Concept Paper

Project Number: 46165-002 November 2013

Proposed Loan Republic of Indonesia: Scaling up Hydropower Development Project

CURRENCY EQUIVALENTS (as of 12 November 2013)

Currency Unit – rupiah (Rp)

Rp 1.00 = $0.0000865052 $1.00 = Rp 11,560.00

ABBREVIATIONS ADB – Asian Development Bank AfD

AusAID EA

– – –

Agence Française de Développement Australian Agency for International Development Executing agency

GW – Gigawatt HPP – hydroelectric power plant PLN

PPTA RPJMN

– – –

Perusahaan Listrik Negara (State Electricity Company) project preparatory technical assistance National Medium-Term Development Plan

MW – megawatt SPS – Safeguard Policy Statement TA – technical assistance

NOTES

(i) The fiscal year (FY) of the Government of Indonesia and its agencies ends on 31 December.

(ii) In this report, "$" refers to US dollars

Vice-President S. Groff, Operations 2 Director General J. Nugent, Southeast Asia Department (SERD) Director C. N. Chong, Energy Division, SERD Team leader P. Tharakan, Climate Change Specialist, SERD Team members R. Kausar, Head, Project Administration Unit, SERD N. Mardiniah, Social Safeguards and Resettlement Officer, SERD

B. Mudiantoro, Project Officer, Infrastructure, SERD M. E. Paterno, Finance Specialist, SERD

G. Peralta, Senior Safeguards Specialist (Environment), SERD K. Uematsu, Safeguards Specialist (Resettlement), SERD

Peer reviewer

Zhang Lei, Energy Specialist, South Asia Department

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

I. THE PROJECT 1

A. Rationale 1 B. Impact, Outcome, and Outputs 2 C. Investment and Financing Plans 2 D. Indicative Implementation Arrangements 2

II. TECHNICAL ASSISTANCE 3

III. DUE DILIGENCE REQUIRED 3

IV. PROCESSING PLAN 4

A. Risk Categorization 4 B. Resource Requirements 4 C. Processing Schedule 4

V. KEY ISSUES 4

Appendixes

1 Basic Project Information 5 2 Problem Tree 6 3 Design and Monitoring Framework for the Investment Program 7

4 Project Preparatory Technical Assistance 10 5 Initial Poverty and Social Analysis 18

I. THE PROJECT

A. Rationale

1. The project will provide a $360 million project loan(s) to the Government of Indonesia for the development of nearly 184 megawatts (MW) of hydroelectric power plants (HPP) in East Java, and West Papua.1 The two subprojects in East Java are - (i) expansion of existing Sutami HPP (Units IV and V - 2x50 MW) and (ii) Kesamben HPP (Units I and II - 2x18.5 MW).2 The subproject in West Papua is Warsamson HPP (Units I-III – 3x15.5 MW).

2. The project will provide additional clean energy and meet increased electricity demand. The project (i) is part of the state-owned power company, PT Perusahaan Listrik Negara’s (PLN), long-term power development plan; (ii) directly supports ADB’s Country Partnership Strategy (2012–2014); (iii) is included in the COBP (2013-2014); (iv) is highlighted in ADB’s Energy Policy (2009); and (v) is incorporated in the draft energy sector assessment, strategy and roadmap that is currently under revision. The project is consistent with the government’s master plan3 (MP3EI) for accelerating economic development and the National Medium-term Development Plan 2010–2014 (RPJMN). Warsamson is included in the government’s list of projects to be financed in 2014 through overseas assistance. The East Java subprojects are expected to be included in the list of projects for financing during 2015-2019.

3. To meet economic development imperatives, the country’s projected electricity generation installed capacity is expected to increase from about 35 gigawatts (GW) to nearly 85 GW. Power shortage remains a critical infrastructure constraint throughout the country. The country is endowed with a range of renewable energy resources, including hydropower, wind, solar, biomass and geothermal. In particular, geothermal and hydropower sources are well placed to address Indonesia’s near term electricity sector challenges. The government plans to increase the share of renewable energy in its power generation mix from about 11% (7% hydropower) currently to nearly 19% (11% hydropower) by 2020.

4. Indonesia’s hydropower potential is estimated at about 76,000 MW. The current installed capacity is about 5,705 MW. PLN owns and operates 96% of this capacity. PLN’s national power master plan (RUPTL, 2011–2020) envisions the development of an additional 5,722 MW. Overall, hydropower development continues to be constrained in the country. Large upfront capital costs, environmental safeguard compliance, and associated land acquisition and resettlement make investment in hydropower prohibitive for the private sector. The government remains the developer of last resort. ADB involvement in subsector has been relatively modest, mainly limited to small hydropower projects in the 1990s and more recently the just-completed Loan 1982-INO: Renewable Energy Development Sector Project. The government and PLN are seeking long-term financing from ADB to allow PLN to develop hydropower generation capacity across East Java and West Papua and associated transmission lines (TLs).

1 A project preparatory technical assistance (PPTA) grant will help the government formulate the investment in accordance with ADB requirements (see Appendix 4 for details). The TA first appeared in the business opportunities section of ADB’s website on 31 May 2013.

2 The PPTA may lead to a single loan for the three subprojects or two loans, one for the West Papua plant, and

another for the East Java plants. This is because the subprojects are in varying stages of readiness. Warsamson is most advanced and may be processed as a separate loan in 2014. PLN currently does not have the development rights for the projects in East Java. The project concept paper and the related PPTA are designed to prepare the project in all possible combinations for the eventual investment loan(s) in 2014 and or 2015.

3 The Masterplan for Acceleration and Expansion of Indonesia's Economic Development (abbreviated MP3EI) is

intended to accelerate the development of the country in an equitable manner.

2

B. Impact, Outcome, and Outputs

5. The impact of the project will be an increased supply of clean energy generation in Indonesia. Its outcome will be that hydropower generation capacity in East Java and West Papua is expanded. Appendix 1 provides basic project information and Appendix 2 presents the problem tree. The design and monitoring framework for the investment program is in Appendix 3. Project outputs will include: (i) a HPP with a capacity of 46.5 MW at Warsamson and related TLs commissioned; (ii) two HPPs totaling 137 MW of capacity at Sutami and Kesamben and related TLs commissioned; and (iii) project implementation capacity strengthened within PLN.

C. Investment and Financing Plans

6. The project is estimated to cost $510 million. ADB may provide $360 million from ordinary capital resources (OCR), and the government will provide the remaining $150 million as counterpart financing. The tentative financing plan is summarized in Table 1.

Table 1: Tentative Financing Plan

Source Amount($ million) Share of Total (%)

Asian Development Bank 360.00 71.00

Government 150.00 29.00 Total 510.00 100.00

Source: ADB staff estimates

D. Indicative Implementation Arrangements

7. PLN will be the executing agency (EA) for the investment program (and the PPTA) and will be responsible for the overall technical supervision and execution of the project. A senior PLN staff member will assume overall responsibility of the project and will establish a dedicated project management unit headed by a full-time project director with administrative support. East Java subprojects. A project steering committee will be set up in Malang to oversee PPTA and project implementation and comprise officials from PLN and PJT-I4 and representatives from the local governments of Malang and Blitar. The steering committee membership for the West Papua subproject will include the local government of Sorong.

8. The indicative procurement method for the project will be international competitive bidding, in accordance with ADB’s Procurement Guidelines (2013, as amended from time to time). A procurement plan will be prepared for the project and suitable turnkey contracts may be adopted. A supervision consulting firm will be recruited using the quality and cost-based selection method (quality: cost weighting of 90:10),5 following ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time) to assist the EA in implementing the project. The project envisages the use of advance contracting and retroactive financing of up to 20% of total financing subject to ADB management’s approval, preparedness of the project, and availability of counterpart financing. The project’s implementation period is May 2015 – December 2019.

4 P.T. Jasa Tirtha I (PJT-I, a state-owned water utility) is responsible for the overall management of the Brantas River

system and also owns the Sutami Dam on which PLN proposes to add two hydropower generating units. 5 The firm will have extensive expertise in hydropower and an in-depth understanding of Indonesia’s power sector,

social and environmental regulations, and a high quality team of national consultants. Hence a higher weight for quality has been adopted.

3

II. TECHNICAL ASSISTANCE

9. The PPTA is estimated to cost $2.0 million and will be financed from the Technical Assistance Cluster (TAC) on a grant basis by the Government of Australia and administered by ADB (footnote 1). PLN will also provide in-kind contribution in terms of access to past studies and data, counterpart staff time, administrative services, communication and field travel. The outcome of the PPTA will be to produce an agreed project design, feasibility study, implementation arrangements suitable for ADB financing, well-prepared subproject(s) completed with a financing and implementation plan, advance procurement actions, and the government’s concurrence on the subproject(s) implementation plan. Details are in Appendix 4.

III. DUE DILIGENCE REQUIRED

10. The following aspects will be covered under the due diligence:

(i) Technical. The proposed projects include an expansion of an existing project, and a run-of-river project. The proposed due diligence will ensure that technical and geological risks are minimal, and focus on optimization of the expanded electromechanical equipment taking into account existing civil works, recent hydrological trends, and sedimentation patterns.

(ii) Economic and financial. Economic and financial viability of each project will be evaluated along with the current and forecasted financial health, of the EA, PLN.

(iii) Poverty and social. The due diligence will focus on minimizing negative social impacts while documenting positive impacts on poverty reduction and vulnerable people.

(iv) Safeguards. The project is being preliminarily classified as A for environment, involuntary resettlement (IR) and indigenous peoples (IP). At the subproject level, classifications are: (1) East Java: Category B for environment; Category B for IR in Sutami and Category A for IR in Kesamben; and Category C for IP in both sites; (2) Warsamson: Category A for environment, IR and IP.

11. Major risks and mitigation measures are as follows.

(i) Technical risks: Increased sedimentation upstream of Sutami is possible. The potential impacts on the project will be fully evaluated during the PPTA.

(ii) Implementation delays: Development of Warsamson would involve the relocation of a 5 km national road, and obtaining a forestry conversion permit from the Ministry of Forestry. Both of these could be delayed. Risks will be mitigated by ensuring (i) a high degree of project readiness with technical designs and detailed cost estimates, forestry and environmental ministry approvals, consultations with related ministries and advance procurement; and (ii) adequate provision for project implementation support. PLN may be delayed in obtaining the development rights for Sutami and Kesamben. Early consultations between PLN and PJT-I and the local governments will be supported to expedite the signing of appropriate agreements.

(iii) Safeguards: Sutami will involve expansion of an existing power project. The land to be acquired is small and will therefore have minimal negative environmental and social impacts. Kesamben is a small-sized run-of-river project that will require the acquisition of about 70 hectares (with about 80 affected households, and the permanent relocation of about 15 households). This scale of impact is considered low-to-moderate for a hydropower project and can be mitigated

4

through the implementation of ADB’s Safeguard Policy Statement (2009). The forest classification of the Warsamson area is “production forests” and the area is disturbed. Notwithstanding the impacts on biodiversity and IP will be evaluated. PLN is familiar with ADB’s SPS. Nevertheless, PPTA consultants will support the implementing agencies (IA) during due diligence to prepare SPS documents.

IV. PROCESSING PLAN

A. Risk Categorization

12. The requirements for a “low risk” project are: (i) the project loan amount does not exceed $200 million; (ii) there is a sound record of ADB's previous experience in the sector in the concerned country; (iii) the EA has prior extensive experience in the sector and with development projects; and (iv) the safeguard categorizations are B. The proposed project does not fulfill two of the four criteria, and therefore, this project is considered a complex project. B. Resource Requirements

13. Staff requirements for due diligence of the project include: mission leader (6.0 person-months [p-m]), financial specialist (2.0 p-m), economist (2.0 p-m), environmental specialist (3.0 p-m), involuntary resettlement specialist (3.0 p-m). C. Processing Schedule

14. The processing schedule is as follows:

Table 2: Proposed Processing Schedule Milestones Expected Completion Date

Warsamson HPP Sutami and Kesamben HPP

ADB reconnaissance mission PPTA inception mission

August 2013 January 2014

September 2013 January 2014

Loan fact-finding mission September 2014 April 2015 Management review meeting October 2014 May 2015 Loan negotiations November 2014 June 2015 Board circulation January 2015 July 2015 Board consideration February 2015 August 2015 Loan signing May 2015 September 2015 Loan effectiveness October 2015 January 2016 Source: Asian Development Bank estimates.

V. KEY ISSUES

15. Key issues that will require due diligence and support of other ADB teams are the following: (i) Certified emissions reductions: The support of the Regional and Sustainable Development Department would be required to conduct due-diligence on the carbon reduction potential, and (ii) Advance procurement and retroactive financing: The support of Operations Services and Financial Management Department (OSFMD) would be required to facilitate advance action for PPTA and implementation consultants, advance procurement under the project, and retroactive financing as appropriate.

Appendix 1 5

BASIC PROJECT INFORMATION

Aspects Arrangements

Modality Project Loan

Financing ADB OCR $ 360.0 million 71% Government $ 150.0 million 29% Total $ 510.0 million 100%

COBP/ RCOBP

The PPTA is included in the COBP 2013-2014. ADB is in discussions with PLN and BAPPENAS to include the East Java subprojects in the COBP for 2014, and the government’s blue book revision expected in Q3-Q4, 2014.

Classification Sector (subsectors): Energy Themes (subthemes):

Economic growth Environmental sustainability Climate change: Mitigation

Targeting classification: General Intervention Location impact: Rural (high), urban (low) and national (medium) Safeguards: The project is being preliminarily classified as A for environment, involuntary resettlement (IR) and indigenous peoples (IP). At the subproject level, classifications are: (i) East Java: Category B for environment; Category B for IR in Sutami and Category A for IR in Kesamben; and Category C for IP in both sites; (ii) Warsamson: Category A for environment, IR and IP. Gender benefits: No gender elements (NGE)

Risk categorization

Complex

Partnership(s) NA

Use of a PBA PBA will not be used.

Parallel PIU Parallel PIU will not be used.

Department and division

Southeast Asia Department, Energy Division

Mission leader and members

P. Tharakan, R. Kausar, SEEN, N. Mardiniah, and B. Mudiantoro, IRM, M. E. Paterno, G. Peralta, and K. Uematsu, SEEN

ADB = Asian Development Bank, BAPPENAS = National Development Planning Agency, COBP = country operations business plan, IP = indigenous people, IR = involuntary resettlement, IRM= Indonesia Resident Mission, OCR = ordinary capital resources, PBA = programmatic based approach, PIU = project implementation unit, PLN = Perusahaan Listrik Negara, SEEN = Energy Division, Southeast Asia Department, TBD = to be determined.

6 Appendix 2

PROBLEM TREE

PLN unable to recover costs and take into account grid expansion requirements. Annual budget allocation for expansion is inadequate. Dispersed population and presence of islands increases the costs of providing energy access

Institutional and technical capacity weakness leads to long implementation delays Poor interministerial coordination leads to long delays in obtaining environmental and forestry permits and land acquisition

Low tariffs and non-implementation of existing renewable energy promotion programs and targets Lack of regulatory framework and targets for energy efficiency Inadequate investment by the private sector owing to low tariffs

The energy sector fails to support economic growth aspirations adequately

and leads to a disproportionate level of negative local and global environmental impacts

Power system reliability compromised leading to brownouts and blackouts

The power sector has high carbon intensity and causes relatively high local air pollution impacts

Inefficient use of natural resources as renewable energy investments is limited

Large energy subsidy payments and reliance on imported fossil energy has negative impact on national budget

Inadequate supply of reliable power from clean energy sources including hydropower

Heavy reliance on fossil-fueled generation

Inadequate investment in generation, transmission, and distribution relative to demand

Renewable energy generation such as hydropower is not prioritized

State-owned utilities unable to realize rapid capacity expansion plans

Public service obligation and fuel cost pass through scheme for oil and coal favors use of fossil energy over other sources The 1997 economic crisis derailed plans to expand renewable energy generation

Appendix 3 7

DESIGN AND MONITORING FRAMEWORK FOR THE INVESTMENT PROGRAM

Design Summary

Performance Targets and Indicators with

Baseline

Data Sources/ Reporting

Mechanism Assumptions and Risks

Impact

Assumptions

Increased supply of clean energy generation in Indonesia

By 2025, annual investments in new hydropower projects total $1 billion (2012 baseline for investment: $0.5 billion) Emissions reductions of XX

6 million tons of CO2

equivalent per annum in 2025. (Baseline estimated at 550 million tons of CO2 equivalent per annum)

Government economic statistics and MEMR reports on energy supply and utilization PLN annual reports Statistical data from BAPPENAS, MEMR and MOF. Periodic reports by the government to the UNFCCC.

The government’s emphasis on climate change mitigation in the energy sector continues Additional annual budgetary allocations or fiscal incentives become available for scaling-up hydropower development Economic growth projects are realized and projected power demand growth materializes Risks Increased access to cheaper natural gas (LNG) may displace hydropower Tariffs kept below cost-recovery level

Outcome Hydropower generation capacity in East Java and West Papua expanded

Hydropower generation capacity increased by 184 MW by 2020 (2012 country baseline: 5,700 MW)

National statistics and MEMR records PLN annual reports ADB review mission reports Government statistics and UNFCC reports

Assumptions Government continues to promote hydropower development Risk PLN may find it harder to raise the needed counterpart financing, given the ongoing financial markets slow down and a weakened currency

6 Estimates will be determined during the PPTA implementation.

8 Appendix 3

Design Summary

Performance Targets and Indicators with

Baseline

Data Sources/ Reporting

Mechanism Assumptions and Risks

Outputs 1. A hydropower project with a capacity of 46.5 MW at Warsamson and related transmission lines commissioned 2. Two hydropower projects totaling 137 MW of capacity at Sutami and Kesamben and related transmission lines commissioned 3. Project implementation capacity strengthened within PLN

Construction of three units comprising 15.5 X 3 MW by 2019 Construction of hydro power generation plants for a total of 137 MW comprising: Sub Project 1: Sutami (100 MW) by 2019 Sub Project 2: Kesamban (37 MW) by 2019; Procurement activities for each project completed within 10 months from loan approval Established or strengthened operational, environmental and social safeguards units with full-time trained staff within PLN by 2015 Implementation of EMP, RP, IPP and CDP in accordance with ADB SPS by 2019 Prepared technical designs and constructed power plants and transmission lines in accordance with international standards within a year of loan approval

Quarterly progress reports and project completion reports provided by PLN. ADB review mission reports Bidding documents and contracts submitted by PLN Periodic reports by PLN on safeguard compliance, organizational structure and staffing. Reports provided by Independent Monitoring Agency Progress reports and design documents submitted by PLN

Assumptions Projected price and contingencies are sufficient for potential changes in investment costs Relevant staff participates in procurement training programs and can be retained within PLN. PLN ensure that the power plants and transmission infrastructure are constructed according to international standards. Risks Lack of inter-governmental coordination on land acquisition and forestry permits Implementation delays caused by delays due to construction of associated facilities not financed by ADB PLN may not obtain the development rights for Sutami and Kesamben in a timely manner

Appendix 3 9

Design Summary

Performance Targets and Indicators with

Baseline

Data Sources/ Reporting

Mechanism Assumptions and Risks

Activities with Milestones Output 1: A hydropower project totaling 46.5 MW at Warsamson and related transmission lines commissioned 1.1. Preparation of procurement plan, and safeguard measures (RP,

EMP, IPP etc): June 2014 – January 2015 1.2. Preparation of detailed design: August 2015 – May 2016 1.3. Procurement, award of contract, and construction: November 2015

— July 2019 1.4. EMP, RP and IPP implementation: January 2015 – July 2019 1.5. Commissioning of the power plant and related transmission lines:

September 2019. Output 2: Two hydropower projects totaling 137 MW of capacity at Sutami and Kesamben and related transmission lines commissioned 2.1. Preparation of procurement plan, and safeguard measures (RP, EMP, IPP etc): October 2014 – September 2015 2.2 Preparation of detailed design: January 2016 – July 2016 2.3. Procurement, award of contract, and construction: May 2016 – July

2019 2.4. EMP, RP, and IPP implementation: January 2015 – July 2019 2.5. Commissioning of the power plant and the related transmission

lines: September 2019. Output 3: Project implementation capacity strengthened within PLN 3.1. Recruitment of project implementation consultants: February 2015 – May 2015 3.2. Design, procurement, and construction supervision: May 2015 – September 2019 3.3. Preparation and implementation of safeguards monitoring activities: June 2015 – September 2019 3.4. Independent safeguard compliance monitoring: June 2015 – September 2019

Inputs Advisory services for project design and subprojects preparation ADB financing: $2.0 million (source: AusAID) ADB financing: $360 million Government financing: $150 million

ADB = Asian Development Bank; BAPPENAS = National Development Planning Agency, CDP = community development plan, EMP = environment management plan, GHG = greenhouse gas, IPP = indigenous peoples plan, LNG = liquefied natural gas, MEMR = Ministry of Energy and Mineral Resources, MOF = Ministry of Finance, MW = megawatt, PLN = Perusahaan Listrik Negara, RP = resettlement plan, SPS = Safeguard Policy Statement (2009); UNFCCC = United Nations Framework Convention for Climate Change. Source: Asian Development Bank.

_____________ ____________________ Chong Chi Nai James Nugent Director, SEEN Director General, SERD

10 Appendix 4

PROJECT PREPARATORY TECHNICAL ASSISTANCE

MEMORANDUM

FOR APPROVAL OF PARA 25. 6 November 2013

To: James A. Nugent, Director General, SERD Through: Chong Chi Nai, Director, SEEN From: Pradeep Tharakan, Climate Change Specialist, SEEN Subject: INO (46380): Sustainable Infrastructure Assistance Program;

- Request for Approval of Subproject 3, Scaling Up Hydropower Development Project

I. INTRODUCTION

1. The above subproject is part of the INO: Sustainable Infrastructure Assistance Program (SIAP) that was approved by the ADB Board of Directors on 17 June 2013. The INO: (SIAP) is a technical assistance cluster (TAC) financed by AusAID and administered by ADB. 2. Progress of SIAP. This is the third subproject under the $20 million INO: Sustainable Infrastructure Assistance Program. Approval of the subproject will make total approvals $5.215 million. Five further subprojects are expected to be considered for approval in 2013. There is no implementation performance issues to report. A. Justification

3. A project preparatory technical assistance (PPTA) is required to conduct due diligence and prepare the relevant project documents for two investment projects, namely: (i) Sutami IV and V (extensions): 2 X 50 megawatts (MW); and (ii) Kesamben 2 X 18.5 MW, and another in West Papua, Warsamson (3 X 15.5 MW). B. Major Outputs and Activities

4. Due diligence on Warsamson will be conducted first as the loan is to be prepared for 2014. Some work for the East Java projects will begin but the bulk of the work on those locations is to be conducted from late 2014 to mid-2015. The loan for the East Java project is to

Appendix 4 11

be prepared for 2015.7 The consultant will (i) update relevant studies, analyses8, and data on project feasibility reports prepared by PLN and other agencies; (ii) review demand forecasts and preliminary project designs, and undertake a least cost analysis for additional generation capacity; and (iii) prepare project proposals (including technical, financial, economic, social and environmental analysis) for consideration by the government and ADB, including necessary documents under the Safeguard Policy Statement (SPS), in the format of a RRP and linked documents, in close coordination with the ADB project officer. The consultants will also organize and implement all necessary surveys required for data collection, and organize all workshops and information dissemination sessions including inception, interim and final workshops.9 5. The major outputs and activities are summarized in Table A4.1. The activities are expected to be initiated in November 2013.

Table A4.1: Summary of Major Outputs and Activities

Major Activities Major Outputs Expected

Completion Date

Review of pre-feasibility or feasibility studies, hydro-geology and transmission access infrastructure, and safeguards status for Warsamson

Inception report detailing priority list of projects, PPTA implementation schedule, and issues that need resolution (to be presented at an inception workshop)

February 2014

Technical feasibility assessment, and confirmation of technical design, implementation arrangement, estimation of project costs and preparation of a financing plan and procurement plan for Warsamson

Technical report including technical design, cost estimate, procurement plan, and implementation schedule for Warsamson. Initial review of safeguards issues and hydrological analysis for the East Java projects.

April 2014

Financial and economic analysis, detailed risk and sensitivity analysis, and preparation of safeguard documents for Warsamson

Technical report including detailed financial and economic analysis, disbursement plan, and all safeguard-related documents (IEEs, RP, IPP and EARF), and hold mid-term workshop for Warsamson.

May 2014

Preparation of the draft final report for Warsamson. Review of pre-feasibility or feasibility studies, hydro-geology and transmission access infrastructure, and safeguards status for Sutami and Kesamben

Preparation of the RRP and linked-documents and hold final workshop for Warsamson. Initial report on Sutami and Kesamben,

August 2014

Preparation of the final report for Warsamson. Technical feasibility assessment, and confirmation of technical design, implementation arrangement, estimation of project costs and preparation of a financing

Revised draft RRP and linked-documents.

October 2014

7 The PPTA may lead to a single loan for the three subprojects or two loans, one for the West Papua project, and one

for the two sites in East Java. This is because the subprojects are in varying stages of readiness. Warsamson is most advanced in terms of project readiness for possible Board consideration in 2014. PLN currently does not have the development rights for the projects in East Java. It is expected that PLN negotiate these rights within the next 4 months. While the loan concept paper and the related PPTA is designed to focus on three subprojects.

8 Feasibility reports produced in 1997 are available for both Sutami and Kesamben. Further, drainage studies and

basin-wide hydrological studies are also available from the mid-1980s, and early 2000s. A detailed feasibility study report produced by PLN is available for Warsamson. ADB will make available these reports to the consultants.

9 Expenses for the surveys and workshops will have to be approved by the ADB officer prior to the consultant

committing the expenses.

12 Appendix 4

Major Activities Major Outputs Expected

Completion Date

plan and procurement plan for Sutami and Kesamben Financial and economic analysis, detailed risk and sensitivity analysis, and preparation of safeguard documents for Sutami and Kesamben Preparation of the draft final report for Sutami and Kesamben Preparation of the final report for Sutami and Kesamben

Technical report including technical design, cost estimate, procurement plan, and implementation schedule for Sutami and Kesamben Technical report including detailed financial and economic analysis, disbursement plan, and all safeguard-related documents (IEEs, RPs, EIA), and hold mid-term workshop for Sutami and Kesamben. Preparation of the RRP and linked-documents Revised draft RRP and linked-documents

November 2014

February 2015

March 2015

June 2015

Final workshop

Discussion on procurement updates and implementation plans

September 2015

EIA = Environmental Impact Assessment, EARF = Environmental Assessment Review Framework, IEE = initial environmental examination, IPP = Indigenous Peoples Plan, PPTA = Project Preparatory Technical Assistance, RRP = Report and Recommendation to the President, RP = Resettlement Plan Source: Asian Development Bank estimates.

C. Cost Estimate and Proposed Financing Arrangement

6. The Scaling Up Hydropower Development Project subproject 3 is estimated to cost $2.0 million equivalent and will be financed from the TAC on a grant basis by the Government of Australia and administered by ADB. The estimated cost includes the management fee of 5 percent. The government will provide counterpart support in the form of communication facilities for consultants, and other in-kind contributions. The detailed cost estimate is presented in Table A4.2.

Table A4.2: Cost Estimates and Financing Plan ($'000)

Item Total

Government of Australia 1. Consultants

a

a. Remuneration and per diem i. International consultants (42.5 person-months) 1,100.0 ii. National consultants (53 person-months) 400.0 b. International and local travel 125.0

2. Reports and communications 3. Surveys (topography, hydro-geology, socio-economic, biodiversity)

b

4. Workshops and consultation

10.0 100.0

50.0 5. Vehicle

c 10.0

6. Contingencies 205.0 Total 2,000.0

a

In addition to 41 months of international consultants and 39 months of national consultants hired through a firm, the following specialists will be hired as individual consultants, namely: international hydrologist (1 month), international

Appendix 4 13

dam safety specialist (0.5 month), national environment and biodiversity specialist (6 months), national resettlement specialist (6 months) and national IP specialist (2 months).

b Includes translation expenses

and the obtaining of requisite hydrometerological equipment, lab analysis, GIS etc.

c Vehicle lease in Java and Papua and expected length of use is 10 months.

Source: Asian Development Bank estimates.

D. Consulting Services

7. The implementation of the PPTA will require the services of a multidisciplinary team comprising international and national consultants. Twenty two (22) consultants (13 international and 9 national) for 41 person months of consulting services will be engaged through an international firm in accordance with the ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). In addition, the following specialists will be hired as individual consultants, namely: international hydrologist (1 month), international dam safety specialist (0.5 month), national environment and biodiversity specialist (6 months), national resettlement specialist (6 months) and national IP specialist (2 months).

Table A4.3: Summary of Consulting Services Requirement (Firm)

Person-Months Required

Total Positions International National

1 Hydropower planner (and team leader) 8 8 16

2 Surveyor and geographical information system specialist

2

4

6

3 Engineering hydrologist 3 4 7

4 Geotechnical specialist 4 6 10

5 Civil/hydraulic design engineer 3.5 4 7.5

6 Mechanical engineer 2.5 3 5.5

7 Electrical engineer 4 4 8

8 Energy economist 2 3 5

9 Financial analyst 3 3 6

10 Environmental safeguards specialist 2 0 2

11 Social and resettlement specialist 2 0 2

12 Indigenous peoples specialist 2 0 2

13 Procurement specialist 3 0 3

Total 41 39 80

Source: Asian Development Bank estimates.

8. The qualifications and outline terms of reference for the PPTA consultants are described in paras. 9 to 21. 9. Hydropower Planner/ Team Leader. The international expert should preferably have a master’s degree in mechanical or civil engineering with extensive experience in senior positions in a power utility. As team leader this expert will be responsible for all TA outputs and liaison with both PLN and the ADB project officer. The expert will seek and coordinate the inputs of all team members and ensure the quality of technical, financial, social safeguards and implementation arrangements-related documents. Specifically, the expert will: (i) coordinate with the economist in the team to confirm that the proposed projects are part of the least-cost generation expansion plan for Indonesia, (ii) define the configuration and operation of the

14 Appendix 4

proposed hydropower projects including the maximum and minimum operating levels, tail water levels, dam height, installed capacity and projected energy output, (iii) estimate the proposed hydropower projects cost, including physical and price contingencies, and financing charges during implementation, (iv) prepare detailed project-implementation schedules clearly indicating the tasks on the critical path; (v) review PLN’s technical capacity in supervising and managing projects of similar magnitude and identify the need for capacity strengthening; and implementation advisory services, and (vi) review the safeguard documents produced by specialists on the team and ensure that it meets ADB’s SPS requirements. The national expert will work closely with and support the international expert. 10. Surveyor and Geographical Information Systems (GIS) Specialist. The specialist will work closely with the engineering hydrologist, the geotechnical engineer and the electrical engineer to conduct surveys, and produce maps (e.g. digital elevation maps, maps of forest areas and affected people, land boundaries and land use patterns). The specialist will have advanced training in mapping and GIS. The national expert will have work closely with and support the international expert. 11. Engineering Hydrologist. The expert should preferably have a master’s degree in civil engineering, or hydrology with extensive experience in hydropower plants. The expert will: (i) assess validity of existing hydrological data at the proposed project sites and recommend additional studies; (ii) determine project design according to Indonesian regulations and international good practice and take into account current and future changes in upstream water use; (iii) carry out low flow studies, estimate sediment deposition and assess water quality in reservoirs over the life of the projects; (iv) undertake sedimentation and transport modeling in the context of the proposed and existing dams and weirs in the watershed, and propose an appropriate management plan, (v) assess potential channel erosion downstream of Sutami Dam due to change of operation regime, (vi) establish the amount of firm and secondary energy to be generated, dependable capacity and the breakdown of energy during peak load and off-peak load, and (vii) verify the total and firm energy increments in proposed downstream projects, and irrigation and flood control benefits attributable to each project. Further, the specialist will undertake an analysis of the impacts of projected climate change on the subprojects for the 2030 and 2050 time slices.This will include using down-scaled climate models and their outputs to derive scenarios of total rainfall, variation and incidence of severe events on total inflow into the dams, and the resilience of the proposed dam designs to changes in future floods incidence (frequency and severity). Appropriate measures to climate-proof the dams need to be developed and cost estimated derived. The national expert will work closely with and support the international expert. 12. Geotechnical Specialist. The expert should preferably have a master’s degree in civil engineering or geology. The specialist will: (i) determine the geological conditions in the reservoir and project component areas with special reference to - reservoir water tightness, earthquakes and major faults; (ii) assess the geological investigation done so far at dam site, along waterways and at power house, and at other relevant locations; (iii) with the Civil Design Engineer, assess the need for lining along the proposed tunnels and make sure there is sufficient overburden between tunnel and surface; (iv) assess special requirements for underground power house cavern (if any); (v) assess the foundation requirements at the dam and at powerhouse sites, and other relevant project sites; and (vi) develop proposals for dam safety monitoring. The national expert will work closely with and support the international expert. 13. Civil/Hydraulic Infrastructure Design Engineer. The expert should preferably have a master’s degree in civil engineering with experience in project design and engineering of

Appendix 4 15

hydropower plants, including dams. The specialist will review and improve if necessary the general layout, foundations, plan for civil works, and the detailed design of different component of each proposed project. The specialist will also provide detailed costs for the financial analysis. The national expert will work closely with and support the international expert. 14. Mechanical Engineer. The expert should preferably have a master’s degree in mechanical engineering with extensive experience in designing hydropower stations and dams. The expert will design the general layout of the power stations, generators and other mechanical components, and provide detailed costs for the financial analysis. The national expert will work closely with and support the international expert. 15. Electrical Engineer. The expert should preferably have a master’s degree in electrical engineering with extensive experience in power generation plants and transmission lines. The expert will design the general lay-out of the power stations, generators and other electrical components and power plant electrical systems, and protection systems, in collaboration with the civil and mechanical engineer. The expert will also provide cost estimates for the financial analysis. The experts will review the status of the regional grid and interconnection plans to evaluate feasibility of connecting the proposed power plants to the grid. The national expert will work closely with and support the international expert. 16. Energy Economist. The expert should preferably have a master’s degree in economics, or business administration. The experts will (i) assess the economic benefits of the project including impacts on energy imports, current account deficit, and balance of payments; (ii) identify the risks, and undertake appropriate economic analysis of the projects, and (iii) prepare a project framework that clearly identifies the proposed project’s impact and outcomes. The expert will have experience in least-cost generation expansion plans. The national expert will work closely with and support the international expert. 17. Financial Analyst. The expert should preferably have a master’s degree in finance or business administration. The expert will: (i) prepare detailed project cost tables for the proposed investments in line with ADB requirements, and a project financing plan; (ii) conduct in-depth financial analysis of the project; and (iii) undertake a financial management assessment of the executing agency. The national expert will work closely with and support the international expert. 18. Environmental Safeguards Specialist. The expert should preferably have a master’s degree in environment science or engineering. The expert will guide the preparation of and be responsible for quality assurance of the following: (i) environmental impact assessment10 or initial environmental examination of the proposed projects considering the likely impacts associated with construction activities, as well as the long-term impacts during operation; and (ii) outline appropriate environmental mitigation measures for identified significant impacts, and recommend monitoring plans and cost estimates to address these impacts in an environmental management plan, and (iii) prepare the environmental management plan. Assessment documents are to be prepared in accordance with the updated ADB sourcebook available at http://www.adb.org/documents/environment-safeguards-good-practice-sourcebook. The specialist will also, in close collaboration with the hydrologist, undertake a cumulative environmental impact assessment for the East Java projects taking into account watershed-

10

PLN is responsible for preparing the AMDAL. The consultant will need to work closely with PLN and prepare an EIA to comply with ADB’s requirements taking into account information contained in the AMDAL.

16 Appendix 4

level water usage, the presence of other dams, and projected future demand in the near-to-medium term. The international expert will work closely and supervise the work of the national specialist (to be hired separately with a level of effort of 6 months intermittent). 19. Social and Resettlement Specialist. The expert should preferably have a master’s degree in social science or related subjects. The expert will guide the preparation of and ensure quality assurance for the following: (i) social impact assessment, including gender analysis; and (ii) land acquisition and resettlement plan, and community development plans as required, and (iii) IPP, as required, to meet the social safeguards requirements of SPS. The expert should ensure and assist that the EA/IA carry out meaningful consultation with affected people, and the consultation processes will be appropriately documented in the safeguards documents (resettlement plan, IPP, etc.). The expert should pay special attention to ensure that vulnerable groups have sufficient opportunities to participate in consultations. The international expert will work closely and supervise the work of the national specialist (being hired separately as a national consultant with a level of effort of 6 months intermittent).

20. Indigenous Peoples Specialist. The expert should preferably have a master’s degree in social science or related subjects. The expert will guide the preparation of and ensure quality assurance for IPP and community development plan for Warsamson subproject, as required, to meet the social safeguards requirements of SPS. The expert should ascertain whether there is broad community support from affected IP communities under three circumstances11. In such cases, the expert should document the processes and outcomes of consultation with, and participation of, affected IP communities. The international expert will work closely and supervise the work of the national specialist (hired separately as an individual consultant). 21. Procurement Specialist. The expert will work closely with the other specialists to prepare: (i) a detailed procurement plan specifying packages, schedule and mode of procurement, and source of financing, (ii) provide guidance to the Implementing Agency in preparing the bidding documents for contracts to be funded by ADB according to ADB’s Procurement Guidelines, and with the aim of meeting the advance procurement and retroactive financing requirements, and (iii) undertake a thorough review of the contract packages identified for advance contracting to ensure that they are in line with ADB procurement guidelines, and national guidelines. E. Implementation Arrangements

22. PLN is the executing and implementing agency. TA proceeds will be disbursed in accordance with Technical Assistance Handbook (May 2010, as amended from time to time). PLN will provide counterpart support in the form of counterpart staff, access to feasibility studies and data, communication facilities for consultants, and other in-kind contribution. F. Processing Schedule

23. The proposed PPTA processing and implementation schedule is listed in Table A4.4. The TA will be implemented over a 21 month period with a commencement date of 1 February 2014 and completion of 1 November 2015. The processing schedule may be extended and is

11

IP may be particularly vulnerable when project activities include (i) commercial development of the cultural resources and knowledge of IP; (ii) physical relocation from traditional or customary lands; and (iii) commercial development of natural resources within customary lands under use that have potential impacts on the livelihoods or the cultural, ceremonial, or spiritual uses that define the identity and community of IP.

Appendix 4 17

contingent on the subprojects meeting all readiness criteria as per the government and ADB’s requirements.

Table A4.4: Technical Assistance Processing and Implementation Schedule

Major Milestones Expected Completion Date

Concept paper department review meeting September 2012

Reconnaissance mission to the sites October 2012, August & September 2013 Interdepartmental review meeting January 2013

ADB approval of PPTA November 201312

Recruitment of consultants August-November 2013

Inception workshop January 2014

Midterm workshop February 2015

Final workshop September 2015

II. OTHER

24. Intra and interdepartmental comments were sought. The paper has been revised to incorporate these comments. The comments matrices are attached.

III. RECOMMENDATION 25. Pursuant to para. 27 of OM Section D12/OP, we request your approval for the implementation of the TA cluster subproject for Republic of Indonesia: Scaling up Hydropower Development Project in an amount not exceeding the equivalent of $2.0 million on a grant basis, funded by the Government of Australia and administered by ADB.

12

Source of financing was only confirmed in June 2013 and hence the delay in ADB approval.

18 Appendix 5

INITIAL POVERTY AND SOCIAL ANALYSIS

Country: Indonesia Project Title: Scaling up Hydropower Development Project

Lending/Financing Modality:

Project Loan Department/ Division:

Southeast Asia Department / Energy Division

I. POVERTY IMPACT AND SOCIAL DIMENSIONS

A. Links to the National Poverty Reduction Strategy and Country Partnership Strategy

The National Medium–Term Development Plan (RPJMN) 2010–2014 which is part of the Long-term National Development Plan 2005–2025 aims at achieving an annual economic growth rate of at least 7% by 2014 and reducing national poverty ratio

13 from 14.15% in 2009 to 8%–10% by the end of 2014. The economic growth rate

reached 6.5% in 2011 and this resulted in about 1.5 million new jobs being created and formal employment raised by 16.0%. The new jobs were mostly created in the construction, manufacturing, and services sectors. Notwithstanding these recent improvements, as of September 2012, the number of poor people was 28.59 million (11.66% of the total population). Some parties considered this poverty line figures is too low and does not reflect the real life needs which is about $2 per day. Nearly 52% of the population (about 135 million people) is living on less than $2 a day. Accelerated economic growth that provides regions with improved economic opportunity and access to social services is required to ameliorate this persistent poverty. The government has identified lagging infrastructure, including energy generation, transmission and distribution as a key constraint for achieving the medium-term target of poverty reduction.

The country’s current per capita annual electricity consumption of 590 kWh and the national electrification rate at 66% in 2010 lags behind that of its neighbors. Indonesia’s current energy elasticity is estimated at about 2; i.e. for every 1 percent increase in GDP growth; electricity consumption would need to increase by about 2 percent. The future growth prospects of the country are thus contingent on rapidly increasing access to reliable sources of energy. PLN, the state-owned power company has embarked on an ambitious plan to add over 20,000 MW between 2006 and 2018 and related transmission and distribution infrastructure. The proposed hydropower project will augment generation capacity and improve the reliability of the power infrastructure through clean energy resource.

ADB’s Indonesia Country Partnership Strategy (CPS) 2012–2014 is closely aligned with the government’s RPJMN. Improved infrastructure (including the generation of additional electricity) and climate change mitigation (a motivation for clean energy provision) lie at the intersection of RPJMN’s priority areas and ADB’s Strategy 2020. Specifically, the CPS comprises two pillars – Pillar I: Inclusive growth, and Pillar II: Environmental Sustainability with climate change mitigation and adaptation. ADB’s proposed future financing for the development of clean hydropower directly addresses both pillars.

B. Targeting Classification

General Intervention Individual or Household (TI-H) Geographic (TI-G) Non-Income MDGs (TI-M1, M2, etc.)

The project benefits the general population of East Java and West Papua Provinces through the provision of higher quality and more stable supply electricity from renewable energy sources. In 2012, 13.08% in East Java and 27.14% in West Papua are classified as poor (National Statistics Agency, January 2013), and all those people will benefit from the project.

C. Poverty and Social Analysis

1. Key issues and potential beneficiaries.

The proposed project is an effort to improve the supply of reliable electricity from indigenous sources in the country, while the potential needs of the beneficiaries are the supply of stable and high quality electricity at an affordable price. The regional population will benefit from improved access to electricity to support their economic activities. By generating local employment and livelihood opportunities, the project will also benefit local communities in the three proposed project areas (Districts of Blitar and Malang in East Java, and District of Sorong in West Papua Province). National statistic indicates that in 2012, the poverty incidence in East Java was 13.08% and West Papua was 27.04%. This percentage is higher than the national level that was 11.66%. During due diligence, the Project

13

Poverty line is used as a threshold to determine whether a person is considered poor or not. The poor are people who have an average monthly per capita expenditure (for food and non-food) below the poverty line. In September 2012, the national poverty line in Indonesia was Rp 259,520 per capita per month (National Statistics Agency, January 2013).

Appendix 5 19

Preparatory Technical Assistance (PPTA) team will identify concerns and needs specific to various community stakeholders (including poor, customary communities, and the socially excluded) to further improve project design features.

Lack of generation capacity and lack of transmission and distribution infrastructure have been the biggest constraint to accessing the proposed benefits and services. By increasing the supply of electricity from an indigenous and renewable source, the project will provide economic opportunities for large industries, and small and medium enterprises in the region, and households and community-level facilities (e.g. clinics, schools) in the area. By lowering the demand for imported and expensive fossil fuels (e.g. coal and natural gas), the project saves foreign exchange.

2. Impact channels and expected systemic changes.

The project is to develop hydropower plants that are going to be connected to the grid. However, recruitment of unskilled labors for civil works will prioritize locally sourced labor from project communities. The PPTA team will also undertake a rapid assessment of communities’ access to energy in the project areas.

3. Focus of (and resources allocated in) the PPTA or due diligence.

A PPTA with a budget of $2.0 million is being provided for conducting due diligence and preparing the appropriate impact mitigation documents and plans. The PPTA team will comprise an energy economist (international and national consultant), a social impacts and resettlement issues specialist (international and national consultant), an indigenous people (IP) specialist (international and national consultant), and an environmental specialist (international and national consultant). These specialists will review aspects relating to poverty and employment impacts disaggregated by gender, carry out resettlement assessment and due diligence, and environmental impact assessments, and IP assessment. The team will also develop an inventory of potential losses and social economic surveys and engage in consultations with affected peoples (APs), local and national government agencies and other relevant stakeholders facilitate board community support and document the process and outcomes of consultations with IP. and assist ADB to perform the requisite public disclosure activities. Social and environmental safeguards documents will be prepared.

4. Specific analysis for policy-based lending.

Not applicable.

II. GENDER AND DEVELOPMENT

1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project or program?

The social impact analysis undertaken under the PPTA will characterize poverty and access to energy disaggregated by gender to describe the status of women in the local communities. The project will provide access for women to participate and obtain benefits during the project implementation phase including participating in the consultation meetings, access to project-related jobs, and participation in livelihood improvement programs if required. The impacts mitigation/resettlement plans and indigenous people plan (IPP) will ensure that there aren’t any disproportionate negative impacts on women.

Once the project is completed, the more reliable supply of electricity is expected to have positive impacts on women both in terms of alleviating women’s burden in the domestic sector and opening up increased avenues for women to operate small businesses and rural enterprises.

2. Does the proposed project or program have the potential to make a contribution to the promotion of gender equity and/or empowerment of women by providing women’s access to and use of opportunities, services, resources, assets, and participation in decision making?

Yes No Please explain.

The project does not have direct contribution to improving access of women to electricity. It is not foreseen that a grid-connected power project will specifically widen gender equality.

3. Could the proposed project have an adverse impact on women and/or girls or widen gender inequality?

Yes No Please explain.

The project will have positive impacts on women’s burden in reducing the domestic sector, businesses, and better access to public services. There is no adverse impact to be experienced by women and/or girls.

20 Appendix 5

4. Indicate the intended gender mainstreaming category:

GEN (gender equity theme) EGM (effective gender mainstreaming) SGE (some gender elements) NGE (no gender elements)

III. PARTICIPATION AND EMPOWERMENT

1. Who are the main stakeholders of the project, including beneficiaries and negatively affected people? Identify how they will participate in the project design.

Provincial and district government agencies, PJT I in East Java, forestry agencies at national and local levels, local communities, customary councils, APs/IPs will be consulted for the proposed project. They will participate in the project planning, implementation, and monitoring through various ways including i) consultations with stakeholders (government and non-government entities) to get inputs on the project design, required permits, and mitigation measures for APs/IPs; ii) public consultation meetings and focus group discussions (FGDs) with communities and APs/IPs to get their view and suggestions on the project potential impacts and mitigation measures.

2. How can the project contribute (in a systemic way) to engaging and empowering stakeholders and beneficiaries, particularly, the poor, vulnerable and excluded groups? What issues in the project design require participation of the poor and excluded?

Meaningful consultation will be carried out during the PPTA stage and it will be continued on an ongoing basis throughout the project cycle. Views and concerns of concerned parties will be elicited with regard to project potential impacts, resettlement, social risk, and mitigation measures. The methods to be used for consultations will vary that will include i) public consultation meetings and FGDs with potential APs/affected IPs; ii) limited household surveys; and iii) meetings and interviews with government officials both at national and local levels; iii) meetings with informal leaders/groups in all project areas and customary council in West Papua. The PPTA will facilitate social and environmental impacts assessment and promote participatory planning to enable local communities to voice their opinions on the project and its potential impacts, and appropriate mitigation measures.

A broad community support/consent of affected IPs communities will be sought, as the project in West Papua may affect to physically displacement of IP from traditional or customary lands. The process of consultations with the IP and IP organization, recommendations, and any formal agreement reached with them will be properly recorded. When the project (client) and the affected IPs have major disagreements relating to the project design, the IPP, or the implementation of the IPP activities, then a process of good faith negotiations for resolving such differences and disagreements will be adopted.

3. What are the key, active, and relevant civil society organizations in the project area? What is the level of civil society organization participation in the project design?

There are several active non-government organizations in the project area that have concern on environment, energy, and water. There are also several farmer organizations that have strong concerns on rights to water and indigenous councils that has concerns on the IPs rights. They will be consulted on the project design, its potential impacts, and efforts to minimize the impacts.

Information generation and sharing Consultation Collaboration Partnership

4. Are there issues during project design for which participation of the poor and excluded is important? What are they and how shall they be addressed?

Yes No

All APs/IPs and communities including the poor, IPs/customary groups, and other vulnerable groups will be intensively consulted, especially during resettlement plan preparation and implementation. No specific capacity building program will be conducted to strengthen the participation of poor and other vulnerable groups.

IV. SOCIAL SAFEGUARDS

A. Involuntary Resettlement Category A B C FI

1. Does the project have the potential to involve involuntary land acquisition resulting in physical and economic displacement?

Yes No

The proposed project (Sutami, Kesamben, and Warsamsom Hydropower Development) will require land acquisition and resettlement.

Land to be acquired for Sutami subproject is state land which comprises forestry land managed by PT Perhutani and agricultural production land used by sharecroppers and managed by PT Jasa Tirtha I (PJT-I, a state-owned water

Appendix 5 21

shed management company). There is no residential land to be acquired; however, several structures used for small business (kiosks) will be potentially affected for the subproject construction. Less than 50 persons are expected to be severely affected (i.e. having 10% or more of their productive income generating assets lost) and no physical relocation is expected.

The Kesamben subproject will require around 70 ha land comprising residential area, mixed garden, and dry land. Lands are privately owned by households, PT Perhutani (forestry agency), and PJT I (several meters along the river). A total of approximately 80 households with around 320 members will be either economically or physically displaced. Among the 80 affected households (AHs), about 15 AHs need to be physically relocated as their houses need to be totally demolished. Some AHs will lose their income from agricultural production. None of AHs have business activities (shops or kiosks).

The Warsamson project in Sorong District, West Papua requires 3,240 ha of land. It consists of 2,440 ha of forestry land occupied by customary communities/IPs, 175 ha of cacao plantation land, 600 ha of agricultural land, and 600 ha of river basin areas. There are several costmary groups living in the project area. These groups will potentially lose their land, trees/crops, and access to the natural resources as a source of livelihood. There are 96 households (IPs) who may need to be physically relocated for inundation areas.

2. What action plan is required to address involuntary resettlement as part of the PPTA or due diligence process?

Resettlement plan Resettlement framework Social impact matrix

Environmental and social management system arrangement None

B. Indigenous Peoples Category A B C FI

1. Does the proposed project have the potential to directly or indirectly affect the dignity, human rights, livelihood systems, or culture of indigenous peoples?

Yes No

2. Does it affect the territories or natural and cultural resources indigenous peoples own, use, occupy, or claim, as their ancestral domain?

Yes No

The proposed project will affect the IP living in the project area and 96 households of IP may need to be physically relocated for the Warsamson project in West Papua. There are no IP to be affected in East Java projects. Further assessment on the project impacts to the IP and explorations on alternative project designs to avoid the physical displacement will be carried out by the PPTA team.

3. Will the project require broad community support of affected indigenous communities?

Yes No Please explain.

Broad community support of affected indigenous communities is required because the proposed sub project in Warsamson may physically displace 96 households of IP. Exploration on the alternative project design will be undertaken to avoid the adverse impacts on the IPs and to provide them with culturally appropriate project benefit. The Executing Agency/Implementing Agency will document in detail the process and outcomes of consultations with, and participation of, affected IPs communities and relevant IP’s organizations that include; (i) the findings of the social impact assessment (SIA); (ii) the process of meaningful consultation with the affected Indigenous Peoples communities; (iii) the additional measures, including project design modification, that may be required to address adverse impacts on the Indigenous Peoples and to provide them with culturally appropriate project benefits; (iv) the recommendations for meaningful consultation with and participation by Indigenous Peoples communities during project implementation, monitoring, and evaluation; and (v) the content of any formal agreements reached with Indigenous Peoples communities and/or Indigenous Peoples’ organizations.

4. What action plan is required to address risks to indigenous peoples as part of the PPTA or due diligence process?

Indigenous peoples plan Indigenous peoples planning framework Social Impact matrix

Environmental and social management system arrangement None

V. OTHER SOCIAL ISSUES AND RISKS

1. What other social issues and risks should be considered in the project design?

Creating decent jobs and employment (L) Adhering to core labor standards Labor retrenchment

Spread of communicable diseases, including HIV/AIDS (L) Increase in human trafficking Affordability

22 Appendix 5

Increase in unplanned migration Increase in vulnerability to natural disasters Creating political instability

Creating internal social conflicts Others, please specify __________________

2. How are these additional social issues and risks going to be addressed in the project design?

Social impact assessment including key issues related to core labor standard will be assessed during the project preparation and it will be included in the provisions of civil work contract

VI. PPTA OR DUE DILIGENCE RESOURCE REQUIREMENT

1. Do the terms of reference for the PPTA (or other due diligence) contain key information needed to be gathered during PPTA or due diligence process to better analyze (i) poverty and social impact; (ii) gender impact, (iii) participation dimensions; (iv) social safeguards (resettlement and indigenous people); and (vi) other social risks. Are the relevant specialists identified?

Yes No

2. What resources (e.g., consultants, survey budget, and workshop) are allocated for conducting poverty, social and/or gender analysis and participation plan during the PPTA or due diligence?

The PPTA team will include social impacts and resettlement issues specialist (international and national consultant) and IP specialist (international and national consultant) who will conduct poverty and social impact assessment including gender and community participation issues.