la esperanza hydroelectric project honduras

2E Carbon Access La Esperanza Hydroelectric Project Appendix A1 to the simplified modalities and procedures for small-scale CDM project activities

CLEAN DEVELOPMENT MECHANISM

SIMPLIFIED PROJECT DESIGN DOCUMENT FOR SMALL SCALE PROJECT ACTIVITIES (SSC-PDD)

Version 01 (21 January, 2003)

La Esperanza Hydroelectric Project Honduras

August 8, 2005

1 This appendix has been developed in accordance with the simplified modalities and procedures for small-scale CDM project activities (contained in annex II to decision 21/CP.8, see document FCCC/CP/2002/7/Add.3) and it constitutes appendix A to that document. For the full text of the annex II to decision 21/CP.8 please see http://unfccc.int/cdm/ssc.htm).

2E Carbon Access La Esperanza Hydroelectric Project

CONTENTS

A. General description of project activity B. Baseline methodology C. Duration of the project activity / Crediting period D. Monitoring methodology and plan E. Calculation of GHG emission reductions by sources F. Environmental impacts G. Stakeholders comments Annexes Annex 1: Information on participants in the project activity Annex 2: Information regarding public funding


A. General description of project activity A.1 Title of the project activity: La Esperanza Hydroelectric Project. A.2 Description of the project activity: The La Esperanza Hydroelectric Project is a small containment run-of-river hydroelectric project in the Intibuca region of Honduras that has a contract to sell generated electricity to the National Utility, ENEE, for the next 15 years. Total installed capacity will be 12.77 MW. The project is located four kilometers from the city of La Esperanza on the Rio Intibuca and is at the site of an abandoned hydro power plant that operated until 1969. The site, formerly known as La Pozana, was never previously redeveloped due to the river water being heavily contaminated by the local community. Consorcio de Inversiones S.A. (CISA) is cleaning up and developing the site. In addition to building and operating the hydroelectric project, CISA will implement numerous community and environmental projects to benefit the surrounding community. The project is being built in two phases with separate powerhouses located one below the other. The first phase consists of two stages, 1A and 1B. Stage 1A, which is operational since June 2003, has a capacity of 485 kW and Stage 1Bhas a capacity 785 kW and has been operational sinceJune 2004. Phase 2 began construction in June 2004 and will have an installed capacity of 11.5 MW and become operational in January 2006. Annual emission reductions for the entire project are expected to be 37,031 tons CO2e and are achieved by displacing diesel generation from the national grid. Currently, total grid electricity generated in Honduras in 2003 was made up of 61% diesel and 39% hydro and biomass. The project is greatly improving the quality of electricity service in the town of La Esperanza, characterized by voltage fluctuations and brown/black outs prior to project implementation. Furthermore, since a major problem in the region is lack of access to electrical energy, rural electrification of local communities will be a major local benefit. Access to energy will also reduce dependency on fuelwood. The project will provide local employment to local people both during construction and operation in an area where permanent and reliable sources of employment are scarce. Another benefit is improvement to the basin where the water sources are located by means of reforestation and educational programs. Reforestation of deforested and degraded land in the project area includes 37,000 seedlings already planted, another 24,000 planted in spring 2004, and a continued expansion program thereafter. Additional benefits include roads maintenance and repairs as the project obtains economical stability; provision of (non-potable) running water for a few households in the immediate vicinity of the project; first aid training; greater engagement of women in work life and community issues and efforts to engage the communities; and the municipality authorities to better manage the environment and the catchment area as a whole, including waste management.


A.3 Project participants:

Name of Party involved ((host) indicates a host

Party)

Private and/or public entity (ies) project participants (as

applicable)

Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No)

Honduras (host) Consorcio de Inversiones S.A (CISA) No

Italy

International Bank for Reconstruction and Development (Public Entity) as the Trustee of the Community Development Carbon Fund

Yes

A.4 Technical description of the project activity: La Esperanza is a small hydroelectric project, which consists of three powerhouses located in cascade that uses the waters of the Intibucá River. The project is located at the same site where an abandoned hydroelectric plant, probably with a capacity of some 500 kW, had been built by German immigrants after World War II. The original dam was partially rebuilt by CISA at the start of construction and forms a regulation reservoir with a total capacity of 356,000 m3. The Intibucá River delivers a water flow of as low as 0.5 m3/s during the driest month of the dry season (December-April) to as high as 6 m3/s during the wettest month of the rainy season (May-November). The average annual water flow is 2 m3/s. The project consists of 2 phases as follows: Phase I Phase I consists of the construction of two powerhouses, 1A and 1B, with an installed capacity of 485 kW and 785 kW, respectively. Powerhouse 1A is located 186 meters from the dam. The penstock consists of one pipe run of 1.60-meter diameter steel pipe. This powerhouse has a head of 17.5 meters. Phase 1A started operation in June, 2003. Powerhouse 1B was built 700 meters further from the first powerhouse and provides an additional installed capacity of 785 kW. It required the construction of 360 meters of 1.6 meter diameter steel pipe. This powerhouse has a head of 32.5 meters. Phase 1B started operations in June 2004. The main function of Phase I power plants will be to control the flow of water from the dam in order to use more efficiently the water through the larger Phase II turbine/generators, which in the medium term, would bring to the project an added installed capacity of 11.5 MW. The interconnection to the national grid consists of 1.6 kilometers of new power line that tie into the existing 34.5kV ENEE grid to 1A substation and a further 1,000 meters of power line to 1B substation. Another 5 kilometers of new power line will be required to reach the substation for Phase II. Phase II Phase II is being implemented now that Phase I has been brought on-line. Phase II will be located approximately 6 km from the first power plant, connected to it as follows. The old reservoir is about


350,000 cubic meters and there is a small dam that has an intake that can direct the water through 185 meters of steel penstock that is 1.45 meter diameter and buried. This penstock feeds the water through a 500 kW turbine in the phase 1A powerhouse. The water exits this powerhouse into a small reservoir with an area of 8000 m2. At the end of this reservoir is the phase 1B intake that can direct the water through 380 meters of steel penstock that is 1.55 meter diameter and buried. This penstock feeds the water through a 1000 kW turbine in the phase 1B powerhouse. The water exits this powerhouse into another small reservoir with an area of 35,000 m2. At the end of this reservoir will be the intake for phase 2 where the water will be directed into a penstock that will be 5,500 meters long and feed two turbines, each of 6000 kW capacity, into powerhouse 2. The water will then exit this powerhouse and flow back into the river. It will have two Pelton turbines operating at a gross head of 395 meters. The sponsors expect to bring Phase II on-line in January 2006. Details for each Powerhouse are summarized below. Powerhouse 1A: Daily containment run-of-river hydro generation facility Turbine supplier is Canyon Industries, Inc. Installed Capacity – 485 kW Head - 17.5 meters Number of units - 1 Custom Crossflow Turbine Generator voltage - 4160 Volts Powerline - 34.5 kV Powerhouse 1B: Daily containment run-of-river hydro generation facility Turbine supplier is Canyon Industries, Inc. Installed Capacity – 785 kW Head - 27 meters Number of units - 1 Custom Crossflow Turbine Generator voltage - 4160 Volts Powerline - 34.5 kV Powerhouse 2: Daily containment run-of-river hydro generation facility Turbine supplier has not been selected but possible suppliers include Canyon Industries, Inc., Alstrom, Dependable Turbine and others. Installed Capacity – 11.5 MW TDH - 385 meters Number of units - 2 each Horizontal Two Nozzle Pelton Turbines Generator voltage - 4160 Volts Powerline - 34.5 kV A.4.1 Location of the project activity: A.4.1.1 Host country Party(ies): Honduras A.4.1.2 Region/State/Province etc.: Intibuca


A.4.1.3 City/Town/Community etc: La Esperanza A.4.1.4 Detailed description of the physical location, including information allowing the unique identification of this project activity (max one page): Four kilometers downstream of the city of La Esperanza on the Rio Intibuca presently exists an abandoned power plant that operated until 1969. This site, known as La Pozona, was abandoned when the government power utility, ENEE, integrated all the town’s distribution into the national interconnected system supplied by the new hydroelectric facilities. There is no development at this site nor downstream of the abandoned plant. The main office of the project is located at Barrio Lempira, La Esperanza. The mailing address is CISA, La Esperanza Intibuca Apartado Postal # 53. The best way to get to the project coming from Tegucigalpa, the capitol of Honduras, is using the main paved road that heads to San Pedro Sula (Carretera del Norte) CA 5. The detour to La Esperanza is at km 111 (Siguatepeque sector). At this intersection, La Esperanza town is a 66 km drive on paved road. The project is located 4.5 km from the town, heading to Barrio El Tejar, best known as the landing strip.

• Department Intibuca • Municipality La Esperanza • River Rio Intibuca • Cartographic sheet La Esperanza, No. 2558 I E752

Edition 2-DMA • Coordinates of the site (using world geodetic system 1984) Dam 16372572E 1578205N Powerhouse #1A 16372301E 1578183N Intake #1B 16372064E 1577774N Powerhouse #1B 16372264E 1577559N Intake #2 16372650E 1577125N Power House #2 16374650E 1572825N


A.4.2 Type and category(ies) and technology of project activity The category for the project activity according to the UNFCCC’s published simplified procedures for small-scale activities is Type 1D – Renewable Electricity Generation for a Grid. The project conforms to the project category since the nominal installed capacity of La Esperanza project is below the 15 MW threshold and the plant will sell its generated electricity to the National Utility under its Power Purchase Agreement. The project uses run-of-river hydropower technology. The turbines required have been specified and quotations have been received. They will be of a Pelton design, which is standard for this head and widely used throughout the world with many manufacturers available and many years of experience in their operation. A high pressure section of 600 meters will be installed with technical assistance from experts in the United States. See also section A.4. above. A.4.3 Brief statement on how anthropogenic emissions of greenhouse gases (GHGs) by sources are to be reduced by the proposed CDM project activity: The proposed activity will displace existing and future generation facilities in the Honduran national electricity grid that use diesel fuel. Under the business as usual scenario there would be continuing growth in diesel based electricity generation capacity and large scale hydroelectric projects. Total estimate of anticipated reductions over a twenty-one year crediting period is 678,184 of CO2 equivalent. The annual average for full operation is 37,031 tons per year. For details, please refer to Section E. A.4.4 Public funding of the project activity:

La Esperanza Project Site


This project is not seeking any public funding. A.4.5 Confirmation that the small-scale project activity is not a debundled component of a larger project activity: Based on the information provided in Appendix C, this Project is not a debundled component of a larger project activity since the project participants have not registered or operated another project in the region surrounding the project boundary. B. Baseline methodology B.1 Title and reference of the project category applicable to the project activity: Project Activity I.D. Renewable electricity generation for a grid. B.2 Project category applicable to the project activity: Appendix B of the simplified modalities and procedures for CDM small-scale project activities states that where all fossil fuel fired generating units in the grid use diesel or fuel oil the baseline is calculated as follows:

Annual kWh generated by the renewable unit times an emission coefficient for a modern diesel generating unit of the relevant capacity operating at an optimal load as given in Table 1.D in Appendix B.

The correct emission coefficient is 0.80 since the grid is larger than 200 kW. This baseline was selected since all fossil fuel fired generating units connected to the Honduran grid use diesel and fuel oil. Furthermore, the La Esperanza project will displace mostly fossil-fuel generating sources since they are at the margin of the electricity generation system. According to the Honduran Generation Expansion Plan, 2002 – 2007, prepared and published by ENEE, the majority of future generating capacity expected to come online over the next several years will be primarily fossil-fuel plants. For example, a 210 MW diesel plant is expected to come online in 2005 and a 200 MW combined cycle plant in 2006. B.3 Description of how the anthropogenic GHG emissions by sources are reduced below those that would have occurred in the absence of the proposed CDM project activity (i.e. explanation of how and why this project is additional and therefore not identical with the baseline scenario) Market Situation: As of the end of 2003, energy in Honduras was generated by 39% renewable energy (hydroelectric and biomass) and 61% diesel. Hydroelectric projects made up 80% of total generation in 1993. In the last ten years, primarily only diesel generation plants or large hydro have been built, except for two small-hydro projects, Babilonia (3 MW) and La Nieve (0.5 MW). Considering total current hydro capacity, well below 1% represents small hydro plants (below 15 MW capacity). ENEE estimates that local demand for energy will require an increase in gross capacity from 798 MW in 2002 to 1690 MW in the year 2015, equal to an increase of 892 MW. To help meet this demand ENEE:


Increased diesel production by 75 MW in 2001, Negotiated a public bidding with a diesel producer Lufussa for an additional 200 MW of supply

to come online in 2005, and Finalized a contract in 2003 to purchase 200 MW from ENERSA for a combined cycle project

expected to come online in 2006. Small power producers, including hydro developers, are also expected to help further fill the demand. As of April 2004, sixteen project developers have negotiated PPAs with ENEE to implement small-scale projects. These include La Esperanza and the two projects, Babilonia and La Nieve, which are already operating. The sixteen projects include 75.4 MW of hydro and 20.8 MW of biomass. At present, few of these plants have completed all the required government permits and licenses, let alone secured financing. An optimistic estimate is that 50% of these projects will actually come online in the next few years considering the current status of the project and the track record in the country. As described below, due to the significant barriers, especially access to finance and regulatory requirements, none of the six hydro projects originally projected to come online in 2004 according to ENEE’s expansion plan of the year 2002 will actually do so. The present laws supporting this project are listed below, there are also a number of revisions to these laws being discussed in government now to further encourage and increase private participation in the energy sector of the Honduran economy. i. Framework Law of the Electrical Sub-sector – Decree No 158-94

ii. Regulations of the Law - Decree No. 934-97 iii. Incentive Law – Decree No. 85-98 iv. Additions to the Incentive Law - Decree No. 267-98 v. Law of Production / Stimulation Decree No. 131-98 and includes reforms to framework Law of

Electrical Sub-sector Decree No. 158-94 vi. Master Plan for National Reconstruction and Transformation ADDITIONALITY: According to Attachment A to Appendix B of the simplified modalities and procedures for CDM small-scale project activities evidence to why the proposed project is additional is offered under the following categories of barriers: (a) investment barrier, (b) technological barrier, and (c) prevailing practice. a) Investment Barrier: The La Esperanza project has taken over three years to secure financing in a very challenging environment. Honduras suffers from a weak local economy - local banks charge high interest rates, up to 32% for Lempira based loans and 15% for US dollar loans, for their limited funds and foreign banks are generally not willing to lend into the country without significant levels of guarantees and secured hard currency. The main source of local funds is CABEI (Central American Bank of Economical Integration), however the financing requirements, such as 150% guarantees, makes accessing local finance extremely difficult. Given the lack of access to capital, energy systems with high up-front capital expenditures (such as hydro) are particularly challenging. La Esperanza was able to reach financial closure for Phase 1A through a loan by E+Co in 2002, a small non-profit organization that provides business development services and small loans to clean energy enterprises. It was hoped that this loan would encourage investment in the future phases; however this never occurred. Equity, an additional loan from E+Co, and a local loan allowed for Phase 1B to move


forward. Carbon finance from the World Bank and the Finnish government was pursued prior to financial closure on Phase 1 and such documentation can be provided to a Designated Operational Entity. Phase 2 is possible due to a loan from CABEI and the inclusion of potential CER revenue. CABEI is basically the only lender for small-scale hydro projects in Honduras and as such has increased its risk exposure. The inclusion of CER revenue and hard currency based on the ERPAs reduces their risk. It is also important to note that Phase 1 and Phase 2 are only two steps in the development of one integral, meaningful project. Without Phase 1, Phase 2 would not have proceeded; and Phase 1 would not have been implemented without a prospect and intention of implementing Phase 2. This phased approach is evidenced in all project design documentation and applications for licenses and financing, such as the Project Idea Note (PIN) of 10 December 2001 (this document was prepared well in advance of the beginning of the construction of Phase 1 in February 2002). The PIN describes a project carried out in two implementation phases and it clearly demonstrates that the CDM opportunity has been a part of the design assumptions of the complete Project from the beginning. Such a phased approach is regularly followed by many project developers to demonstrate implementation capacity and to leverage further steps in project development through equity injection from cashflow of earlier stages. Importantly, this was the case in La Esperanza Project. Project sponsors were as a matter of fact forced to go ahead with Phase 1 without being fully confident that they would be able to implement the whole Project. This was a high risk business decision that project sponsors, entrepreneurs and high risk venture capital financiers often have to make in developing country economies - even in cases where the assumption of receiving some CDM revenue is built into the design assumptions. The implementation of Phase 1 was crucial in demonstrating to local banks, Canadian equity financiers and other potential financiers that the sponsors were capable of constructing and managing the project, especially that they would be able to sell the energy to the state utility (ENEE) and that they would be able to secure the payments for the electricity sold to ENEE. The Power Purchase Agreement that the Project Entity has signed with ENEE is for the entire Project, not for Phase 1 or Phase 2 separately. The PPA allows the Project Entity to sell power to ENEE during the construction of the complete Project, i.e. from Phase 1 while the construction of Phase 2 is still on-going. The prospect of the relatively modest cashflow generated in Phase 1 helped in the negotiations of financing for Phase 2 and has made it possible to re-invest some of the revenue as project equity. If one after all were to analyze the additionality of Phase 1 as separately from Phase 2, the same barriers that apply to Phase 2 would also apply to Phase 1. In fact, a small hydroelectric project of 1.27MW nominal capacity situated in a remote part of Honduras would arguably face even higher investment, technology and administrative barriers that the entire Project. Such a small project would not provide significant prospect for return on investment for either equity or debt financiers, and the Honduran Government would give a small capacity addition of 1.27MW lower priority than the entire La Esperanza Project. Successful implementation of Phase 1 was predicated on the project sponsors and developers accepting a high risk as to whether it could be implemented successfully within an modest budget which gave no room for cost overruns or less than average rainfall. The IRR for such a small project would have been very low and significantly lower than a reasonable IRR expectation for a private sector power project developer in Honduras. In fact, in order to be able to use the International Finance Corporation (IFC) SME credit line that E+Co (the development-oriented financier of small scale renewable projects in the region, and the provider of the initial $250,000 bridge financing loan) manages, such a calculation of Phase 1A IRR was conducted by E+Co and it showed that the IRR for Phase 1A would only have been 5%. A similar calculation for the Phase 1 (powerhouses 1A and !B) by E+Co shows a project IRR of 10.8%. These returns clearly do not constitute an economically attractive course of action (unless the


Phase 2 would be implemented as part of the complete Project) and are below reasonable expectation of return for an investment in a developing country such as Honduras, commonly considered to be in the range of 15% of more. (b) Technological Barrier: Overall, the predominant and known technology is thermal plants and all experience is oriented to that sector. The lack of available knowledge and confidence in the technology involved in small, privately built hydroelectric projects makes this type of development non-existent and difficult to establish. As a result, the government and Banks see thermal plants as less risky. This risk is reflected in the fact that well under 1% of the current hydro capacity represents small hydro plants (below 15 MW capacity).

(c) Prevailing Practice: Privately financed, built and operated small hydro plants are not common practice in Honduras. The primary barriers within the institutional and regulatory framework are the unclear process, sudden and unsubstantiated changes to the legal process, and timing for completing licenses and permits. All of these issues amount to enough uncertainty to deter many project developers from starting small-scale energy projects and financial institutions from supporting project that choose to do so. The time frame for the legal documentation required to develop small renewable energy projects has proven to be more than three years for each project. The paperwork involved with the government is not well defined with procedure and personnel changes frequently causing significant delays. Another uncertainty within the government is a pending reform to the framework law stating that all concessions must go for public bidding. Documentation of the proposed law is available. The risk with this law taking effect is that small developers could locate a potential site, do all preliminary feasibility, and then face the possibility that the site will be given to another developer in the auction process. These uncertainties are further illustrated through the Babilonia project. Babilonia, one of the two operational small-scale hydro projects, was developed by a project developer with numerous other assets and was able to obtain financing by securing the project to other tangible assets. Despite this, the project was under construction for over three years due to several political and institutional barriers. For example, in order to receive the public support and approval of the project, the mayor required that $40,000 was put into his escrow account to cover social projects. There was much public debate about the legalities of this requirement and after many months the project reached agreement and continued advancing. Considering that government procedures, laws and paperwork to access the licenses and permits required to develop a small hydro project takes significantly longer than for a diesel power plant (in some cases over 3 years as opposed to less than a year for some diesel plants), it is very likely that the ratio of diesel to hydro energy production in Honduras will increase significantly or that all of the small-scale hydro projects under development will actually be implemented. Summary: The current and expected practice of predominantly relying on thermal sources and some large hydro in expanding the generation capacity, as well as the combination of lack of access to finance, institutional and regulatory barriers, and perceived risks of the selected technology, clearly demonstrate that the La Esperanza project is additional and therefore not the baseline scenario. The prohibitive barriers that exist


in Honduras are confirmed by the observed trend in recent capacity additions and small hydro plants’ low share of the total electricity generation in the country. B.4 Description of the project boundary for the project activity: The project boundary is defined as the notional margin around a project within which the project’s impact (in terms of carbon emission reductions) will be assessed. As referred to in Appendix B for small-scale project activities, the project boundary for a small scale hydropower project that provides electricity to a grid encompasses the physical, geographical site of the renewable generation source. For the La Esperanza project this includes emissions from activities that occur at the project location. . The system boundary for the proposed project is defined as the national grid in Honduras. The project boundary for the baseline will include all the direct emissions, being the emissions related to the electricity produced by the facilities and power plants to be replaced by the La Esperanza project. This involves emissions from displaced fossil fuel use at power plants. Conforming to the guidance and rules for small scale project activities, the emissions related to production, transport and distribution of the fuel used for the power plants in the baseline are not included in the project boundary as these do not occur at the physical and geographical site of the project. For the same reason the emissions related to the transport are also excluded from the project boundary. B.5 Details of the baseline and its development: B.5.1 Specify the baseline for the proposed project activity using a methodology specified in the applicable project category for small-scale CDM project activities contained in appendix B of the simplified M&P for small-scale CDM project activities: As specified for project category Type 1.D, the appropriate baseline is number 29a. B.5.2 Date of completing the final draft of this baseline section (DD/MM/YYYY): 26/04/2004 B.5.3 Name of person/entity determining the baseline: Ronal Turner CISA Annika Lundgren Colston 2E Carbon Access Both are listed in Annex 1 of this document. C. Duration of the project activity and crediting period C.1 Duration of the project activity: C.1.1 Starting date of the project activity: 13/06/2003


Operation of Phase 1A began in June 2003. Construction for Phase 1B and 2 are ongoing as of March 2004. C.1.2 Expected operational lifetime of the project activity: (in years and months, e.g. two years and four months would be shown as: 2y-4m.) 50y-0m C.2 Choice of the crediting period and related information: (Please underline the selected option (C.2.1 or C.2.2) and provide the necessary information for that option.) C.2.1 Renewable crediting period (at most seven (7) years per crediting period) C.2.1.1 Starting date of the first crediting period (DD/MM/YYYY): 01/06/2003 C.2.1.2 Length of the first crediting period (in years and months, e.g. two years and four months would be shown as: 2y-4m.):

7y-0m C.2.2 Fixed crediting period (at most ten (10) years): C.2.2.1 Starting date (DD/MM/YYYY): C.2.2.2 Length (max 10 years): (in years and months, e.g. two years and four months would be shown as: 2y-4m.) D. Monitoring methodology and plan D.1 Name and reference of approved methodology applied to the project activity: Metering the electricity generated as described in the Simplified Procedures for SSC Projects for Type 1D Projects. D.2 Justification of the choice of the methodology and why it is applicable to the project activity: The methodology was selected as suggested by the Simplified Monitoring Methodologies for small-scale CDM projects. Measuring and recording the amount of electricity supplied to the buyer is the most accurate method of monitoring the project.


D.3 Data to be monitored: (The table below specifies the minimum information to be provided for monitored data. Please complete the table for the monitoring methodology chosen for the proposed project activity from the simplified monitoring methodologies for the applicable small-scale CDM project activity category contained in appendix B of the simplified M&P for small-scale CDM project activities. Please note that for some project categories it may be necessary to monitor the implementation of the project activity and/or activity levels for the calculation of emission reductions achieved. Please add rows or columns to the table below, as needed) ID number

Data type Data variable

Data unit Measured (m), calculated (c) or estimated (e)

Recording frequency

Proportion of data to be monitored

How will the data be archived? (electronic/ paper)

For how long is archived data to be kept?

Comment

1 Electricity Generation of the Project delivered to the Grid

MWh M Daily 100% Electronic and paper

Crediting period plus 2 years

-

D.4 Name of person/entity determining the monitoring methodology: Ronal Turner CISA Annika Lundgren Colston 2E Carbon Access Both are listed in Annex 1 of this document.


E. Calculation of GHG emission reductions by sources E.1 Formulae used:

E.1.1 Selected formulae as provided in appendix B:

Annual kWh generated by the renewable unit times an emission coefficient for a modern diesel generating unit of the relevant capacity operating at an optimal load as given in Table 1.D in Appendix B.

E.1.2 Description of formulae when not provided in appendix B:

E.1.2.1 Describe the formulae used to estimate anthropogenic emissions by sources of GHGs due to the project activity within the project boundary: (for each gas, source, formulae/algorithm, emissions in units of CO2 equivalent)

No formula is used. Emissions by sources are zero since hydroelectric power is a zero CO2-neutral source of energy.

E.1.2.2 Describe the formulae used to estimate leakage due to the project activity, where required, for the applicable project category in appendix B of the simplified modalities and procedures for small-scale CDM project activities (for each gas, source, formulae/algorithm, emissions in units of CO2 equivalent)

This is not applicable as the renewable energy technology used is not equipment transferred from another activity. Therefore, as per the Simplified Procedures for SSC Project Activities no leakage calculation is required.

E.1.2.3 The sum of E.1.2.1 and E.1.2.2 represents the project activity emissions:

Zero Emissions

E.1.2.4 Describe the formulae used to estimate the anthropogenic emissions by sources of GHG’s in the baseline using the baseline methodology for the applicable project category in appendix B of the simplified modalities and procedures for small-scale CDM project activities: (for each gas, source, formulea/algorithm, emissions in units of CO2 equivalent)

Baseline emissions, Ebaseline, are given by:

E baseline (t CO2/yr) = <E>baseline (t CO2/MWh) * LEG (MWh/yr)

Where LEG stands for La Esperanza’s electricity generation; and <E>baseline is the provided standard emission coefficient 0.80.

E.1.2.5 Difference between E.1.2.4 and E.1.2.3 represents the emission reductions due to the project activity during a given period:


Emission reductions are achieved from the equation in section E.1.2.4. Emission reductions of project activity are 0.80 tons CO2/MWh * 46,289.55 MWh/year = 37,031.64 tons CO2/year E.2 Table providing values obtained when applying formulae above: Based on La Esperanza’s assumptions and findings in the Feasibility Study the installed capacity will be 12.77 MW and the plant operating capacity (load factor) is approximately 41.4%. Therefore the Project has an annual electricity generation of 46,289.55 MWh per year, calculated as follows: 12.77 MW * 8,760 hours/year * 41.38% = 46,289.55 MWh per year The baseline emissions are: 0.80 tons CO2/MWh * 46,289.55 MWh/year = 37,031.64 tons CO2/year F. Environmental impacts F.1 If required by the host Party, documentation on the analysis of the environmental impacts of the project activity: (if applicable, please provide a short summary and attach documentation) An Environmental Impact Assessment (EIA) was completed in accordance with Honduran law for the project and is available in hard copy in Spanish. A copy will be provided to the Operational Entity validating the project. The outcome of the EIA was favorable and the project was found to not have significant environmental impacts. Where impacts were identified, mitigation measures were defined. The EIA also found that the project brought about more positive environmental benefits than adverse impacts. Ecological Flow A) Dry Season Presently the waters of the River Intibuca are contaminated with sewage water originating from the towns of La Esperanza and Intibuca. The water of this river is not utilized by the local people due to the contamination. B) Rainy Season During the rainy season, the level of contamination in the river is not as serious as in the dry season because of the higher dilution of rainwater to raw sewage. The main flow of the river will be greater than the amount diverted into the penstock and turbines. Direct Area of Influence The total area of influence is 5,044 hectares, the existing forest cover has been severely altered, for which the retention of humidity is very poor. This is mainly due to the existence and concentration of the local population using wood (Lena) from the forest for their main source of cooking and heating energy. Contamination of the ground water is high and there is considerable loss of the natural organic layer.


Indirect Area of Influence The indirect area of influence extends 4,656 hectares in the lower part of the basin of the Dam. The present condition is good with few interventions in the natural forest. Due to the topographical conditions being very dry, sparsely forested and steep terrain, there are few people living in this area. The conditions of the access roads are in a poor condition with very few internal paths. The sparse population has allowed an area of fairly undisturbed forest cover with a layer of organic soil to develop as well as some local wild life. Emissions of the Reservoir The existing dam has been repaired; therefore the reservoir is now full during both the dry season and the wet season. For the last 20 years the reservoir was only full during the rainy season, and during the dry season the reservoir was essentially empty with only a small stream in the center. In this condition the dry areas of the reservoir would have considerable growth of grass and weeds which would then be submerged each year during the rainy season. This cycling each year would have caused some production of methane from the decomposing of the submerged vegetation. Now that the reservoir is maintained, there is only a small visible change in the reservoir and no vegetation growth each year. Therefore, the reservoir should now produce less methane. Additionally, it is worth noting that the existing reservoir has not changed, there is no new flooded land, and the size of the reservoir is 156,000 square meters which is a small area. The size of the reservoir for Phase 1B is 8000 m2 and the reservoir for Phase 2 is 35,000 m2. G. Stakeholders comments G.1 Brief description of the process by which comments by local stakeholders have been invited and compiled: Upon review and discussion with local authorities, CISA proposed to the municipality a package of benefits to obtain the rights to develop, build and operate the abandoned hydroelectric plant. As a result, a 25-year concession was approved. Over the next two years, the developer dedicated time to meet with the main NGOs, government institutions and others related to the energy sector in order to gather data and studies in the area. Meetings were held with the following organizations:

∗ SERNA (Secretaria de Recursos Naturales y Ambiente) – Government Agebcy of Natural Resources,

∗ COHDEFOR (Corporacion Hondureña de Desarrollo Forestal) – Forest Development, Government,

∗ PRODER (Programa de Desarrollo de Energias Renovables) – Renewable Energy Development Program, NGO,

∗ PNUD (Programa de las Naciones Unidois para el Desarrollo) – United Nations Development Program,

∗ OICH (Mecanismo de Desarrollo Limpio de Honduras) – Honduran CDM Office, ∗ ENEE (Empresa Nacional de Energia Electrica) – Government, National Utility, ∗ BCIE (Banco Centroamericano de Integracion Economica) – Regional Development

Bank, ∗ CNE (National Energy Commission) – Government Agency, ∗ Chamber of Commerce of Intibuca, ∗ Tourist Committee of La Esperanza,


∗ Women Organization Las Hormigas (women group), ∗ Net of Patronatos of La Esperanza, ∗ Environmental Net in La Esperanza, and ∗ AHPPER – NGO, Renewable Energy Association .

Different methodologies were used according to the interest group. In the majority of the cases invitations were extended to each representative since radio and newspaper are not an effective fast-response medium in the zone. In other cases a bulletin was published inviting the representatives of each group to the presentation of the project. The theme presented was a definition of the concept of a generation project utilizing a renewable source to produce electrical energy. The negative and positive impacts of this type of project were openly discussed as well as how this project will have more positive impacts due to the rehabilitation of the area and the fact that the main negative impacts were caused during initial construction that took place 40 years ago with a different project developer. A profile of the company was presented to clearly demonstrate the intentions of the company, with resumes of the main management team. The presence of the General Manager and Public Relations persons was mandatory at all this meetings. Furthermore, radio announcements were transmitted on the Voice of La Esperanza stating the exact address of the company in case anyone had questions or issues with regards to the hydro plant rehabilitation. To guarantee the effectiveness of the meetings held, an opinion survey was conducted among various neighborhoods and popular barrios of La Esperanza, totalling 300 surveyed persons. La Esperanza project has signed a Letter of Intent for the sale of CERs from the project to the CDCF. All CDCF projects are contractually required to demonstrate and implement significant and verifiable community benefits. These benefits are confirmed by soliciting independent opinions from representative groups and organizations in the project area or otherwise familiar with the project and local conditions. The most significant benefits identified for La Esperanza project include significantly improved electricity service for the town of La Esperanza, employment benefits and reforestation of the project basin area’s degraded and deforested lands. In addition, project sponsor is committed to trying to electrify some of the surrounding small communities and households currently without electricity service. These benefits will be monitored together with the emission reduction monitoring and verified by a third party. G.2 Summary of the comments received: The meeting and survey results showed that the majority of the local residents were neutral with regards to the project, expecting it to have little or no effect on their present situation. They were optimistic that it could improve delivery of electricity to their home and community, which would help them directly. The use of the river would have no adverse effects as the river is presently very contaminated with raw sewage and therefore is not used nor is there any future intention of using this water resource for any purpose. G.3 Report on how due account was taken of any comments received: In order to fulfil the requirements of the environmental license, the project sponsor hired an environmental consulting firm to interview individuals, do polling in the area, and hold public meetings. Results were included in the Environmental Impact Assessment and were taken into account in defining the mitigation measures.


Annex 1

CONTACT INFORMATION FOR PARTICIPANTS IN THE PROJECT ACTIVITY Organization: Consorcio de Inversiones S.A. (CISA) Street/P.O.Box: Apartado Postal # 53 Building: City: La Esperanza State/Region: Intibuca Postfix/ZIP: Country: Honduras Telephone: 504- 783-0778 FAX: E-Mail: [email protected] URL: Represented by: Title: General Manager Salutation: Mr. Last Name: Turner Middle Name: First Name: Ronald Department: Mobile: Direct FAX: Direct tel: Personal E-Mail: Organization: The Ministry for Environment and Territory of Italy Street/P.O.Box: Via, Cristoforo Colombo, 44 Building: City: Rome State/Region: Postfix/ZIP: 00147 Country: Italy Telephone: (+39) 06 5722 8100 FAX: (+39) 06 5722 8178 E-Mail: URL: www.minambiente.it Represented by: Title: Salutation: Ms. Last Name: Claudia Middle Name: First Name: Croce Department: Mobile: Direct FAX: (+39) 06 5722 8178


Direct tel: (+39) 06 5722 8169 Personal E-Mail: [email protected] Organization: World Bank Community Development Carbon Fund Street/P.O.Box: 1818 H Street, NW Building: World Bank Main Complex City: Washington State/Region: District of Columbia Postfix/ZIP: 20433 Country: United States Telephone: +1-202-473 6010 FAX: +1-202-522 7432 E-Mail: [email protected] URL: www.carbonfinance.org; http://carbonfinance.org/cdcf/home.cfm Represented by: Title: Senior Manager Salutation: Mr. Last Name: Newcombe Middle Name: J. First Name: Kenneth Department: ENVCF Mobile: Direct FAX: Direct tel: Personal E-Mail: [email protected]


Annex 2

INFORMATION REGARDING PUBLIC FUNDING

NOT APPLICABLE

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la esperanza hydroelectric project honduras

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