environmental and Social Review Summary is prepared and

distributed in advance of the IFC Board of Directors consideration of the
proposed transaction. Its purpose is to enhance the transparency of
IFCs activities, and this document should not be construed as
presuming the outcome of the Board of Directors decision. Board dates
are estimates only.
Any documentation which is attached to this Environmental and Social
Review Summary has been prepared by the project sponsor and
authorization has been given for public release. 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.
Project number 25218
Country Indonesia
Region East Asia and the Pacific
Sector Coal - Thermal Power Generation
Department Reg Ind, Infra & Nat Res, ASIA
Company name MSW Power
Environmental category B
Date ESRS disclosed March 23, 2007
Last Updated Date April 30, 2014


Status Completed
Previous Events Signed: June 30, 2008
Approved: June 21, 2007

Overview of IFC's scope of review
IFCs review of this project consisted of appraising environmental, health
and safety and social information submitted by PT Makmur Sejahtera
Wisesa (MSW or the company), a field visit conducted by the IFC project
team including its environmental specialist to the proposed project site,
its surroundings, and the nearby existing coal mine operated by PT Adaro
Indonesia, and interviews with MSWs officers in charge of environmental,
health and safety, and social management. Key documents reviewed by
IFC included the following:

English version of UKL-UPL (Environmental Management and Monitoring
Study):
- Environmental Management and Monitoring Study, 2x30MW Coal Fired
Steam Power Generator (PLTU), Tanjung Tabalong, PT. Makmur
Sejahtera Wisesa, March 2007

Bahasa Indonesia version of UKL-UPL:
- Upaya Pengelolaan Lingkungan (UKL) dan Upaya Pemantauan
Lingkungan (UPL), PLTU BATU BARA 2X30 MW, DI TANJUNG
TABALONG, PT MAKMUR SEJAHTERA WISESA, Maret, 2007

After the ESRS was disclosed on March 23, 2007, there have been some
changes made to the Project. IFC reviewed additional information
submitted by MSW to update the ESRS.
Project description
MSW plans to construct, own and operate a 60MW (2x30MW) mine-
mouth coal-fired power plant on a 100 ha site in Mabuun Village, Murung
Pudak, Sub-district of Tabalong Regency, South Kalimantan Province,
Indonesia (the project). The nearby (4-5km) Wara coal mine, one of the
three coal mines (Tutupan, Paringin and Wara) being operated by PT
Adaro, will supply the fuel (about 1,200 ton/day) for the plant by trucks.
Coal produced by PT Adaro has very low sulfur and ash contents and is
traded internationally as Envirocoal. MSW will sell most of its electricity
to PT Adaro under a Power Purchase Agreement. It also plans to sell its
excess electricity to the local power grid as well as provide a small
amount of free electricity to the local community. Water for the operation
of the plant will be taken from the Tabalong River and pumped to the
plant through a 9 km pipeline. An intake well will be constructed in the
riverbank situated in Sulingan Village of Murung Pudak Sub-district. About
75 km, 70 kV transmission line for the Adaros coal transportation
conveyer, as well as about 4-5 km 20 kV transmission line to the PLNs
Tanjung Substation which will connect to the forthcoming South Central-
East Kalimantan interconnection line, will be developed to deliver the
generated electricity. An area of about 7 ha of land will be provided within
the plant boundary for ash disposal. The total project cost is estimated at
$162.4 million. IFC is proposing to provide financing of up to $25 million
plus a syndicated loan of up to $96.8 million.

Identified applicable performance standards
Considering the nature of the project and based on the findings of the
IFCs appraisal, the following Performance Standards are applicable to the
project:

- PS-1 Social and Environmental Assessment and Management Systems
- PS-2 Labor and Working Conditions
- PS-3 Pollution Prevention and Abatement
- PS-4 Community Health, Safety and Security
- PS-5 Land Acquisition and Involuntary Resettlement

The proposed project site is surrounded by rubber, palm oil and other
mixed plantations, and currently being used for small scale farming with
some undeveloped areas (bushes and grass fields). No physical relocation
of people is expected. The project is not expected to have adverse
impacts on any indigenous peoples, the nearest being the residents of
Warukin Village about 9km from the site. Nor will the project impact any
sensitive natural resources, or cultural heritage.
Environmental and social categorization and rationale
The project is a small scale mine-mouth, coal-fired power plant project
which will use coal from the nearby existing coal mine (Wara coal mine),
operated by PT Adaro Indonesia, producing Envirocoal, one of the
cleanest quality coal traded internationally in the world. Potential
environmental impacts of the project, typical to small coal-fired power
generation, including ash utilization and disposal, are limited, few in
number, generally site-specific, largely reversible and readily addressed
through mitigation measures proposed in the UKL-UPL and incorporated
into the projects technical design. Land acquisition for the project site
will not require any physical relocation of people. No other major
Performance Standards issues (biodiversity, indigenous people, cultural
heritage) were identified. Considering all these, the project has been
categorized as B by IFC, in accordance with the IFCs Policy on Social and
Environmental Sustainability.

Key environmental and social issues and mitigation
MSW has presented plans to address these impacts to ensure that the
proposed project will, upon implementation of the specific mitigation
measures incorporated into the project design and operation, comply with
the environmental and social requirements the host country laws and
regulations and the IFC Performance Standards on Social and
Environmental Sustainability. The information about how these potential
impacts will be addressed by the company/project is summarized in the
paragraphs that follow. Further information is provided in the attached
documentation.

PS-1 Social and Environmental Assessment and Management Systems:

Social and Environmental Assessment In 2004, MSW and PT
Pembangkitan Jawa Bali (Subsidiary of PLN a vertically integrated
utility, wholly owned by the Government of Indonesia) proposed to
develop a 2x50MW coal-fired power plant in Tabalong and prepared a full
environmental impact assessment (AMDAL: Analisis Mengenai Dampak
Lingkungan). This was reviewed and approved by the Local
Environmental Impact Control Agency (BAPEDALDA: Badan Pengendalian
Dampak Lingkungan Daerah), South Kalimantan, in October 2004.

Under the Government of Indonesia regulation on environmental impact
assessment, including Government Regulation Number 27/1999
Concerning Environmental Impact Assessment (AMDAL), and other
relevant regulations, especially Decree of State Minister for Environment
No. 11 of 2006 regarding Type of Enterprises And/Or Activities That
Require AMDAL, projects of 100MW or larger require AMDAL, whereas
projects less than 100MW require UKL-UPL (Environmental Management
and Environmental Monitoring Study).

In early 2006, the project proposal reduced in capacity from 2x50MW to
2x30MW. MSW prepared an earlier version of UKL-UPL and this was
approved by BAPEDALDA in May 2006. However, subsequent geological
explorations by PT Adaro Indonesia, revealed that the proposed power
plant site was located on the Wara coal bearing area. The project location
was therefore shifted to the north east area of the Wara coal mine, and
further revised UKL-UPL was prepared by Environmental Research Center,
Research Agency of Lambung Mangkurat University (UNLAM),
Banjarmasin, South Karimantan (the institute that prepared the original
AMDAL). This was reviewed by BAPEDALDA in January 2007. The report
has been further revised as per BAPEDALDA comments and was approved
by BAPEDALDA in March 2007.

Majority of the power from the project is expected to be used to operate
a newly built 70 km conveyor to transport coal from the Adaro mine to
the Kelanis barge-Loading Facility. Adaro has current approvals from the
Government of Indonesia to mine up to a 39 million ton of coal per year.
In April 2008, Adaro applied to expand its capacity to 45 million ton of
coal per year. A full environmental impact assessment (AMDAL) is under
way for this expansion project which includes the 70 km conveyor. The
conveyor is planned to be built about 50 m away from the existing haul
road being used exclusively by Adaro for transportation of coal. About
700 ha of land will be acquired (70 km length x 100 m width) for the
conveyor. Up to 30 land owners / users are expected to be impacted by
the land acquisition. The AMDAL is expected to recommend appropriate
environmental and social mitigation measures for the conveyor (e.g.
fugitive dust and noise mitigation, alternatives for crossing such as fly
over or under pass, safety features, etc.). Once completed, the conveyor
would be the primary mover of coal and the haul road trucking will
supplement the conveyor. No loss of jobs for the truck drivers is
expected. Since both MSW and Adaro are controlled by the same owners,
MSW will work with Adaro to monitor and minimize the environmental
and social risks of the conveyor for successful operation of the project.

Action Plan MSW will develop the project to fully comply with both the
Indonesian regulations and standards and the IFC Performance Standards
on Social and Environmental Sustainability. Various mitigation measures
are incorporated into the project design. MSW will implement the Action
Plan which will mainly constitute the proposed management, mitigation
and monitoring programs described in the UKL-UPL. Additional elements
of the Action Plan will include:

- appointment of Environmental, Health and Safety (EHS) Officer and
Community Liaison Officer at MSW for both the construction phase and
the operational phase,
- implementation of any follow-up actions, if needed, to ensure that the
land transfer, land acquisition, and right-of-way acquisition will meet IFC
Performance Standard 5 (Land Acquisition and Involuntary Resettlement)
before start of construction,
- review, and implement if adequate, back-up options for water supply to
the project (e.g. underground water, water from PT Adaro mine) to
supplement the planned water intake from the Tabalong River, as
suggested in the UKL-UPL before project completion,
- prioritization and monitoring of local hire for both the construction
phase and the operational phase, and
- establishment and implementation of Environmental, Health and Safety
and Social Management System for both the construction phase and the
operational phase before start of construction (construction phase) and
within six month from the commercial operation of the project
(operational phase).

Organizational Capacity MSW will initially consist of about 30 staff
including a core team of specialists and engineers in different disciplines
to manage development of the project. MSW will be supported by Poyry,
a global consulting and engineering firm, as Owners Engineer.
Implementation of the Action Plan will be managed by MSW in
coordination with the Owners Engineer and an EPC (Engineering,
Procurement and Construction) contractors. The operation and
maintenance (O&M) of the project will initially be conducted by an O&M
contractor. MSW will gradually recruit its own staff for O&M, who will be
trained by the O&M contractor. Implementation of the environmental,
health and safety mitigation measures in the Action Plan relevant to the
roles of EPC contractors and the O&M contractor (initial stage), will be
supervised by MSW. MSWs core team will be responsible for land
acquisition, establishment of Environmental, Health and Safety and Social
Management System, obtaining and complying with environmental
permits, management of EHS trainings and on-going community
engagement.

Training MSW plans to recruit a team of 88 staff for O&M of the project.
Contracts with EPC contractors and O&M contractor (for initial phase) will
include provisions of necessary trainings to recruited MSW staff. As part
of the MSWs commitment to comply with IFC Performance Standards,
MSW will develop and implement a program to train employees and
contractors with direct responsibility for activities relevant to the projects
social and environmental performance.

Monitoring and Reporting Various monitoring programs were proposed
in the UKL-UPL. As part of the Environmental, Health and Safety and
Social Management System, MSW will establish an overall monitoring and
reporting framework to evaluate the implementation status of the Action
Plan and to provide the affected communities with periodic reports that
describe progress with implementation of the Action Plan on issues that
involve ongoing risk to or impacts on affected communities, and on issues
that consultation process has identified as of concern to those
communities.

PT Adaro coal mine operation and MSW Project MSW is owned 99.6%
by PT Adaro Energy, a holding company, which also indirectly owns the
majority shares of Adaro. Adaro started its production in 1991 and has
been constantly increasing annual production levels reaching 34 million
ton in 2006. About 70% of Envirocoal is exported to Europe, US,
Australia, Asian countries, and 30% is consumed in Indonesia. Coal is
hauled from the mines to Kelanis barge loading facility along the Adaros
dedicated 75 km coal haul road. Coal is then crushed, and transferred by
barges through the Barito River to transshipment location located at
offshore Banjarmasin, or to the export coal terminal on the island of
Pulau Laut off the south eastern coast of Kalimantan, or directly to
customers. PT Adaro is implementing various environmental management
and social programs for the affected local communities. MSW is of the
view that development a coal-fired power plant in the area where
domestic coal is extracted, exported to foreign countries, or transported
to other parts of the country, would deliver benefits and create economic
opportunities for the local communities. The power plant will provide
more reliable electricity at a lower cost. Economic benefits will be realized
through local employment and procurement. This is likely to generate the
perception by the communities that their domestic coal contributes to
their economic wellbeing.

PS-2 Labor and Working Conditions:

During the construction phase, about 400 persons, including 20
expatriate staff, will be working for the project. About 230 persons will be
recruited from the local areas, based on their suitability and skills. During
the operational phase, a total of 88 employees are expected to be
required. Some of them will be recruited from construction workers after
passing selection, while others will be new personnel with specific
qualifications. MSW is fully aware of the potential social risk of a
temporary influx of workers from other regions, especially skilled workers
from urban areas, with cultural traits that are very different from those of
the local villagers. MSW will ensure that such risks are minimized through
careful management of Engineering, Procurement and Construction
contractors and sub-contractors and the companys hiring policy that will
prioritize local hiring. As proposed in the UKL-UPL, MSW will monitor local
employment by MSW and its contractors working for the project.

Strict occupational health and safety management will be implemented by
MSW in accordance with good international practice, including providing
employees with, and requiring use of, necessary Personal Protective
Equipment (PPE). MSW will also manage and monitor strict usage of PPE
by its contractors.

PS-3 Pollution Prevention and Abatement:

Construction Phase Equipment for the development of the project are
shipped from main ports in Java Island to Kelanis port in South
Kalimantan, and then transported toward the project location of about
75km distance using the PT Adaros haul road. Fill soil will be taken from
mine area of Pt Adaro. Various mitigation measures were proposed in the
UKL-UPL, and MSW will implement those, in coordination with the EPC
contractors, to avoid or minimize adverse impacts during the construction
phase.

Air Emissions and Air Quality Proposed mitigation measures include:

- 65 m chimney to have better dispersion of air pollutants,
- fabric filter (bag filter) to reduce particulate matter to achieve 50
mg/Nm3 (6%O2) World Bank guideline, and in compliance with
Indonesian standard of 150 mg/m3 (25C, 6%O2) which is equivalent to
136 mg/Nm3 (6%O2),
- use of Wara coal which has very low sulfur content (0.4% maximum)
achieving Indonesian standard of 750 mg/m3 (25C, 6%O2) which is
equivalent to 818 mg/Nm3 (6%O2), in full compliance with World Bank
guideline of 2,000 mg/Nm3 (6%O2),
- CFB boilers with inherently lower NOx emissions to achieve 500
mg/Nm3 (6%O2), in full compliance with Indonesian standard of 850
mg/m3 (25C, 6%O2) which is equivalent to 930 mg/Nm3 (6%O2), and
World Bank guideline of 750 mg/Nm3 (6%O2),
- water spraying onto coal storage and storing coal in covered storage to
minimize fugitive dust emissions,
- dust extraction / suppression at coal unloading yard, dust extractor in
the coal transfer point equipped with fabric filter of 99% efficiency, dust
extractor at coal bunker, covered gallery conveyor and telescopic chute
work at ash conveyance system, also to minimize fugitive dust emissions.

UKL-UPL provided an analysis showing that with these mitigation
measures, air quality impacts are minimized and Indonesian air quality
standards will be maintained. MSW will install and operate continuous
emission monitoring system for SOx, NOx and particulate matter.
Ambient air quality monitoring will also be conducted quarterly at
communities surrounding the project site.

Liquid Effluent Proposed mitigation measures include:

- use of closed cooling system to avoid large quantity of cooling water
intake / thermal discharge,
- reuse of cooling tower blow down for coal handling system and ash
handling system,
- treatment of oil waste (lube and fuel oil) in oil-water separator,
- use of seepage tank for domestic waste effluents,
- neutralization of demineralization plant regeneration effluent, and
- collection of remaining cooling tower blow down, boiler blow down,
demineralization plant waste water, clarifier sludge and filtration waste in
guard pond, and reuse of water from guard pond, with balance to be
treated before discharge.

MSW will ensure that effluents comply with both Indonesian standards,
South Kalimantan standards, and the World Bank effluent guidelines.
Volume and water quality of effluents will be monitored regularly to
evaluate effectiveness of wastewater treatment of the project.

Waste (Ash) Management Proposed mitigation measures include:

- 7 ha of land for ash dykes planned for ash disposal for 7 years
(assuming no utilization of ash),
- use of fly ash for manufacturing building blocks and bricks, and
- disposal of ash to ash dykes lined with impermeable HDPE (High Density
Polyethylene) to prevent ash seepage into soil.

Water Intake The project plans to take water needed for the operation
of the project (about 350 m3/h) from Tabalong River and pumped by 175
m3/hour capacity pumps (2 running plus 1 reserve) from the river via a
250mm diameter pipe buried underground along the existing road. MSW
is aware of the potential impacts of the water intake on existing water
users, especially during dry season. MSW will minimize water
consumption by such means as closed cooling system and recycling of
water usage within the power plant. The river flow is in general large
enough to supply water to the project, but UKL-UPL analyzed that with 4
% probability (once in 25 years), the minimum river water flow could be
reduced to 0.51 m3/s (or 1,840 m3/h), and with 2% probability (once in
50 years) to 0.23 m3/s (or 830 m3/h), suggesting that the extraction of
350 m3/h water by the project could affect use of river water by other
users including local people during extreme low-flow conditions. UKL-UPL
also analyzed the option of taking water from aquifer in the project area,
but concluded that the aquifer option is insufficient. UKL-UPL suggested,
and MSW is committed, to

- control and limit volume and time of water taking from Tabalong River
considering water availability of the river,
- provide other alternative water sources such as underground water or
water pumped from PT Adaro coal mine in Wara as a back-up, and
- use the project area as rain water preservation by making artesian well
for rainwater of building and drainage flowing into runoff reservoir. MSW
will also monitor the Tabalong River hydrology, water consumption and
complaints by downstream communities during dry season.

Noise Mitigation Acoustic enclosures will be provided to achieve
prescribed noise levels and silencers will be provided for fans and safety
valves as required. As suggested by UKL-UPL, MSW will implement
ambient noise monitoring at communities surrounding the project site
quarterly.

Green Belt MSW will develop and maintain a green belt (wide-leave
high and flexible trunk trees) around the power plant as a buffer zone
surrounding the project site.

Greenhouse Gas Emissions MSW estimates that the project may emit
0.58 million tCO2/year at 1,230 gCO2/kWh, assuming 27% Higher
Heating Value (HHV) basis, or 30% Lower Heating Value (LHV) basis
generating efficiency, and calorific value of the coal as 3,800 kcal/kg
(HHV). This 0.58 million tCO2/year is about 0.17% of the total
Indonesian CO2 emissions in 2005 (341 million tCO2/year) according to
International Energy Agency statistics. In 2005, 51,774 GWh of electricity
was generated by coal-fired power plants in Indonesia, with heat
consumption of 15,786 thousand ton of oil equivalent at LHV (or about
183,600 GWh heat input at LHV). This level shows average coal-fired
thermal power efficiency of about 28 % (LHV) in 2005. Although the
project is small in scale using high moisture coal with limited achievable
generation efficiency, the energy efficiency of the project (30% LHV) is
expected to exceed the Indonesian average (also about 28 % LHV) which
reflects performance of larger, and relatively newer coal-fired power
plants in the country.

The existing palm oil plantations around the proposed site may provide
opportunities for co-firing biomass waste with coal. The CFB boiler to be
adopted by the project is capable of using such mixed fuels of coal and
biomass waste. This may also create additional local benefits and jobs.
MSW is reviewing this option. MSW will annually quantify and monitor
GHG emissions from the project in accordance with internationally
recognized methodologies.

PS-4 Community Health, Safety and Security:

The air quality impacts during construction phase due to transportation of
construction material are one of the concerns raised by communities. As
proposed in the UKL-UPL, MSW will implement mitigation measures such
as limiting the truck speed at maximum 40 km/h on public road and 25
km/h on village road, water sprinkling on village roads passing through
dense settlements during dry season, coordination between MSW and PT
Cakung Permata Nusa (neighboring palm and rubber plantation company)
on the use of palm and rubber farming roads.

UKL-UPL also identified the traffic accident as one of the concerns during
construction phase. MSW will implement not only the strict management
of the traffic speed limit of construction vehicles, but also, control of
traffic frequency by loaded truck fleet and establishment of an
appropriate traffic accident handling and settlement framework.

To support the improvement of the health status of community members,
MSW will provide health services to not only to the employees and
contractors, but also to the communities near the project site.

The project plans to have 4 security personnel in a shift. As part of
complying with PS-4, MSW will train them adequately in the use of force
and appropriate conduct toward workers and the local community, and to
require them to act within the applicable law.

PS-5 Land Acquisition and Involuntary Resettlement:

Project Site The company acquired about 100 hectares for the power
plant site (about 30 hectares for the planned facilities, plus 70 hectares
for future expansion). The area for the proposed power plant site was the
property of the government of the Tabalong Regency, but was used by
about 77 people for mixed small scale plantations. Land transfer was
undertaken by MSW in cooperation with Tabalong Regency. The
compensation to the land users was determined by a team appointed by
the Tabalong Regency after discussions with the local users. MSW paid
the total compensation amount to the local government, who in turn
disbursed to the land users. MSW worked closely with the Tabalong
Regency to expedite the process. MSW understands that the
compensation was based on market rates plus a premium.

Other Facilities In addition, MSW needs to acquire:
- right-of-way for the 9 km water pipeline from the Tabalong River to the
project site, mainly along existing roads, and
- maximum 30m x 30m water intake area at a riverbank of the Tabalong
River.

Commitment by MSW to PS-5 MSW is aware of the need to compensate
people in a fair and transparent manner for the sustainable
implementation of the project, and committed to work with the local
government to achieve this in accordance with the local requirements and
IFC Performance Standard 5 (Land Acquisition and Involuntary
Resettlement).

Client's community engagement
As part of the UKL-UPL preparation, MSW and the UNLAM team conducted
consultations with villagers of Mabuun, Maburai and Warukin in the
surroundings of the project site. The consultations started in late 2006
and ended in early 2007. UKL-UPL indicated that 93% of the people
interviewed said that the project would have positive impacts. Concerns
of negative impacts were about erosion, dust waste, and price increases.
UKL-UPL has proposed, and MSW will implement, measures to mitigate
the risk of erosion and dust emissions.

UKL-UPL identified concerns of some community members about the final
location of the project site and compensation uncertainty. UKL-UPL
suggested, and MSW is committed, to strengthen on-going consultation
and communication with communities in order to manage these issues.
Local access of project documentation
The following UKL-UPL (Environmental Management and Environmental
Monitoring Study) documents, dated March 2007, as received by MSW,
are attached to this ESRS. MSW also disclosed the Bahasa Indonesian
version of the UKL-UPL locally. UKL-UPL has been placed for public review
at:

- MSW office in Tanjung Tabalong
Jl Stadion 27 Tanjung- Tabalong,
Kalimantan Selatan,
Indonesia

and

- MSW office in Jakarta
Menara Kadin Indonesia,
19 A JI.H.R. Rasuna Said,
Blk. X-5, Kav. 2-3,
Jakarta 12950

Availability of UKL-UPL was announced by local newspaper (name:
Banjarmasin Post) on March 27, 2007.

MSWs Community Liaison Officer for the project preparation phase is
conducting ongoing public consultation and managing land transfer, land
acquisition and right-of-way acquisition activities for the project.

English version of the UKL-UPL:
- Environmental Management and Monitoring Study, 2x30MW Coal Fired
Steam power Generator (PLTU), Tanjung Tabalong, PT. Makmur
Sejahtera Wisesa, March 2007

Bahasa Indonesia version of UKL-UPL:
- Upaya Pengelolaan Lingkungan (UKL) dan Upaya Pemantauan
Lingkungan (UPL), PLTU BATU BARA 2X30 MW, DI TANJUNG
TABALONG, PT MAKMUR SEJAHTERA WISESA, Maret, 2007

Contact details of MSW about the project:

Mr Deepak Khullar
PT Makmur Sejahtera Wisesa
Menara Kadin Indonesia, 19 A JI.H.R.
Rasuna Said, Blk. X-5, Kav. 2-3
Jakarta 12950, Indonesia
Phone: 62-21-5790-3666,
Fax: 62-21-5790-3723,
Email: deepak@akrayaintl.com;
project@ptmsw.com

Mr Dewanto
PT Makmur Sejahtera Wisesa
Jl Stadion 27 Tanjung - Tabalong,
Kalimantan Selatan, Indonesia

Phone: +62 526 2024112,
Fax: +62 526 2024112 ,
Email: dewanto@ptmsw.com