For country and regional PPTA

P&G Waste to Worth Project

Project Preparatory Technical Assistance Concept Paper Date: 10 July 2012

1. Country partnership strategy (CPS) / Regional cooperation strategy (RCS): Final TA Paper for Vice President Approval

• Year included in CPS/RCS/COBP/ROBP/CPS or RCS Midterm Review Report: N/A • Document reference number and date approved: N/A • In case of change in the PPTA title, type, or amount, please state reason: N/A

2. Coverage

Country Subregional Interregional

2 urban centers in Luzon, Philippines

sovereign non-sovereign 3. Assistance Focus

a. Sector(s): Agriculture and natural resources Industry and trade Education Public sector management Energy Transport and ICT Finance Water supply and other municipal infrastructure and services Health and social protection Multisector

Subsector(s): Renewable Energy

b. Targeting classification Targeted intervention TI-H TI-M TI-G General intervention (more indirectly addressing poverty reduction)

c. Theme(s) Economic growth Gender equity Social development Private sector development Environmental sustainability Governance Regional cooperation and integration Capacity development

Subthemes Urban environmental improvement

d. Location impact

Relative weight of spatial impact of the project

High Medium Low

Rural

Urban

National

Regional

4. Partnership N/A 5. Name of the Specialist (project team leader) in

charge of the project: Jose Manuel Limjap Name of the Alternate Specialist: Gena Uy

• Local Number: 1745 • Local Number: 6488 • Email Address: jmlimjap@adb.org

• Email Address: cguy@adb.org

6. Department/Division:

PSOD/PSIF2

7. Key Development Issues to be addressed: The effective disposal of municipal solid waste (MSW) is a serious environmental and social challenge in the Philippines, especially in urban centers. In Metro Manila alone, of the estimated 6,700 tons of solid waste generated per day, only approximately 720 tons per day is recycled or composted. The balance—some 6,000 tons daily—is either hauled to the city’s dump sites, dumped illegally on private land, in rivers, creeks, Manila Bay, or openly burned thereby adding to the heavily polluted air shed.1 Metro Manila’s diversion rate2 of 10.75% is way below the acceptable ratio of 50%, the target ratio also set in the United States. Leachate from the dump sites were tested and found to have levels of contaminants that were far above the maximum allowed in drinking water; most of this leachate seeps untreated into groundwater, a source of drinking water, and runs into the river systems and Manila Bay, a fisheries resource.3

The failure to manage MSW appropriately causes serious environmental problems such as air pollution and soil and groundwater contamination. Increasing numbers of migrants from rural areas often live near polluting landfills, making them vulnerable to the air pollution and soil contamination.

The risks to human health are enormous. Solid wastes can come into direct or indirect contact with human beings at several stages in the waste cycle. The groups at risk include: (i) those living in unserved areas, especially pre-school children; (ii) garbage collectors/scavengers; (iii) people living close to waste disposal facilities; and (iv) population whose water supplies have been polluted due to waste dumping or leakage from landfill sites. Waste-linked diseases include chronic respiratory diseases from exposure to dust, bacterial blood infections due to injuries caused by infectious sharp waste, eye and skin infections from waste generated infected dust, vector-borne diseases like dengue, yellow fever and malaria transmitted by vectors living or breeding in waste-generated ponds, and bacterial and parasitic enteric diseases like diarrhea and amoebiasis transmitted by insects/rodents feeding on wastes and through drinking water contaminated by leachate fom waste.4

Therefore, a more integrated approach to developing an efficient, environmentally sustainable, and well-managed MSW system is needed.

Through its Long Term Sustainability Vision and 2020 Goals, The Procter & Gamble Company (P&G, Sponsor of the project) has committed to conduct pilot studies in developing markets to understand how to eliminate landfilled and dumped consumer solid waste and, at the same time, improve the economic, social and environmental sustainability of existing systems. In addition to finding ways to design products and packaging out of waste, P&G is exploring how to catalyze development of new integrated waste management systems in one or more emerging markets by 2020. The Waste-to-Worth (W2W) project (the Project) involves development of a profitable and flexible business model/supply chain for the collection and treatment of MSW into valuable products. The Project is consistent with P&G’s long-term vision of powering its plants with 100% renewable energy and having zero consumer or manufacturing waste going to landfills. This initiative is also part of P&G’s social responsibility agenda for investing in solid waste management and waste-to-energy projects as an offset to commercial waste produced by P&G products. The Project aims to develop an integrated MSW management plan which includes:

• Collection of all fractions of MSW from homes and businesses; • Sorting at a Materials Recycling Facility (MRF) by current waste scavengers to separate recyclables; • Conversion of remaining waste using reliable technologies into something with value (e.g. organic ‘wet’

waste converted to biogas or soil amendments; ‘dry’ waste converted by thermal treatment into a type of energy);

• Creation of new markets and solicitation of buyers for the new products (e.g. electricity generated by waste-to-energy plant); and

• Enable the community to sustain a safe integrated waste system by involving local and national stakeholders, including local government units, industries, non-governmental organizations (NGO) and the residents.

1 National State of the Brown Environment Report 2 Diversion Rate is the percentage of waste materials diverted from traditional disposal such as landfilling or

incineration to be recycled, composted, or re-used. 3 The Garbage Book – Solid Waste Management in Metro Manila 2004 4 UN Environment Program: Solid Waste Management December 2005

P&G selected the Philippines for the first pilot project due to existence of (i) legislation on solid waste management, (ii) active national and local solid waste associations, (iii) potential commercial and NGO partners; and (iv) potential funding and commercial incentives for waste collection and treatment systems. The expectation is for the W2W to be sustainable for the entire community in the long-term and to be successfully replicated in other urban centers in the Philippines as well as other countries. P&G approached ADB for technical assistance funding to add credibility to the Project and encourage other potential stakeholders like local government units, local entrepreneurs, utilities and non-government organizations to participate. P&G also believes that the Project will benefit from ADB’s experience in infrastructure finance and waste to energy sector. The ADB’s technical assistance for the proposed Project is justified by its development impacts. The Project supports the ADB’s operational strategy as well as the government’s national strategy and policy objective for addressing the growing problem of MSW. More specifically, the Project will: i) provide access to clean and reliable electricity supply, ii) provide a sustainable solution to the growing MSW problem, iii) raise urban living standards and advance sustainable urban development, iv) arrest environmental degradation which disproportionately affects the urban poor’s air and water quality and v) reduce harmful greenhouse gas emissions. The proposed PPTA will further incentivize P&G to replicate this in other parts of the Philippines and other countries where it has operations, if proven feasible and cost effective. P&G has the financial muscle to fund projects like this but initially seeks ADB’s support and participation to show a stamp of legitimacy and attract potential stakeholders to participate in the project and ensure its sustainability.

8. TA Description: a. Link to Country Partnership Strategy/Regional Cooperation Strategy: Link to ADB’s Strategy 2020 The Project embodies ADB’s Strategy 2020, which emphasizes more support for environmentally sustainable development and private sector development utilizing clean technologies. ADB will also promote complimentary financing schemes as well as innovative financial products, if needed, to catalyze funds from other commercial sources. Link to ADB’s 2009 Energy Policy ADB seeks to meet energy security, facilitate the transition to a low-carbon economy, and achieve ADB’s vision of a region free of poverty. ADB also seeks to help developing member countries (DMCs) to provide reliable, adequate, and affordable energy supplies for inclusive growth in a socially, economically, and environmentally sustainable way. Link to Philippine Country Partnership Strategy One objective of ADB’s country partnership strategy for the Philippines is to reduce environmental degradation and vulnerability to climate change and disasters. To achieve this, ADB will support investment needs to ensure sustainable financing of infrastructure and foster development of sustainable communities; ADB assistance aims to strengthen waste management and flood control systems among others. PSOD, in particular, is in search of commercially viable solutions and partners who have the financial capacity and are willing to experiment and innovate in this area. The proposed PPTA is consistent with this objective—improving sustainable environmental infrastructure in highly urbanized areas where economic gains can be maximized. It will also incentivize private sector participation in addressing MSW problem.

b. Impact The impact of the PPTA is the demonstrated viability and sustainability of waste-to-energy projects in the Philippines.

c. Outcome The outcome of the PPTA is the construction and operation of two WTE projects in the Philippines.

d. Outputs The output of the PPTA is satisfactory completion of the feasibility study, supporting the development of the two WTE projects in selected urban centers in the Philippines.

The preliminary design and monitoring framework is attached as Appendix 1. The PPTA will be processed over an estimated 24 month period, excluding the time allotted to engagement of consultants. The major milestones and expected completion date are summarized in the Table below:

Proposed Milestones and Completion Date

Milestones Expected Completion Date Initial Concept Approval July 2012 Approval of PPTA July 2012 TA Agreement signed July 2012 Consultant Selection August 2012 Feasibility Study started October 2012 Feasibility Study completed July 2014

Final Report September 2014

9. Assumptions and risks Key risks in undertaking the PPTA and the corresponding mitigants in project design and implementation include:

Risks Mitigation Measures

Delay in consultant recruitment Close coordination and monitoring in engaging a competent and experienced consulting firm.

Poor Consultant Performance.

Strict consultant applicant evaluation and hiring. Close collaboration with consulting firm and Sponsor. Contract performance management and adequate contract supervision by ADB and Sponsor. Although consultants may be working directly with the Sponsor, a progress report will be submitted regularly to ADB and any contract variation or change to the engagement contract will be subject to ADB approval.

Lack of adequate and reliable data. Intensive monitoring and review of project performance and consultant outputs.

Availability and accessibility of the proposed project sites.

Detailed profiling of the two proposed sites should be available prior to site visitation and evaluation.

Cost Overruns Re-allocation among cost categories. Hands on contract management.

10. Implementation Arrangements

a. Proposed executing/implementing agency (EA/IA) The Procter & Gamble Company

b. Institutional/organizational/procurement and financial management assessments on the EA/IA previously conducted

Yes No The EA/Sponsor of the Project is The Procter & Gamble Company (P&G), a Fortune 500 US multinational corporation, which manufactures a wide range of consumer goods. In 2011, P&G recorded $82.6 billion in sales and was ranked by Fortune magazine at fifth place of the "World's Most Admired Companies" list. P&G’s senior unsecured debt is rated AA- by S&P and Aa3 by Moody’s. P&G has the organizational and financial wherewithal to manage this PPTA and fund its share of the cost. The Project is consistent with P&G’s long-term vision of powering its plants with 100% renewable energy and having zero manufacturing waste going to landfills. Through this Project, P&G aims to create a profitable and sustainable MSW business model that can attract support from various stakeholders like LGUs, local entrepreneurs and utilities.

c. ADB inputs

Upon approval, a TA Letter Agreement will be executed with the Sponsor, setting out the terms and conditions of the technical assistance. PSIF2 and the EA/Sponsor will each assign a Project Officer that will be responsible for:

• Timely communication and actions between the Consulting Firm, the Sponsor and ADB; • Monitoring and when appropriate providing guidance to the Consulting Firm; • Attending scheduled review meetings at the start, interim and end of the PPTA; and • Reviewing, commenting on and approving the Inception, Draft and Final reports.

The consultants will be engaged by ADB in accordance with the Guidelines on the Use of Consultants (2010, as amended from time to time) with the Central Operations Services Office (COSO) primarily responsible for negotiating the consulting contracts and overseeing the correctness of the recruitment process. The feasibility study (FS) will require total 31 person-months of consulting services. An international consulting firm shall be hired through QCBS by following ADB's Guidelines on Use of Consultants by ADB and Its Borrowers (2010, as amended from time to time) with 90:10 quality-cost ratio and using Bio-Data technical proposal. The assignment will be on an intermittent basis over a twenty four (24) month period. The consulting services are expected to start by October 2012 and finish by September 2014. The PPTA will be undertaken by a team of professionals with diverse fields of expertise in engineering, economics, finance, environment, social impacts, and law. The PPTA will engage and finance a total of 31 person-months (PM) of consulting services (14 PM international and 17 PM national). Composition of the consulting team will be as follows:

International Consultant Person-months and Remuneration

Expertise Person-months

Total Days

Team Leader/Project Manager 2.0 44 Sr. Solid Waste Specialist 4.0 88 Sr. Mechanical Engineer (Project Manager) 3.0 66 Sr. Waste-to-Energy Technology Specialist 5.0 110

Total 14.0 208 Source: ADB and Sponsor estimates

Local Consultant Person-months and Remuneration

Expertise Person-months

Total Days

Energy Specialist 5.0 110 Environmental & Social Safeguards Specialist 3.0 66 Financial Specialist 2.0 44 Carbon Specialist 2.0 44 Legal Specialist 5.0 110

Total 17.0 374 Source: ADB and Sponsor estimates

The Summary Terms of Reference for each consultant is attached in Appendix 2. Although consultants’

fieldwork may be supervised by the Sponsor, a progress report will be submitted monthly to ADB and any contract variation or change to the engagement contract will be subject to ADB approval. Disbursements under the PPTA will be done in accordance with the ADB's Technical Assistance Disbursement Handbook (May 2010, amended time to time). The Sponsor will be informed that approval for assistance under this PPTA does not commit ADB to finance components of the Project. If ADB considers possible equity and/or debt finance for the Project, it is anticipated that additional inputs for environmental and social assessments and documentation may be needed. Any additional work for the Project, such as environmental assessments and permits, will be financed by the Sponsor separately. The Project Sponsor must be knowledgeable and have the capacity to apply environment and social safeguards following ADB’s 2009 Safeguard Policy Statement.

d. Complementary inputs to be provided by Government and/or other TA providing agencies

N/A

11. Nature/extent of government/beneficiary involvement in identifying or conceptualizing the assistance: N/A

12. Cost Estimates and Proposed Financing Arrangements

It is proposed that ADB provide TA financing up to $385,000 equivalent, from TASF-Others resources. In the event a project ensues from this TA and ADB participates in its financing, the Sponsor will reimburse the cost of the TA that is financed by ADB. Arrangements for the recovery of this cost will be incorporated in the TA Letter Agreement to be entered into between ADB and the Sponsor.

13. Estimated period of TA implementation:

a. Approval of TA: July 2012 b. Physical completion of TA: July 2014 c. Closing of TA: September 2014

Appendix 1

PRELIMINARY DESIGN AND MONITORING FRAMEWORK P&G Waste to Worth Project

Design Summary

Performance Targets and Indicators with Baselines

Data Sources and Reporting Mechanisms

Assumptions and Risks

Impact Demonstrated viability and sustainability of an integrated MSW management plan, including operation of waste-to-energy projects in the Philippines

EIRR of at least 10% for each of the WTE projects at project completion FIRR of at least [TBD] for each of the WTE projects at project completion Average of [TBD] MWh of waste-to-energy delivered to offtakers per annum during each plant’s operations Reduction of [TBD] tons of municipal solid waste annually on average during the life of each project Reduction of [TBD] tons of CO2 emissions annually on average during the life of each project

Project reports on operations Statistics and information disclosure by Department of Energy Disclosure by local or regional governments

Assumptions Plants achieve forecasted capacity Offtakers comply with their purchase and payment commitments The Government at all levels will maintain policies that support integrated MSW management plans and waste-to-energy projects Risks The Sponsor is unable to obtain financing on commercial terms

Outcome Construction and operation of a Materials Recycling Facility and two WTE plants in selected urban centers in the Philippines

2 WTE plants of approximately 2 MW each constructed by 2016

Project reports

Assumptions Supply contracts for WTE projects in the Philippines is clearly established Risks Delays in reaching power purchase and/or financing agreements

Outputs Satisfactory completion of the feasibility study, supporting the development of an integrated MSW management plan and two WTE plants in the selected sites

PPTA Final report complete by September 2014 Project Sponsor accepts design for WTE project identified in PPTA Final Report Sponsor decides to pursue construction of WTE plants by December 2014

Final Feasibility study /PPTA report Project Sponsor accepts Final Report and makes final payment for consulting services

Risks The PPTA does not identify bankable projects

Activities with Milestones Initial Concept Approval July 2012 Approval of PPTA July 2012 TA Agreement signed July 2012 Consultant Selection August 2012 Feasibility Study started October 2012 Feasibility Study completed July 2014 Final Report September 2014

Inputs TA Financing ADB – Up to $385,000

Appendix 2

OUTLINE TERMS OF REFERENCE FOR CONSULTANTS P&G Waste to Worth Project

The Asian Development Bank (ADB) is committed to—and currently promoting—greater use of clean energy in its developing member countries (DMC). The 2009 Energy Policy (Policy), congruent with ADB’s Strategy 2020, identifies the promotion of renewable energy, as one of its pillars for implementation. This is consistent with ADB’s overall strategy emphasizing energy security, facilitating a transition to a low-carbon economy, universal access to energy, and for achieving ADB’s vision of a region free of poverty. In support of these thrusts, ADB’s Private Sector Infrastructure Finance Division 2 (PSIF2) will, following consultation with The Procter & Gamble Company (“P&G” or the “Sponsor”), recruit Consulting Firms to conduct a project preparation technical assistance (PPTA) to develop the “Waste to Worth Project” in the Philippines. This project will require consultant services spread over 24 months (over 2 fiscal years) commencing on October 2012. The PPTA will engage and finance a total of 31 person-months (PM) of consulting services (14 PM international and 17 PM national). This PPTA will help the Sponsor to determine the viability of constructing two (2) Material and Energy Recovery Facilities in the Philippines (The Project). The PPTA will review 2 pilot cities/site locations for the Project. Further, the Consulting Firms will assess the size, optimal siting, technology integration, financial and economic viability, environmental impact, regulatory issues, and recycling options for the Project. The PPTA will also determine the optimal business model for the Project based on cost/benefit analysis that includes fuel availability projections, capital investment, technology integration and potential Project expansion. The detailed tasks and qualifications for the PPTA are described below.

A. TASKS Task 1 – Material Supply Market Assessment (Energy Specialist; National; 2 PM)

The Consulting Firm will identify and evaluate all material supply sources and options (i.e. landfills, municipal solid waste sites, biomass disposal locations and fuel streams) for the Project. In support of the Consulting Firm’s work, the Sponsor will provide the Consulting Firm the following information based on preliminary work done. A description of the Project potential, including an assessment of fuel/waste tonnages generated in

the Project areas and how much fuel is available and currently supplied in the proposed Project areas on a [daily/monthly/annual] basis

Fuel supply chain and collection systems (including transport arrangements and evaluation of existing recycling systems at the landfill sites, if any);

A summary of all industry/ownership structures of all potential suppliers in the Project areas that could provide material for the Project, including profiles of stakeholders that play a role in the waste supply chain.

In continuation of this task, the Consulting Firm shall: Review existing contracts for material supply arrangements that would impact the Project and identify

best industry practices; Evaluate costs and fees associated with the material fuel supply chain and landfill operations (such

as any potential tipping fees); Assess the competitive landscape by profiling entities competing for waste streams currently supplied

to landfills and the current demand (tonnage) on a [daily/monthly/annual] basis; Identify all legal, political, environmental and regulatory considerations that must be addressed during

Project development including government, municipal, Department of Energy (DOE) and Energy Regulatory Board (ERB) (and NGCP if applicable) policies, regulations & laws;

Determine and summarize the role of the local government in the waste and energy sectors; Evaluate market and industry trends within the waste and energy sectors including the potential for

change in the composition of fuel, waste and sources of supply to the landfills; Forecast over the next 10 years and project anticipated changes to the waste sector that could impact

the Project including but not limited to, waste generation changes, waste composition changes, increases or decreases in specific waste product, competition for waste stream flow, impact of recycling programs, and legislative changes;

Deliverable

: The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, maps, work performed, and analyses provided under Task 1.

Task 2 - Waste Composition and Characterization Assessment of Local Project Site Selection (Sr. Solid Waste Specialist; International; 4 PM) The protocol includes: Current assessment of the volumes/tonnages of waste delivered to the sites as well as a 10-year

forecast of future projections; Assessment of the waste stream from different sources such as commercial, residential, institutional,

municipal services, construction, (in percent); Assessment of the composition and characteristic of the waste:

o Composition may include organic waste, paper/cardboard, plastic, wood, glass, metal, rubber and others, etc. (in weight percent);

o Characteristics may include density (kg/m3), moisture content (%), combustible content (%), ash amount (%), high heating value (kJ/kg), and low heating value (KJ/kg) and any other pertinent information relating to the chemical characteristics of the waste;

o Execution of the developed protocol in wet and dry seasons Consideration and estimation of seasonal changes and long-term trends that could impact waste

quantity, composition, and characteristics; Quality of the waste and energy value that can be generated by the usable waste; and Pre-treatment capabilities, including requirements such as sorting, recycling, and shredding of

municipal solid waste (MSW). Following analyses of the waste characterization studies are expected to inform/confirm the financial viability of the 2 pilot Project sites. Deliverable

: The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analyses provided under Task 2.

Task 3 – Technology Integration (Sr. WTE Technology Specialist; International; 5 PM) The Sponsor has completed an extensive technology evaluation process over the past 15 months resulting in selection of three separate technology approaches that would work in concert together:

• a separation technology vendor (VM Press, Italy) that uses pressure to separate mixed MSW into “wet” (largely organic slurry for anaerobic digestion) and “dry” fractions (a mixture of inorganic and fibrous organic materials ideal for thermal processing);

• a thermal processing technology (SkygasTM; MPM Technologies, USA)--this approach maximizes conversion to electricity using a modified plasma arc approach coupled with extensive emissions controls through its sister company, Airpol; and

• a more traditional anaerobic digestion technology. The Sponsor did not complete a selection process for this approach as it is quite well known and validated (as such the vendor is open).

The key tasks yet to be completed are the integration of these three technology platforms into one operational site. Therefore, the Consulting Firm shall:

• Understand the technology approaches offered by VM Press, MPM and anaerobic digestion to

determine the optimal efficiency of integration of these three approaches for viability for Project implementation – this should include, at the minimum, an implementation plan outlining feed stock input (from the waste characterization), conversion efficiencies at each step of the integrated technology approach, residual waste recommendation, conversion efficiency of each step in the integration and final energy generation (of electricity and of biogas)

• Recommend the appropriate anaerobic digestion vendor based on the size, amount and quality of the waste stream from the VM Press machine

• Consider waste disposal options when providing the integration scenario and identify the optimal sizes of the technology options and operational modes for the Project

• Complete an analysis of the emissions from each stage of the integration and assess any gaps in emissions not covered by the vendors technology options

• Determine the area and utilities required to house all three technologies in an integrated site – this should include land area, water, fuel an waste needs for the site to run the operation – and determine if these needs can be met through the generation of water and power at the site

• Assess the track record of each technology including the number of demonstration projects in operation, the countries of operation, and any verification by accredited organizations. The Consulting Firm shall review existing contracts for engineering, procurement, and construction arrangements as well as operation and maintenance arrangements and determine best industry practices

• Conduct a cost benefit analysis for the technology integration scenario, including but not limited to capital budgets, variable and fixed operating and maintenance (O&M) costs, fuel pricing, and environmental externalities

• Determine the total electricity and biogas production cost for the integration approach expressed as units/Ton MSW

Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analyses provided under Task 3.

Task 4 – Process Engineering Assessment (Sr. Mechanical Engineer; International; 3 PM) The Consulting Firm shall perform a detailed technical assessment including:

analysis of all plant components including waste preparation facility, waste processing facility, power island with emissions controls, and waste disposal;

the compatibility of the site with the proposed Project construction and/or a listing of key processing, environmental control equipment and structures needed for the processes

Availability of local utility infrastructure (water, power interconnections, wastewater disposal, and start up fuel), and transportation infrastructure for equipment, waste deliveries and resulting solid waste disposal;

A review of the geotechnical analysis to confirm the appropriate use of foundations to support the Project construction;

Analysis of the ability of the Project to convert waste to energy to generate power, process waste (tons per day), dispose of ash generated, and recover recyclable material.

The Consulting Firm shall provide a high-level cost estimate and project configuration for the 2 project sites. The estimate shall include a detailed breakdown of equipment and materials for all Project components, including but not limited to waste management equipment, major generation equipment, balance of plant, instrumentation and controls, water treatment, electrical interconnection, and the cost of land acquisition/lease.

Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analysis provided under Task 4.

Task 5 – Transmission Interconnection (Energy Specialist; National; 1 PM) The Consulting Firm shall review the NGCP transmission system and all planned expansion of the system based on public information acquired from industry contacts and provided by the local development partner. The Consulting Firm shall also assess the potential capacity for power transmission from the proposed Project to major load centers using the existing/planned transmission system. The Consulting Firm shall also determine the distance to the proposed interconnection point from the proposed Project site and the estimated cost of the transmission interconnection. The Consulting Firm shall review the Philippine Government’s policy to utilize electricity generated from municipal solid waste disposal facilities in order to operate wastewater treatment plants and evaluate this option at the proposed Project sites if appropriate. Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analysis provided under Task 5.

Task 6 – Financial and Economic Analysis (Financial Specialist; National; 2 PM) The Consulting Firm shall prepare a financial and economic analysis of each Project site identified taking into consideration the technical characteristics developed in Task 4 and waste data prepared in Tasks 1 and 2. The Consulting Firm shall undertake a financial analysis which includes (a) list of capital costs, (b) financial viability analysis and model, and (c) risk and sensitivity analysis. List of capital costs for the Project includes, but not limited to, the engineering, procurement and construction contracts, recommended contractual arrangement (fixed price, target price, guaranteed maximum price, or other), major equipment, interconnections with utilities, and owners’ costs for development (including land costs, permitting costs, professional fees, licensing fees, and financing costs). In addition to listing proposed non-feedstock operational costs, the Consulting Firm shall list staffing, maintenance and repair (including long-term repair and replacement of key components), consumables (such as sorbants, chemicals, catalysts), ash disposal costs, and start-up fuel costs. For the 2 Project sites, the Consulting Firm shall conduct a base case and sensitivity analysis related to projected changes in all external factors, such as waste cost, electricity cost, interest rates, investment costs, and O&M costs that could impact the Project profitability, as well as outline practical strategies and approaches to mitigate these risks. The Consulting Firm shall undertake a financial analysis calculation of weighted average cost of capital, internal rate of return, payback, and debt service coverage ratios. The Consulting Firm shall prepare projected financial statements (balance sheet, income statement, and statement of cash flows) for the Project for 10 years. The Consulting Firm shall undertake an economic analysis in accordance with ADB’s Guidelines for the Economic Analysis of Projects which includes (a) least-cost analysis, (b) economic viability analysis and model, and (c) risk and sensitivity analysis. The Consulting Firm shall calculate an economic internal rate of return for the project and identify any assumptions and economic parameters used in the analysis including willingness to pay and valuation of economic costs and benefits. Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analyses provided under Task 6, including soft copies of the financial and economic models and analysis.

Task 7 – Off-take Supply Assessment and Feed-in Tariff Assessment (Energy Specialist; National; 2 PM) The Consulting Firm shall assess the market for facility outputs including recyclables, electricity, compost, biodiesel and residuals.

• Assess the market for outputs, the factors driving supply and demand, and develop a 10-year forecast of demand and pricing

• Identify potential customers, as well as their demand, supply requirements and specifications • Recommend the key terms of supply agreements e.g. grid access, long-term pricing, volume

requirements, force majeure, default provisions • Recommend the critical terms which should be pre-agreed with customers to manage the financial

risk of the project Deliverable

: The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed and analyses provided under Task 7

Task 8 - Carbon Credit and Investment Incentive Assessment (Carbon Specialist; National; 2 PM) The Consulting Firm shall develop a life-cycle carbon credit assessment. The consulting firm shall assess investment incentives including taxes, Economic Zones and Board of Investments incentives

• Estimate carbon credit yields (registration, additionality, credit estimation, ownership) • Assess carbon credit generation and delivery risks • Identify relevant investment incentives including income tax abatement, property tax abatement,

investment tax credit, technology investment incentive, economic development incentive, environmental protection incentives, and other incentives.

• Determine eligibility requirements for incentives, application processes, and documentation requirements

• Prepare and facilitate applications for eligible incentives Deliverable: The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed and analyses provided under Task 8 Task 9 – Environmental/Social Analysis (Environmental & Social Safeguards Specialist; National; 3 PM) The Consulting Firm will undertake an initial environmental examination (IEE) study and prepare an IEE report including environmental plan (EMP) for the proposed Project in accordance with all Philippine regulations and policies and in accordance with ADB’s Safeguard Policy Statement (2009) and ADB’s Environmental Assessment Guidelines (2003). The Consulting Firm will undertake a social impact assessment, including gender analysis, of the proposed Project following the guidelines described in ADB’s Handbook on Social Analysis (2007) and the Guidelines for Gender Mainstreaming Categories of ADB Projects and in accordance with all Philippine regulations and policies and ADB’s Safeguard Policy Statement (2009). In addition, the Consulting Firm will undertake due diligence on any prior land acquisition or negotiated settlement to determine compliance with ADB's Safeguards Policy Statement. Analysis of the proposed project’s social protection considerations will also be undertaken. Where it is determined that future land acquisition will be required, a Resettlement Plan will be drafted, or where gaps are found in relation to prior land acquisitions, a corrective action plan will be prepared. The Consulting Firm will estimate the value of greenhouse gas emission reductions in the project cycle, and recommend technically and financially feasible options to reduce or offset project-related greenhouse gas

emissions during project design, construction and operation. The Consulting Firm shall assess the potential for registering the project under the Clean Development Mechanism. The Consulting Firm shall identify and propose remedies for increases to pollution in the air, water, or noise as a result of the Project including waste disposal. If the proposed Project utilizes incineration technology, the Consulting Firm shall determine whether or not the proposed Project complies with European Union environmental laws. The Consulting Firm shall ascertain that, at the minimum, the technology will meet the requirements of the Philippine Clean Air Act’s Implementing Rules and Regulations and its corresponding emission limits. Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, maps, and analysis provided under Task 9.

Task 10 – Legal and Regulatory Review (Legal Specialist; National; 5 PM) The Consulting Firm shall identify all local and national permit, licenses and approval requirements for Project implementation including environmental, land use, transportation, water, waste, and electrical interconnection. The Consulting Firm shall meet with agencies that have jurisdiction over the Project, including the DOE, ERB, Department of Environment and Natural Resources (DENR) and Board of Investments (BOI). The Consulting Firm shall review the existing renewable and energy sector laws of the Philippines, permitting requirements, local building requirements, right-of-way, and zoning ordinances that will impact Project implementation. The Consulting Firm shall identify barriers to the Project implementation and recommend how the Sponsors can overcome barriers identified. Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analysis provided under Task 10.

Task 11 – Implementation Plan (Team Leader; International; 1 PM) The Consulting Firm shall provide a comprehensive task by task plan, schedule and timeline required for Project implementation. The schedule shall include Critical Path analysis and detailed milestone descriptions. Deliverable:

The Consulting Firm shall prepare and deliver (both to the Sponsor and ADB) in the Final Report all information collected, work performed, and analysis provided under Task 11.

Task 12– Final Report Preparation and Presentation (Team Leader; International; 1 PM) The Consulting Firm shall prepare and deliver to ADB and the Sponsors a substantive and comprehensive Final Report of all work performed under these Terms of Reference (collating, if necessary, the reports prepared by various consulting firms) (“Final Report”). The Final Report shall be organized according to the above tasks, and shall include all deliverables and documents that have been provided to the Sponsors. The Final Report shall be prepared in accordance with a Professional Services Agreement.

B. KEY QUALIFICATIONS

For this project, the Sponsor will, in their sole discretion, provide assistance to the Consulting Firms, including provision of information and materials, staff with internal skill sets, and utilizing their local (Philippine) organization for managing key interfaces. Accordingly, the qualifications below are those for consultants required to complete the above tasks for which skill gaps exist. The PPTA requires a diverse team of consultants with expertise and experience in preparing and designing feasibility studies for waste to energy (WTE) projects. Preference will be given to an international firm with a Manila office or one that associates with local firms to minimize international travel and ensure easy coordination and communication with key power sector entities and local municipalities. In order to ensure efficient and cost effective services, the proposed team should include local consultants for all tasks of the Project. Each consultant must be

a citizen from an ADB member country and the Consulting Firm (and any associate firms) must also be registered in an ADB member country. The Technical Proposal should indentify the proposed members of the consulting team that will undertake the PPTA and include a curriculum vitae (CV) for each member. A consultant may undertake more than one role.

Consultant Requirements for identified/tasks Team Leader: Engineer Project Manager The Team Leader (TL) will have a proven track record with more than 10 years of related technical and management experience in project and personnel management in the power or waste management sector. The TL will have a strong, broad-based technical background, sound commercial awareness and contract knowledge, excellent communication skills and proven leadership, and project management skills. The TL will have sufficient language and writing proficiency in English. Preference is given to experience in Asia and the Philippines. The TL will have overall responsibility for the Project, including coordination with the Sponsor’s project team leader. This role may be assumed by one of the senior consultants like the Senior Mechanical Engineer or Sr. Waste to Energy Specialist. Sr. Solid Waste Specialist The Sr. Solid Waste Specialist (SW) will have more than 10 years of direct experience in solid waste analysis. The SW will have proven expertise and experience of sampling and analyzing solid waste as a fuel for WTE projects. The SW will have a strong and specialized analytical background. The SW will have sufficient language and writing proficiency in English. Preference is given to solid waste analysis experience in Asia and the Philippines. The SW will be responsible for all aspects of the solid waste analysis for the Project. Sr. Mechanical Engineer The Sr. Mechanical Engineer (ME) will have more than 10 years of technical experience with specialization in power projects or waste management projects. The ME will have proven expertise in site selection, conceptual design of waste preparation/recovery/processing facilities, construction of WTE power plants with emission controls and waste disposal, transmission interconnections, and familiarity with power plant contracts and financial modeling. The ME will have sufficient language and writing proficiency in English. Preference is given to experience in Asia and the Philippines. The ME will be responsible for all aspects of power plant engineering for the Project. Sr. Waste-to-Energy Technology Specialist The Sr. Waste to Energy Technology Specialist (Tech Specialist) will have more than 10 years of direct experience in developing WTE projects. The Tech Specialist will have proven expertise and experience of different types of WTE technologies and their application in climates similar to the Philippines. The Tech Specialist will have a strong and specialized technical background in WTE combined with sound commercial awareness. Preference is given to experience in all phases of WTE projects such as selection, financing, construction, commissioning, operation and maintenance. The Tech Specialist will have sufficient language and writing proficiency in English. Preference is given to experience in Asia and the Philippines. The Tech Specialist will be responsible for all aspects of technology assessment and decision for the Project.

Environmental and Social Safeguards Specialist The Environmental and Social Team (E&S Team) will have more than 10 years of experience in environmental and social assessment of infrastructure projects, preferably in power or waste management projects. The E&S Team will have proven technical skills in designing mitigation/conservation measures and environmental features for power plants, preferably WTE power plants. The E&S Team will have strong experience in preparing environmental and social impact assessments and environment management and risk mitigation plans. The E&S Team will be familiar with Philippine environmental laws and regulations. The E&S Team will have sufficient language and writing proficiency in English. Preference is given to knowledge and experience with ADB’s environmental and social safeguard policies6

as well as previous experience in Asia and the Philippines. The E&S Team will be responsible for all environmental aspects of the Project.

Carbon Specialist The Carbon Specialist will review the requirements for project eligibility for carbon credits under the relevant guidelines, estimate the quantity of CER’s which may be generated by the project, estimate the value of the CER’s per annum and draft CDM proposal. All information collected, work performed and analysis done shall be included in the Final Report. Energy Specialist The Economic Consultants (Economists) will have more than 10 years of economic experience with specialization in development and power projects. The Economists will have proven expertise in economic modeling, risk and sensitivity analysis, least-cost option analysis, and environmental and development economic benefits analysis. The Economists will have sufficient language and writing proficiency in English. Preference is given to previous experience with ADB’s Guidelines for the Economic Analysis of Projects, as well as prior experience working in DMCs and the Philippines. The Economists will be responsible for all economic aspects of the Project. Financial Specialist The Financial Specialist (FS) will have more than XXX years of financial experience with specialization in power projects. The FS will have proven expertise in project financial modeling, risk and sensitivity analysis, projected financial statement reporting, performance and covenant metrics, IFRS, local tax laws and BOI incentives. The FS will have sufficient language and writing proficiency in English. The FS will be responsible for all financial aspects of the Project. Legal Specialist The Legal Team (LT) will have more than 10 years of legal experience with specialization in Philippine power projects, power project contracts, Philippine law and regulations (including licenses, permits and approvals), land lease agreements, and applicable insurance policies. The LT will have sufficient language and writing proficiency in English. The LT will be responsible for all legal aspects of the Project.

6 Namely, ADB’s Safeguard Policy Statement (2009), ADB’s Environmental Assessment Guidelines (2003), Handbook on

Social Analysis (2007).

Appendix 3

Initial Poverty and Social Assessment

Project Number: 46927 July 2012

PHI: P&G Waste to Worth Project

INITIAL POVERTY AND SOCIAL ANALYSIS

Country: Philippines Project Title: P&G Waste to Worth Project Lending/Financing Modality:

TBD Department/ Division:

Private Sector Operations Department Infrastructure Finance 2

I. POVERTY ISSUES

A. Links to the National Poverty Reduction Strategy and Country Partnership Strategy One objective of ADB’s country partnership strategy for the Philippines is to reduce environmental degradation and vulnerability to climate change and disasters. The proposed PPTA is consistent with this objective—improving sustainable environmental infrastructure in highly urbanized areas where economic gains can be maximized. It will also incentivize private sector participation in addressing MSW problem. The Project will indirectly contribute to poverty reduction by ensuring access to clean and reliable electricity supply, offering a sustainable solution to solid waste problem, raise urban living standards and advance sustainable urban development, and arrest environmental degradation which disproportionately affects the urban poor’s air and water quality. B. Targeting Classification

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

The Project will contribute to the general economic development of the Philippines in two fronts. Firstly, by increasing the available power supply needed to support national and local economic activities and secondly, by using municipal waste as fuel, the chronic issue on growing solid waste problem is arrested, at least in the areas where project will operate. In these fronts, the general public stands to benefit. C. Poverty Analysis

1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed? N/A 2. What resources are allocated in the PPTA/due diligence?

The PPTA has earmarked resources for international and local consultants that will undertake poverty and social impact analysis relevant to the proposed project. The consultants’ outputs will be utilized in the project’s further processing.

3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor governance, and pro-poor growth)? Please explain

The implementation of PPTA will look into whether or not pro-poor designs can fit into the overall project design. The Project may also provide employment opportunities to local residents.

II. SOCIAL DEVELOPMENT ISSUES A. Initial Social Analysis

Based on existing information: 1. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from

the project? The primary beneficiaries are the localities where the projects will be constructed and operated; the municipalities where solid waste will be sourced are also considered primary beneficiaries. Further, the locals that will be employed in the operation of the power plant facilities and operation of the solid waste supply can also be project beneficiaries.

2. What are the potential needs of beneficiaries in relation to the proposed project? The PPTA will look into the needs of the beneficiaries mentioned above and other potential direct and indirect beneficiaries.

3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them?

The PPTA will look into any potential constraints in accessing project benefits following not only from the environmental and social aspect, but also from the technical and financial aspect, relevant to power pricing.

2

B. Consultation and Participation

1. Indicate the potential initial stakeholders. The initial stakeholders of the project are: national and local government, including relevant regulatory government bodies, fuel suppliers, power plant host communities, and communities where solid waste will be sourced, NGOs/Civil Society Organizations, waste pickers/scavengers/reclaimers, and junkshop owners. .

2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops, community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)?

Initial consultation with the proposed project stakeholders may be undertaken by the consultants. Much of the consultation and participation dimension of the project will be looked into as part of the environmental and social assessment

3. What level of participation is envisaged for project design?

Information sharing Consultation Collaborative decision making Empowerment

4. Will a C&P plan be prepared during the project design for project implementation? Yes No Please explain.

C&P will be included in the environmental and social assessment stage. Further C&P may be undertaken once the project becomes operational. C. Gender and Development Proposed Gender Mainstreaming Category: SGB

1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program? No adverse gender issue is envisaged relevant to the proposed project. Positive gender benefits are likely by way of increased employment opportunities for women during the operation of the power plants and solid waste supply operations.

2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by

improving women’s access to and use of opportunities, services, resources, assets, and participation in decision making?

Yes No Please explain. The project benefits will be made accessible to all. The project company may implement corporate social programs where community stakeholders, including women, can benefit.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality? Yes No Please explain

Adverse impact on women and/or girls or to widen gender inequality is not expected.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS

Issue Nature of Social

Issue Significant/Limited/ No Impact/Not Known

Plan or Other Action Required

Involuntary Resettlement

Involuntary resettlement aspect of the project will be determined during the PPTA implementation.

Not known

Uncertain

A Resettlement Plan and/or a social safeguard compliance audit will be undertaken in case the policy is triggered.

Indigenous Peoples

Based on the 2 sites selected for the Project, impact on IP is not expected. Confirmation will be made during the PPTA implementation.

No impact

None

3

This draft is for consultation purposes only and does not necessarily reflect the views of ADB’s Management, Board of Directors, or the Government of [country]. Comments may be submitted to [e-mail address] by [deadline].

Labor Employment Opportunities

Labor Retrenchment Core Labor Standards

Construction and operation of the plants will generate employment opportunities. The project may impact on the livelihood/income generating activities of informal waste pickers, waste reclaimers, junkshop owners and workers, among others.

Limited

Other Actions

Affordability

The tariff structure is mandated by regulation.

No impact

No Action

Other Risks and/or Vulnerabilities

HIV/AIDS Human Trafficking Others (conflict, political instability, etc.), please specify

No other social risks are anticipated as a result of the Project.

No impact

No Action

IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the TOR for the PPTA (or other due diligence) include poverty, social and gender analysis and the relevant

specialist/s? Yes No

2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender

analysis, and C&P during the PPTA/due diligence? Yes No An environmental and social specialist will be engaged and tasks will include consultation with local residents in the host communities. Detailed TOR on social aspect is yet to be developed.