Sedapal

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 IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s 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	28741
Country	Peru
Sector	Utilities
Department	Sub-National Finance
Company name	Servicio de Agua Potable y Alcantarillado de Lima S.A.
Environmental category	B
Status	Pending Approval

Date ESRS disclosed	November 6, 2009

View Summary of Proposed Investment (SPI), click here

Overview

Category & Applicable Standards

Key Issues & Mitigation

Community Engagements

Client's Documentation

Overview of IFC's scope of review

The scope of review of Sedapal compliance with IFC´s Performance Standards included an evaluation of Sedapal´s capacity to manage environmental and social aspects. The assessment was based on a desk review of environmental, social, labor and health and safety documents and reports made available by Sedapal and the Huachipa Consortium; and interviews with key management personnel of Sedapal including the Huachipa Consortium (Construcoes e Comercio Camargo Correa - OTV) and Nippon Koei Cesel Oist. In addition, an environmental and social consultant team visited the water treatment plant (construction in process), tunnels and the underground water transmission lines.

In collaboration with Sedapal, the IFC will engage a resettlement expert to perform a compliance audit of the resettlement process to date. Depending of the outcome of this audit, a corrective action plan will be agreed with the Company outlining any complementary measures to achieve compliance if need be.

Project description

The project consists on the construction of a Potable Water Treatment Facility (PWTF), including the Huachipa water intake (Rimac River) and treatment plant (north network and complementary works) in the District of Lurigancho – Chosica towards the eastern boundary of the Lima province. Thirty four percent of construction has been completed to date and the rest is expected to be finalized by December 2010. The Huachipa Consortium led by the Brazilian firm Construcoes e Comercio Camargo Correa is implementing the project, and the Nippon Koei Cesel Oist Consortium acts as the supervision engineer. The Huachipa project consists of three components: (i) water intake installations from the Rimac River, located at Huachipa in the District of Lurigancho-Chosica, at the eastern boundary of the Lima province; (ii) a water treatment plant at Huachipa, to be constructed in stages, with a nominal capacity of 10 m3/s (the first stage capacity being 5 m3/s) on the bank of the Rimac River upstream of the Atarjea plant at Huachipa, located at an altitude of 400 meters above sea level; and (iii) water conveyance pipeline installations 27 km long from Huachipa to the north zone of Lima (Ramal Norte), constructing a main water transmission pipeline, 27 km long and 5 water storage tanks, which will convey by gravity the water treated at the Huachipa plant to the north zone of Lima and will distribute it by gravity to most of the population in the north zone. Some complementary works will connect the water storage tanks constructed under Ramal Norte to the existing water distribution network, mainly to the existing 65 water tanks in the north zone. The project will benefit the population of Lurgiancho-Chosica, San Juan de Lurigancho, Independencia, Comas, Carabayllo, Puente Piedra, San Martín de Porres, Los Olivos and part of Callao, by improving water availability per day and adding new connections to the networks.

Total project cost is approximately US$360 million, financed with a long-term concessional loan from the Japan International Cooperation Agency (JICA) and by Sedapal´s own resources. Sedapal asked for a short-term facility (up to 1-year tenor) from IFC for up to $65 million to overcome short-term liquidity constraints due to the accelerated timetable of the Huachipa project.

The expected project’s development impact are: i) improved water and sanitation services for over 2 million people, most of them low income in underserved area with little to no water service, and ii) increased potable water supply to the growing metropolitan area of Lima ensuring improved water service in the poor areas where potable water is currently available only for part of the day, iii) reduction of infant mortality in the area benefitted by the project.

Key environmental and social issues and mitigation

This is a project that is expected to generate improved environmental and social conditions for the cities of Lima and El Callao through an increase on the reliability and supply of treated drinking water. The key potential Environmental and Social (E&S) issues are (a) potential reduction of the flow and negative hydrodynamics impacts of the Rimac river due to the Huachipa intake, and potential downstream social and ecological implication thereof, (b) potential social impacts associated to service fare increases, if planned, (c) any issues associated with land acquisition and easement required for the Right of Way of the water transmission lines, (d) SEDAPAL 's capacity to identify and manage potential environmental, social, labor, and health and safety impacts and risks associated to their current business (including any existing environmental liability) and any civil works associated with its capital expenditure, and (e) environmental, social and occupational health and safety impacts and risks associate to any civil works (e.g. noise, dust and air emissions, solid and construction waste, hazardous waste, occupation accidents and incidents, etc).

PS1: Social and Environmental Assessment and Management System

Sedapal conducts environmental and social assessment of projects according the Ministry of Housing, Construction and Sanitation’s environmental management regulatory framework. In addition, Sedapal’s Environmental Control Action Plans are guided by the following national regulations: (a) Control of Gas Emission (DS 047-2001-MTC), (b) General Law of Solid Residues (Law No 27314) and Regulation (DS 057-2004-PCM), (c) Technical Norm on Waste Disposal (NTP 900.058-2005), (d) National Standard of Environmental Quality of the Air (DS 074-2001-PCM), and (e) National Standard of Quality of noise (DS 085-2003-PCM.

Sedapal has an integrated management system to monitor the work developed by its different units. Systems are ISO 9001 (quality), ISO 14001 (environment) and OHSAS 18001 (safety and health at work) certified. In addition, Sedapal has modern information management systems (SAP R3, OPEN SGC, OPEN SGI, SICAT, and SCADA).
According to the Ministry’s regulatory framework, and Sedapal’s management systems, Sedapal develops a Reclamation Plan to assure the restoration of the affected areas and to avoid any environmental liabilities. The implementation of the Reclamation Plan for this project is the responsibility of the Huachipa Consortium under the supervision and control of the Sedapal and Nippon Koei Cesel Oist Consortium. In the case of Sedapal, the Environmental Management Team (Equipo de Gestión Ambiental) and the Social Management Team (Equipo de Acompañamiento Social) undertake this supervision.

The Social Management Team is under the Projects and Works’ Department; and the Environmental Management Team is under the Logistic and Service’s Department. The company has a monitoring and supervising system, strengthened with the support of the Nippon Koei Cesel Oist Consortium, including the social and environmental aspects, human resources policy and work conditions.

Sedapal implements in all construction sites (intake, treatment plant, and tunnels/water transmission lines) of the Huachipa project a safety awareness system that shows a mapping of risks, identifying preventive measures and dangerous areas, both for the personnel of the company as well as visitors.

The staff of Camargo Correa’s social team, supervised by Sedapal and Nippon Koei Cesel Oist Consortium, elaborate monthly monitoring reports on the current status of community engagement issues.

PS2: Labor and Working Conditions

Sedapal complies with national labor laws and regulations for all its employment relationships, including requirements on acceptable work conditions. Sedapal’s Human Resources Department oversees and safeguards labor and working conditions for its 2,167 employees. Average wages are above market standards and employees have several social benefits related to retirement, health, and accident insurance.

Specifically for the Huachipa Project, the Camargo Correa Consortium has also devised an institutional policy to assure acceptable work conditions (e.g. 8 hours per day shifts including time for lunch, and day and night shifts are manned by different groups of workers). Professional staff has salaries with all the benefits of full-time employees. Workers are adequately hired as per the regulations of civil construction law. The Huachipa consortium has signed a collective agreement with a workers’ union so that they can benefit through employment in some areas, especially during the construction of tunnels and underground water transmission lines. The agreements signed with the workers’ union and the nearby population allows for an adequate, fare and transparent management of labor force supply, and minimizes potential conflict situations.

Sedapal and the Huachipa Consortium provide all workers with appropriate personal protection safety equipment (PEP) and have ongoing safety training each month according to a training plan. Camargo Correa Consortium has an Environmantal, Health and Safety Manual in place, which is distributed to worker’s at the time of recruitment and is used during project implementation. The Manual describes the occupational health and safety risks associated with the different construction tasks, the use of personal protection equipment (PPE), training/skill requirements and restrictions, as well as the adequate procedures for construction and operation of the treatment plan, tunnels and the underground water transmission lines. Use of appropriate equipment guarantees the safety and health conditions of the workers, especially in periods of detonations, excavations, and exposure to possible toxics gases and pollution (dust).

As part of its institutional policy, Sedapal’s construction sites maintain records of all safety incidents and accidents, and reports them periodically to the company’s Safety, Health and Environment Team and the corresponding Ministry. To date, there have been no fatal accidents in the implementation of the project. The Huachipa consortium has a health station for workers in each of the three areas of the project, with 24 health personnel. In addition, there is an ambulance available 24 hours per day for exclusive use of the project.

The Project has developed an Environmental Training Program for its workers and employees that is implemented by the Huachipa Consortium and Sedapal’s Safety, Health and Environment Team. The program comprises workshops, meetings, and dissemination of printed information and mass media to ensure awareness about prevention, protection, and preservation of the integrity and well-being of the population in the affected area, the workers themselves and the environment.

PS3: Pollution Prevention and Abatement

Sedapal and the Huachipa Consortium implements a set of procedures for the management of environmental impacts related to dust, noise and vibrations that occurs during construction. The Ministry of Housing, Construction and Sanitation’s environmental management regulatory framework regulates these procedures. The laws decreed to implement the regulatory framework are: i) Health General Law No. 26842 (July 20, 1997) and ii) Solid Wasted General Law No. 27314 (July 21, 2000). In addition, there are three supreme decrees for environmental aspects D.S. 074-2001-PCM (particulate material and gas emission), D.S. 085-2003-PCM (noisy) and D.S. 054-2004-PCM (solid waste). The Environmental Office of the Ministry of Housing, Construction and Sanitation is responsible for auditing the Huachipa project. The last audit report was completed in August 2009. The report stated that the Huachipa project has complied with 65% of commitments in the EIA, after only one year of operation (Report Nº 375-2009-VIVIENDA/VMCS-OMA, October 02, 2009). The rest of the commitments will be complied with as the civil works continue to progress; the Huachipa Consortium is working to comply with most of the remaining commitments (25%) by the end of 2009.

Most of the Huachipa water transmission lines are being installed in areas of low population density. However, some transmission lines are being installed in low-income residential areas with dirt roads, where there already existed a high level of dust-related pollution before the project started. Local residents themselves perform illegal excavations of sand for sale to companies that manufacture bricks, further contributing to the dust pollution conditions in the area. Mitigation actions include dust minimization by wetting all roads and work areas. Impacts related to noise related to tunneling detonations or excavations follows the regulations for levels permitted by law. The vibrations caused by excavations and detonations have been minimal and were only experienced during the construction of the tunnel entrances.

The CORPLAB (Environmental Analytical Services) is the laboratory contracted to conduct noise and air quality analysis and produce periodical reports. Air quality control in the tunnel areas is performed every two months. The measurement of noise levels is undertaken as required according to the construction timetable. The testing of environmental quality (air and noise) is conducted according to the methodology certified by the American Society for Testing and Materials (ASTM) and the US’s Environmental Protection Agency (EPA), and the national standards for ambient air quality according to law 074-2001-PCM. Noise tests are conducted based on ISO 1996-1:2003/ and ISO 1996-2:2007/ standards, and the Company periodically reports compliance with local laws.

The flow of the Rimac River is regulated through dams and lagoons during the dry season (May through November) and remains at an average of 18.54 m 3 /s all year round. During the wet season the flow of the river sometimes reaches 70 m 3 /s, while it remains above 10 m 3 /s in the dry season. Without considering the Huascacocha water supply project, which will bring additional 2,80 m3/s of water from a nearby lake into the River Rimac between May and November, Huachipa will increase the average annual water supply to Lima by 1.67 m3/s. Considering both Huachipa and Huascacocha, the marginal increase in water supply will rise to an annual average of 3.16 m3/s. This will have marginal ecological impacts and/or downstream water uses implications, considering also that the water intake from the Atarjea plant will be reduced during the dry season. Huachipa and Huascacocha will increase potable water supply to Lima with marginal impact on the flow of the Rimac River. By bringing more water into the Rimac River, Huascacocha is expected to ultimately improve water quality and benefit the river ecosystem.

PS5: Land Acquisition and Involuntary Resettlement

The Huachipa project directly impacted a total of 114 families: (a) 19 families that were permanently relocated, (b) 82 families needed to be temporary relocated during construction of works, and (c) 13 families suffered various impacts on their houses during construction of works (e.g. cracks in housing structures due to vibration).
According to the information provided, Sedapal has land acquisition and resettlement procedures that, in some aspects, exceed the Ministry of Housing, Construction and Sanitation’s requirements. Implementation of these procedures for the project is the responsibility of the Camargo Correa Consortium under the supervision of Nippon Koei Cesel Oist Consortium and Sedapal. The Project reached an agreement with the affected families early in the process. During implementation, the Huachipa project managed all the social impacts with the goal of “improving the living conditions of the affected population". The project conducted direct negotiations with affected families aiming for a process that, while complying with the Contractor’s timetable, also ensured the fair and transparent compensation for the families. The Huachipa project conducted a detailed baseline study of all residential housing in the Project’s area.

In brief, the Company acted as follows: (a) houses and/or lands were purchased directly from the 19 affected owners before construction commenced. The prices paid took into consideration current real estate values in the area, opportunity cost, and replacement of lost assets, with an additional compensation for the moving costs and lost productivity; (b) 82 affected families were temporarily relocated for 5 months to housing with similar or better conditions to where they lived. In addition, the Huachipa Project covered moving expenses, among other additional expenses. Families living near the second tunnel which, because of relocation had to travel greater distances to work or school, received an economic compensation covering the additional transportation expenses; and (c) 13 families were identified as needing repairs to their homes. These repairs were made promptly and to the satisfaction of the families, as the repairs left the houses in better condition than they originally were. If needed, a corrective action plan will be agreed with the Company outlining any complementary measures to the ones describe above to achieve compliance with PS5.

PS8: Cultural Heritage

The National Institute of Culture (INC) is Peru’s governmental agency responsible for the protection of cultural heritage. Following its procedures and national laws, the INC issues certificates for non-existence of archeological remains (CIRAs) for the areas to be impacted by the Huachipa Project as the works progress.

Additionally, Sedapal and the Consortium have in place standard Chance Find Procedures for its construction activities by which all construction workers are trained by specialized professional of the INC and by 2 full-time archeologists of Camargo Correa’s Safety, Health and Environment Team on how to proceed in case an archeological artifact is found. This procedure consists of an immediate stoppage of works, closure of the area where the remains are found, and informing the Project’s archeologists and the INC, who define the next steps. The Project’s archeologists conduct daily inspections of construction fronts to ensure a rapid response to any chance findings.

Client's community engagement

Water tariffs in Peru are regulated by the government according to an income-based structure, with discounted rates for the poor. The project will improve potable water service to low-income residents, who currently pay for water up to 20 times Sedapal’s tariff from water re-sellers/truckers and other providers.

Sedapal and Camargo Correa conducted three public assemblies with people located the Project’s area of influence, between January and May 2009, with the participation of about 200 people in each occasion. During these assemblies the Project provided specific information about the Project’s activities and potential impacts. During the public meetings questions and concerns were raised regarding potential project impacts related to the construction of the tunnels, and the Company developed information campaigns to further inform the population on this regard. These engagement activities allowed deepening knowledge about the Project and strengthening the relation with the community.

Also, Sedapal and Camargo Correa conducted assemblies with families that would be affected by resettlement and gave them information about the Project and, specifically, details about the negotiation and compensation process. Ten such assemblies were conducted in the district of Comas, and thirteen assemblies in the district of Lurigancho. In these assemblies, the project reported that negotiations with affected families would be conducted directly with them, without any intermediaries.

The Huachipa Project has public information activities and printed materials to inform the nearby communities about the implementation of the Project, particularly in those areas where excavations and detonations will be undertaken. They use oral and written information (bulletins) to inform the population about the alternative access paths and roads that can be taken when regular roads are closed due to constructions activities. The Project has in place an evacuation plan for the population during detonations made for tunnel construction.

Sedapal and the Huachipa Project have many formal and informal mechanisms to interact with the community and play an active role through its relationships with local authorities and the directly and indirectly Project-affected people. There are a total of 18 employees of Camargo Correa (Social Team) in charge of social activities working under the supervision of Nippon Koei Cesel Oist Consortium and Sedapal’s Social Management Team. The Team follows a prevention strategy to identify, register and redress grievances and identify potential conflicts early on. Additionally, the Huachipa Project promotes environmental education and capacity building activities for the communities, developing environmental awareness campaigns, training workshops, local fairs, and cultural activities.

The Huachipa Project also supports productive programs with women to teach other women to weave, paint, and also organizes fairs to sell their products. It also promotes links with social organizations also present in the area such as “Comedores Populares” and “Vaso de Leche”.

Local access of project documentation

Mr. Juan Calderón
Operaciones Financieras, Sedapal
Autopista Ramiro Prialé No 210, Lima 10, Perú.
jcalderon@sedapal.com.pe

Direct Telephone number: 511-317-3173
Sedapal Telephone number: 511-317-3000

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