policy guidelines for the implementation of policy on

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ບົດແນະນໍ າການຈັດຕ້ັງປະຕິບັດ ນະໂຍບາຍການພັດທະນາໄຟຟ້ານໍ ້ າຕົກແບບຍື ນຍົງຂອງ ສປປ ລາວ

Policy Guidelines

for the Implementation of Policy on Sustainable Hydropower Development in Lao PDR

2015

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Contents Abbreviation..................................................................................................................................................11. PurposeandApplication....................................................................................................................22. Background..............................................................................................................................................23. PrincipleofPSHD..................................................................................................................................34. ResponsibleAgencies..........................................................................................................................45. PSHDPolicyGuidelines.......................................................................................................................45.1OverallPolicyObjective-Sustainability...............................................................................4a)Rationale/explanation................................................................................................................5b)Roleandresponsibility................................................................................................................6

5.2PlanningandCoordination.........................................................................................................6a)Rationale/explanation................................................................................................................6b)Rolesandresponsibilities...........................................................................................................7

5.3ModalitiesforHydropowerProjectImplementation......................................................7a)Rationale/explanation................................................................................................................7b)Rolesandresponsibilities...........................................................................................................8

5.4FeasibilityStudy..............................................................................................................................8a)Rationale/explanation................................................................................................................8b)Rolesandresponsibilities...........................................................................................................9

5.5EconomicConsiderations............................................................................................................9a)Rationale/explanation.............................................................................................................10b)Rolesandresponsibilities........................................................................................................10

5.6TechnicalandEngineeringConsiderations......................................................................10a)Rationale/explanation.............................................................................................................10b)Rolesandresponsibilities........................................................................................................11

5.7EnvironmentalandSocialImpactAssessment...............................................................11a)Rationale/explanation............................................................................................................12b)Rolesandresponsibilities.......................................................................................................13

5.8Project-affectedPeople/SocialImpacts............................................................................13a)Rationale/explanation.............................................................................................................13b)Rolesandresponsibilities.......................................................................................................14

5.9Consultation..................................................................................................................................14

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a)Rationale/explanation.............................................................................................................14b)Rolesandresponsibilities........................................................................................................15

5.10InformationDisclosure..........................................................................................................15a)Rationale/explanation.............................................................................................................15b)Rolesandresponsibilities........................................................................................................16

5.11WaterResourceandWatershedManagementandConservation......................16a)Rationale/explanation.............................................................................................................16b)Rolesandresponsibilities........................................................................................................17

5.12ComplianceMonitoring..........................................................................................................17a)Rationale/explanation.............................................................................................................17a)Rolesandresponsibilities........................................................................................................18

5.13RevenuesandBenefitSharing............................................................................................18a)Rationale/explanation.............................................................................................................18b)Rolesandresponsibilities........................................................................................................19

5.14ExistingProjects.........................................................................................................................19a)Rationale/explanation.............................................................................................................19b)Rolesandresponsibilities........................................................................................................20

5.15Institutionalization...................................................................................................................20a)Rationale/explanation.............................................................................................................20b)Rolesandresponsibilities........................................................................................................21

5.16Reporting......................................................................................................................................21a)Rationale/explanation.............................................................................................................21b)Rolesandresponsibilities........................................................................................................21

6. PerformanceEvaluation..................................................................................................................21Annexes........................................................................................................................................................22Annex1:OrganizationandManagementStructureforPSHDImplementation.......221.1OverallOrganizationStructure..............................................................................................221.2ManagementProcess-beforeMOU.....................................................................................221.3ManagementProcess-MOU/PDAStage............................................................................231.4ManagementProcess-PDA/CAStage.................................................................................231.5ManagementProcess-CAOperationStage......................................................................24

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Abbreviation

BOO Build-Own-OperateBOT Build-Operate-TransferBT BuildandTransferCA ConcessionAgreement

COD CommercialOperationDateDEB DepartmentofEnergyBusinessDEM DepartmentofEnergyManagementDEPP DepartmentofEnergyPolicyandPlanningDESIA DepartmentofEnvironmentandSocialImpactsAssessmentDFRM DepartmentofForestResourcesManagementDMH DepartmentofMeteorologyandHydrologyDOL DepartmentofLand

DONA DepartmentofNationalAssetsDOT DepartmentofTaxesDWR DepartmentofWaterResourcesECI ElectricityConstructionandInstallationCompanyEdL ElectriciteduLaos

EdL-Gen EdL–GenerationEPC Engineering,ProcurementandConstructionEPF EnvironmentProtectionFundEIA EnvironmentalImpactsAssessmentFS FeasibilityStudy

GOL GovernmentofLaoPDRIEE InitialEnvironmentalExaminationIPP IndependentPowerProducerIREP InstituteofRenewableEnergyPromotion

LEPTS LaoElectricalPowerTechnicalStandardsMAF MinistryofAgricultureandForestryMEM MinistryofEnergyandMinesMOF MinistryofFinance

MPWT MinistryofPublicWorksandTransportMONRE MinistryofNaturalResourcesandEnvironmentMOU MemorandumofUnderstandingMPI MinistryofPlanningandInvestmentPDA ProjectDevelopmentAgreement

PDEM ProvincialDepartmentofEnergyandMinesPONRE ProvincialDepartmentofNaturalResourcesandEnvironmentPSHD PolicyonSustainableHydropowerDevelopmentSESO StandardEnvironmentalandSocialObligationsTOR TermsofReference

WREA WaterResourceandEnvironmentAdministration

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1. Purpose and Application

This document is the Policy Guideline on the Implementation of theGovernmentDecreeonPolicyonSustainableHydropowerDevelopment(PSHD)in Lao PDR which was approved by the Prime Minister on 12 January 2015(Decree Nº 02/GOL dated 12/1/2015). The Guideline aims to provide policyguidance to the agencies responsible for overseeing the implementation ofinvestmentprojectsinthehydropowersectoraswellastoinformandencourageproject developers/investors to be aware of the Government policy towardachievingsustainabledevelopmentinLaoPDR.

This Guideline applies to all hydropower projects having installationcapacity higher than 15Megawatts including construction and operation of itstransmission lines. Implementation of this Guideline is considered an integralpart of the hydropower project development process covering planning,construction,operation,andtransfer/closurestages.

2. Background

Lao PDR is a mountainous country and is abundant in water resources,forest,andbiodiversityandhashighpotentialfordevelopmentofvariousscalesof hydropower projects. Increasing demands of electricity for socioeconomicdevelopment in neighboring countries as well as within the country hasincreasedopportunitiesforhydropowerdevelopmentinLaoPDR.

In 2005, a National Policy on Environment and Social Sustainability ofHydropowerSector inLaoPDR(NPSH)wasadoptedandapplied.During2006-2014,anumberoflaws,regulations,andinstitutionalframeworksrelatedtotheimplementationoftheNPSHandtheutilizationofnaturalresourcesinLaoPDRhavebeenchanged,thekeyonesinclude:

• Lawsandregulations:TherevisedElectricityLaw(2012);theEIADecreein2010andtheMinisterialEIAInstructionissuedinDecember2013;theCompensationandResettlementDecreein2005whichisbeingrevised;theProtectionForestDecree (2010); theForestryandForestResourceDevelopment Fund (2006); and the 2012 Revised EnvironmentalProtectionLaw.TheWaterLaw(1996)isalsocurrentlybeingrevisedalongwiththeForestryLawandLandLaw.

• Institutions: The establishment of the Ministry of Energy and Mines(MEM)in2006anditsrestructuringin2011-2012;theestablishmentoftheWaterResourcesandEnvironmentAgency(WREA) in2007and itsupgrading to the Ministry of Natural Resources and Environment

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(MONRE) in 2011-2012; and the re-organization of the Ministry ofAgricultureandForestry(MAF)in2011-2012.

In this context, the NPSH was updated with active involvement of theresponsible agencies through a series of meetings including consultationworkshopswithotherkeyagenciesandstakeholdersduring2013-2014. Giventhatscopeofthepolicyhasbeenexpandedtocoverthetechnicalandengineeringaspectsaswellastheenvironmentandsocialimpacts,thenameofthepolicyhasbeenchangedtothePolicyonSustainableHydropowerDevelopment(PSHD).

3. Principle of PSHD

Sustainable hydropower development is a vision that the Government ofLao PDR (GOL) overall, and the Ministry of Energy and Mines (MEM) inparticular,hasbeentryingtoachieve.

Fourelementsofhydropowersustainabilityconsistof“3-Eand1-S”:

• Engineering – guarantee safety, ensure the use of modern technologyandequipmentandpreventormitigatedamagetonaturalresourcesandthird parties during the survey, design, construction and operationstages;

• Economic – reliance upon themaintenance of the renewable resourcebase, and the use of non-renewable resource rents support thedevelopmentofotherfactorsofproduction;

• Environment – relies upon the avoidance if irreversible environmentalimpacts such as the loss of biodiversity, accumulation of persistentpollutants,ordisruptionofecologicalcycles;

• Social – based upon the better-off of project affected people from theprojectsdevelopmentthroughtheprocessofpublicparticipation.

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Figure1:ConceptofSustainableHydropowerinLaoPDR

4. Responsible Agencies

Key agencies responsible for implementation of the PSHD include MPI,MOF, MEM (DEM, DEPP, DEB), MONRE (DESIA, DFRM, DWR, DMH), andprovinces. Other concerned agencies such as EPF, MPWT, MAF (fisheries,irrigation, forest, etc.) and they will be invited to participate in technicaldiscussions.

The organization and management structure for the implementation ofPSHDisprovidedinAnnex1.5. PSHD Policy Guidelines

5.1 Overall Policy Objective - Sustainability “Overall objectives of the Policy on Sustainable Hydropower DevelopmentHydropower Development shall be implemented based on the principles ofeconomic,socialandenvironmentalsustainability”

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a) Rationale/explanation

HydropowersectorplaysanimportantroletoachievetheobjectivesoftheNational Strategy on Poverty Eradication and Economic Development and forsupporting regional energydemands.To achieve socio-economic sustainability,the GOLwill develop hydropower as an export commodity aswell as tomeetelectricityneeds for thenationalsocio-economicdevelopmentandcontributingtothenationalsecurityandimprovinglivingconditionsofthepeople. TheGOLwillpromoteallindividuals,legalentities,andorganizations,bothdomesticandforeign entities, to invest in hydropower development in conjunction withwatershedprotection and in ensuring that hydropower operation is consistentwiththenationalsocioeconomicdevelopmentplan,safe,effective,economic,andsustainable, and that the potential adverse impacts on affected people, naturalresources,andenvironmentareeffectivelymitigated

The GOL acknowledges the right to use water resources for all majorpurposes including human consumption, hydropower, irrigation, industry,navigation, floodcontrol, fisheriesandwildlife,andecologicalmaintenanceandwillencourageactiveengagementofresponsibleagenciesinalllevelsandotherkey entities to discuss, cooperate, and reach agreements on water allocation,waterusers,and/ortrade-offs-relatedissuesinthecontextofintegratedriverbasin management and in accordance with the GOL policies, laws, andregulations.Theintegratedriverbasinmanagementapproachwillbeappliedformultiplehydropowerprojectsplanned todama single river and this approachwillalsoincludeaddressingcumulativeimpacts,howtoassessandmanagementthen along with mitigation plans and be supported by an appropriateinstitutionalandfinancingmechanism.

To achieve environmental and social sustainability, the Government willensure that negative environmental and social impacts associated withhydropower projects are managed; that avoidance, minimization, mitigation,compensationand/oroffsetenhancementmeasuresare implemented;and thatenvironmental and social commitments are fulfilled. TheGOLwill require theproject developers to assess the potential environment and social impacts,including cumulative impacts, at an early stage of project preparation and toeffectively mitigate and/or restore any adverse impacts on the affectedpopulation,landandwaterresources,ecology,biodiversity,andnaturalhabitatsfor aquatic and wildlife including undertaking adequate consultation andinformationdisclosure. Tomaintainsustainabilityofwaterresources, integrityof water storage, and safety of downstream communities protection,conservation, and/or restoration of upstream watershed and capacity onemergencypreparednessofcommunitieslocatedinthedownstreamareawillbepriorityforthesectorandactionsfromprojectdeveloperswillberequired. All

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these costs including the payment for all damages, relocation, and/orcompensationstotheaffectedpopulationwillbepartoftheprojectcost.

The GOL will ensure integrity, accountability, and transparency ofhydropowerprojectthroughcompliancemonitoring,reporting,andinformationdisclosure.GOLcapacitytoconductcompliancemonitoringwillbestrengthenedduringthenextfiveyearswhileappropriatecriteriafordeterminingcompliancelevelswillbeestablishedbyresponsibleagencies.Existinghydropowerprojectswill also be reviewed to ensure that any unsustainable aspects could beadequately addressed. As amember of international community, the GOLwillpromotetransparencyandgoodgovernanceindecisionmakingprocessrelatedto hydropower development in Lao PDR. The integrated water resourcesmanagement(IWRM)principlewillbeapplied.

To ensure socio-economic achievement of hydropower development aswellasfacilitateeffectiveimplementationofthepolicy,theGOLwilldevelopandimplement effective and transparent financialmechanisms for: (i) the revenuesharingamongagenciesand/orprovincestocarryoutthereviewandmonitoringprocessesnecessary for forging effective implementationof thepolicy; and (ii)the benefit sharingwhere project developers couldmake contribution to localdevelopmentandenvironmentalconservationaswellasdevelopmentofhumanresourcesforhydropowersector.

b) Role and responsibility

TheresponsibleagenciesoftheMEMwillworkcloselywithotheragencies,organizations,provinces,andlocalauthoritiestoensurethatwaterresourcesareused for hydropower development in an economic, effective, and sustainablemanner and thatmodern technology in the electricity businesswill be appliedandadequatemitigationmeasuresforsocialandenvironmentalimpactswillbecarriedout.

5.2 Planning and Coordination

“In order to achieve economic, social and environmental sustainability inhydropowerdevelopment,detaileddatacollection,planningandimplementationisrequired. Hydropower Development Plans shall be undertaken in collaborationwith relevant stakeholders in the management, utilization of water and waterresourcesfortheoptimalbenefits”


Developmentofhydropowerprojectswill involve theutilizationofwater,land, and forest that may create both positive and negative impacts on localpeoples and local environment therefore effective coordination among keyagenciesduringplanning,implementation,andmonitoring,andevaluationstages

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will be necessary to ensure that the development activities are effective andtimelyandtheGOLpolicyandregulationsarecompliedwith.

b) Roles and responsibilities

TheDepartmentofEnergyPolicyandPlanning(DEPP)oftheMEMwillberesponsible for forging effective implementation of this policy in closeconsultation with concerned agencies and provinces, including facilitatingdialogue and/or discussion on hydropower sector issues and facilitateagreements. The responsible agencies will develop detailed procedures,technical guidelines, supporting decrees/regulations, and/or institutionalcapacity building to ensure effective implementation of the updated policyespeciallyonmonitoring,reporting,financing,andotheroversightfunctions.

Duringplanning, theprojectdeveloperswill studyall theGOLregulationsandrequirementsrelatedtohydropowerdevelopmentinLaoPDRandprepareaplan for data collection, feasibility study, environmental impacts assessment(EIA), basic design, detailed design, construction, and operation of the project.Initialdatacollectionwill includethoserelatedtosocioeconomic,environment,geology,hydrology,andpotentialimpactsandtheinformationwillbeusedasthebasisfordiscussionwiththeconcernedagenciesandlocalauthoritiesaswellasfortechnicalassessment,design,construction, installation,andoperationof theproject which has to be prepared in accordance with the specific technicalguidelinesand/orstandardsestablishedbytheagenciesoftheMEMaccordingtotheElectricityLaw(2012).

TheprojectdeveloperswillalsoberesponsibleforensuringfullcompliancewithGOLlawsandregulationsandpaymentsforroyalty,dutyandtax,andotherobligations in accordance with the laws and regulations and the concessionagreement includingpayingforcompensationfor land,crops,resettlement,andlivelihood restoration of affected people and for implementation of mitigationmeasures for the potential negative impacts on environment and societyincludingcostformonitoringbyagenciesandprovinces.

5.3 Modalities for Hydropower Project Implementation

“Anyhydropowerdevelopmentofprivateorpublicsectorshallbeimplementedonthebasisofeitherbuild-operate-transfer(BOT),buildandtransfer(BT),build-own-operate(BOO)andthosethataredevelopedbystated-ownedenterprises”


Planning for the project developers for BOT, BT, andBOOwill follow thefollowingkeysteps:signingofaMemorandumofUnderstanding(MOU),signingof a Project Development Agreement (PDA), and signing of a ConcessionAgreement(CA),exceptBTbasis. Detailsontheprocesswillfollowregulations

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and/or technical guidelines to be established by the Ministry of Energy andMines according to the Electricity Law and other agencies responsible forenforcingtheimplementationofotherlawsandregulations.


The Department of Energy Business (DEB) of the MEMwill be the focalagencyresponsibleformanagingtheindependentpowerproducer(IPP)processincloseconsultationwithotherconcernedagenciesandprovinces.

ResponsibilityoftheprojectdevelopersofBOT,BT,andBOOrelatedtothispolicy are as follows: (i) strictly comply with laws and regulations related tolaboraswellasotherlawsandregulationsofLaoPDR;(ii)executethebusinesscorrectlyaccording to theCAandapprovalof socioeconomic, technical, financeandmeasurestomitigateimpactsonenvironment,social,andnaturalresources;(iii) completely and timely pay royalty, duty and tax obligations and otherobligations inaccordancewiththe lawsandregulations;(iv)paycompensationfor damages to life, health, property of people, and environment, and forrelocation of peoples; (v) record and timely report results of CA complianceincluding project expenses; (vi) timely maintain and repair machines and allequipment to be in good conditions according to technical principles; (vii)coordinate,cooperate,andmakecontributiontothesocioeconomicdevelopmentoflocalareawheretheprojectislocated;and(viii)performotherobligationsasprovided by the laws and regulations. The main activities such as damconstruction,powerplantorwaterdiversetunnels,includingreservoirclearance(treelogging)canbecarriedoutonlywhentheCAiseffective. 5.4 Feasibility Study

“All hydropower development shall conduct a comprehensive feasibility studybefore the project can be approved to ensure it is economically, technically andfinancially feasible and that potential negative impacts on the environment andsocialcanbepreventedandormitigated”


Feasibility study aims to determine if the project is technically,economically,andfinanciallyfeasibleaftermitigatingpotentialnegativeimpacts.The Electricity Law requires that technical, socioeconomic, and financialfeasibility study will include feasibility from socioeconomic, technical andfinancial aspects; maximum electricity production; estimated project value;estimatedlifeanddurationofthedamandotherfacilities;estimatedelectricityprices and markets; and plans and steps for implementation includingconstruction, installation, and commercial operation date (COD). Duringplanning for thedesign,construction, installation,andoperationof theprojects

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includingtransmissionlinesandotherassociatedfacilities,theprojectdeveloperwill (i) guarantee high quality and efficiency of energy production by applyingthe modern equipment with quality meeting international standards; (ii)guarantee safety; (iii) limit and reduce damage on the natural resources andpropertyofpeople;and(iv)compensate forall thedamages to life,health,andpropertyofthepeople,naturalresources,andenvironment.

Safeguard analysis will cover at a minimum the following basicrequirements: (i) assessment of damages on environment including proposedmethodology,mitigationmeasures to reducenegative impactsonenvironment,water resources, soil, landuse, ecological biodiversity, andnatural habitats foraquaticandwildlife; (ii)assessmentofdamageandresettlementofpeople thatare affected by the project; (iii) measures to mitigate the impacts on waterquantityincludingcumulativeimpactsondownstreamofthedams;and(iv)costforitems(i),(ii),and(iii)willbepartoftheprojectcost.Inaddition,theinvestorwillhavetopayforenvironmentaltaxasrequirebylawand/orregulations.


DEPPwill be responsible for the approval of the feasibility study in closeconsultationandcoordinationwithconcernedagenciesandprovincesincludingfacilitatingeffectiveintegrationofenvironmentalandsocialimpactsassessmentprocess and ensuring that appropriate economic and financial factors areconsideredduringthefeasibilitystudy.

The DEPPwill also investigate opportunity for maximizing the benefit ofwater resource utilization and reservoir management (including domesticconsumption,floodcontrol,irrigation,fisheries,industry,andothermajorwaterusers)aswell as for sharingbenefitsof theprojectwith the local communitiesandprovincesthatbearsocialandenvironmentalcosts.Effortswillbemadetodevelop and apply appropriatemanagement tools, criteria/regulations, and/ortechnical guidelines (such as mathematical models, EIA guidelines, etc.) tofacilitateconstructivediscussionanddecisionmakingprocess.

5.5 Economic Considerations

“Specialattentionshallbepaidtotheeconomicaspectofeachprojecttoensureitisefficient, effectiveandsustainable.Theeconomic-technical feasibility studies shallbe undertaken in parallel with environmental and social impact assessmentsincludingidentificationofappropriatemeasurestomitigateanynegativeimpacts.It shall be implemented in accordance with the National Socio-EconomicDevelopmentPlanandNationalElectricityDevelopmentPlan”

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In2012thehydropowersectorhascovered7%ofgrossdomesticproductsand its export has covered 15% of gross national export while existinghydropowerdevelopmentprojectscoverabout29.0%ofallmajordevelopmentprojects. The current energy/power development plan will be updated todetermine the targets, directions,mechanisms, andmethods in developing theelectricity project in linewith the current legal and organization arrangement,the regional and domestic electricity demands, the availability of electricitytechnologyand/orpractices.

Transmissionof electricity toand fromLaoPDRwill requireGovernmentapproval. ElectricitytransitwillbetransmittedthroughtheNationalElectricityTransmission Grid (NETG) and pay for the service charge. If the NETG is notavailable,atransmissionlinesystemcouldbeestablishedinaccordancewiththeLaoElectricPowerTechnicalStandard(LEPTS)andotherlawsandregulations.

The electricity export will ensure sufficiency for domestic use, includingindustrial expansion and national socio-economic development. Import ofelectricitycanbemadeonlywhenitisnecessaryforthecountry’ssocioeconomicdevelopment and is approvedby theGOL. The electricity priceswill be stableandsuitableforeconomicconditionsofthecountryandforthetargetandtypeofelectricityusers.TheGovernmentwilldeterminetheelectricitypricesforimportpurchaseandexportsaleaswellasfordomesticpurchaseandsale.


DEPPwill be responsible for ensuring that appropriate economic factorsareconsideredduring theplanningand implementationofhydropowerprojectand that the proposed project are effective, efficient, and sustainable and theoperation is in line with the national socio-economic policy and theelectricity/powerdevelopmentplan.

5.6 Technical and Engineering Considerations

“Projectdevelopersshallusethemostadvancedequipmentthatensuresthesafetyofpeople’slifeandtheirpropertiespreventsandmitigatesanypotentialriskstothenatural resourcesand the environment in thedesign, constructionandoperationstages”


During design, construction, and operation stages of the electricitygenerationand/ortransmissionsystemsincludinginstallation,expansion,repair,andmaintenance,theprojectdevelopermustguaranteesafety,ensuretheuseofmodernequipment,mitigatealldamagestonaturalresourcesandpropertiesoftheaffectedpeople,andfollowstrictlytheLEPTSanditsguidelines.Foralarge

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damhigherthan15meters,specialattentionwillbegiventoaddressdamsafetyaspectsduringdesign,construction,andoperationstages.

The developer will establish the safety rules for Operation andMaintenance in accordance with LEPTS and submit it to the MEM forconsideration.

Duringdatacollection, theprojectdevelopershouldconsideravailabilityandreliabilityofhydrological resource, seismicstability,othernaturalhazards,geotechnicalstability,accesstotheconstructionmateriel,assetsafety,etc.

During construction of transmission line, the project developer mustguaranteefullcompliancewithLEPTS,payforalltaxesandfees,reducedamageto theenvironmentandpeopleand compensate for all thedamages, andallowtheGOLtoutilizethetransmissionlineasneeded.

During construction of main activities such as construction of dams,powerplant,orwatertunnelincludingcuttingoftree/logfromreservoircanbemadeonlywhenCAissignedandeffective.

During operation, the project developer must guarantee safety duringoperationandmaintenanceofprojectareasandfacilitiessuchasdam,reservoirs,spillways, power plants, power stations, transmission line, equipment andfacilitiesincludingelectricityusers.TheprojectdeveloperwillalsoassistGOLinthe development and implementation of the flood management plan for thedownstreamarea.


TheDepartmentofEnergyManagement(DEM)oftheMEMisresponsibleforensuringthathydropowerprojectsareinaccordancewiththeLEPTSduringconstructionandoperationstage.DEMwilldevelopand/orupdatetherequiredregulations,criteria,and/ortechnicalguidelinesnecessaryforensuringadequatesafety of hydropower facilities and operations, including development of damsafety policy for large andmedium size dams. DEM, DEPP, and other relatedagencies of other ministries (MONRE, MPI) and provinces will develop andimplement flood management plan for downstream area of all hydropowerprojects.

Theproject developerswill be responsible for the tasks specified in theprevioussectionduringallstagesofprojectpreparationandimplementation.5.7 Environmental and Social Impact Assessment

“All hydropower projects shall undertake a comprehensive Environmental andSocial Impact Assessment. Any project with large impacts and which is trans-boundary, a cumulative impact assessment and also a trans-boundary impactassessment shall be undertaken. Environmental and Social ImpactManagement

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and Monitoring Plans shall also be developed before the construction andimplementationofaproject”


The Environmental Protection Law (2012) requires preparation andapprovalofan InitialEnvironmentalExamination(IEE)oranEnvironmentandSocial Impact Assessment (ESIA) for an investment project includingdevelopment of an Environment and Social Management and Monitoring Plan(ESMMP) identifying appropriate methods and measures to prevent, avoid ormitigate the potential negative impacts of project activities. The Ministry ofNatural Resource and Environment (MONRE) will issue an EnvironmentalCompliance Certificate (ECC) after approval of the ESIA/IEE report and theproposed ESMMP. Specific regulations on the ESIA/IEE processes have beenissued by MONRE and obtaining an ECC is necessary before undertakingconstructionofprojectactivities. TheESIAand IEEregulationsrequirepublicparticipation during the preparation of the ESIA/IEE reports aswell as publicinformationdisclosureandmoredetailsareprovidedinthepolicyguidelineonpublicconsultationandinformationdisclosure.

For hydropower development project, the ESIA will be prepared asrequired by the ESIA or IEE regulations. Preparation of additional cumulativeimpact assessment will be conducted if the project is expected to generatecumulativeenvironmentalandsocialimpactstootherinvestmentprojectlocatedinnearlyarea. Preparationofadditionaltransboundaryimpactassessmentwillalsobepreparedif theproject isexpectedtocausetransboundary impactstoaneighboringcountry. For theproject that involve landacquisitionaccording totheCompensationandResettlementDecree, theESIA reportmaybe submittedintoanEIAreportandaSocialImpactAssessment(SIA)report.

TheESIAwillalsoincludeariskanalysisovertheentirelife-spanofproject,

ananalysisofalternatives forprojectstructureand locations, including theno-project alternative, lessons learnt from previous projects, and cumulativeimpactsanalysisatbasinand/orsub-basin levels. If impactonphysicalculturalresources is significant, the EIA will also include provisions for field basedsurveysof archaeological, historical and/or sacred sites and includeprovisionsfor “chance find” procedures to address measures to be undertaken whenunknown cultural materials are encountered during the course of projectimplementationofoperation.

Implementationoftheapprovedplansformitigationandmonitoringofthepotential environment and social impacts will need to fully comply with theconditionsspecified in theEnvironmentalComplianceCertificate (ECC)and theStandard Environmental and Social Obligations (SESO) of the ConcessionAgreement(CA).

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TheDepartmentofEnvironmental andSocial ImpactAssessment (DESIA)of theMinistryofNaturalResourcesandEnvironment (MONRE) is responsiblefor ensuring that hydropower projects are fully in compliance with theEnvironmentalProtectionLawandtheESIAandIEEregulations.TheProvincialDepartmentofNaturalResourcesandEnvironment(PONREs)andtheVientianeCapitalCityareresponsibleforreviewandapprovaloftheIEEreportincludinganissuanceofanECC.

The planning and implementation of ESIA activities related to cultural

heritagearecoordinatedwiththeMinistryofCultureandInformation.Theproject developerswill be responsible for all the costs related to the

preparationofthereportsandtheimplementationoftheapprovedmanagementandmonitoringplanstomitigatethepotentialnegativeenvironmentalandsocialimpactsaswellasforthereviewandmonitoringbytheresponsibleagenciesandany damages due to accidents and/or wrong doing that may occur duringconstruction and operation. The environmental and socialmanagement andmonitoring plans and/or the SESO of the CA will clearly define theimplementationbudget formanagementandconservationofwatershedand/ordownstreamareasasneededincludinghowthefundwillflowfromtheprojecttothe agencies either directly to the agencies or through the EnvironmentalProtectionFund(EPF).

5.8 Project- affected People/Social Impacts

“Inordertosafeguardthestatutoryinterestsoftheprojectaffectedpeopleduetoresettlement and compensation cases, the hydropower project developer shallprovideaprogressreportonthesocialimpactassessment,developaresettlementand livelihoods’ improvement plan, an ethnicity development plan, a genderdevelopmentplanandsoforthbeforetheconstructionandimplementationoftheproject to ensure that any potential negatives impacts to the people and othersocialrelatedimpactsaremitigated”


The Compensation and Resettlement Decree (2005) provides definitions,objective, and principles to be applied when land acquisition and/orresettlement of population is required for implementation of an investmentprojectandtheprocessisdescribedaspartoftheESIAandIEEregulations.Therevised Decree is expected to be approved by the Prime Minister. Forhydropowerproject,thebelowprincipleswillbeapplied.

Project-affectedpeoplewillberecognizedasthosewhoseassets,resourceuseandlivelihoods,and/orsocialorculturalstructuresareinvoluntarilyaltered

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by the project, andwill identified on the basis of social, economic, health andcultural studied and impact assessments. Assets and resource use will berecognizedonthebasisof legallyestablishedand/orcustomaryuserights.Therightofallproject-affectedpeopletosustainablelivelihoodoptionsandservicesatleastatthelevelpreviouslyenjoyedwillberecognized,andachievedthroughtheimplementationofthesocialmanagementandmonitoringplan.Theplanwillconsiderdistributionaleffectsofdevelopmentactivitiesandtheparticipationofvulnerable groups, includingwomen and ethnicminorities, andwill commit totargets for replacement or compensation for loss of assets, livelihoodsrestoration,andservicesandcommunitydevelopmentover theentire life-spanof the project, with provision for monitoring and evaluation, participatoryplanning and adaptive management. In cases where ethnic groups are in theproject area a specific plan to meet their aspirations would be prepared inconsultationwith thesecommunities in linewith theethnicgroupconsultationguidelineestablishedbytheLaoFrontforNationalConstruction(LFNC)in2013.

At aminimum consultationwith the affected population and the publicwillbe in linewith the technicalguidelineonpublic involvement issuedby theDESIA.Implementationoftheapprovedenvironmentalandsocialmanagementand monitoring plan and full compliance with the conditions specified in theEnvironmentalComplianceCertificate(ECC)willbenecessary.


The DESIA of the MONRE and the provinces will be responsible forensuring that hydropower project comply with the Compensation andResettlementDecree.

The project developerwill be responsible for all the costs related to thepreparation of the reports and the implementation of the approved socialmanagement andmonitoringplan aswell as for the reviewandmonitoringbytheresponsibleagenciesasstipulatedintheESIAandIEEregulations.

5.9 Consultation

“Reasonable,honest,accurateand transparent consultationswillbe implementedbasedon theprovisionofadequatedataand informationprovided,as thiswouldhelp to effectively listen or hear the public voices before making a decision toapproveahydropowerproject”


The ESIA and IEE regulations require public involvement of the project-affectedpersons(PAPs)andotherstakeholders. TheconsultationispartoftheESIA/IEE preparation and approval process as well as the ESMMP

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implementation and monitoring during construction, operation and closurestages. Consultationduring thepreparationof theESIA/IEE report theprojectownerwillensurethatPAPs:(a)havereceivedinformationonthedevelopmentplanandactivitiesof theproject, thebenefit tobe received, and the social andenvironmental impacts that may arise from the project; (b) cooperate andprovide information on local conditions in the project and nearby area to beconsideredduringthepreparationoftheESIAreport;and(c)participateinfieldinspection and the consultationmeetings at all levels. During implementation,PAPs will (a) receive information on the ESIA report and the implementationprogress; (b) participate inmonitoring activities; and (c) officially inform localauthoritytoresolvetheenvironmentalandsocialimpactscausedbytheproject.


All hydropower projects larger than 15 MW will comply with, at aminimum,consultationwith theaffectedpopulationand thepublic in linewiththetechnicalguidelineonpublicinvolvementissuedbytheDESIA.

TheDESIAof theMONREand theprovinces are responsible for ensuringthatappropriateconsultationiscarriedoutaccordingtotheGOLguidelines.

5.10 Information Disclosure

“All hydropower development projects shall be undertaken on the basis oftransparency and openness. In addition, in the process of information disclosure,ethnicminority’slanguageneedstobetakenintoconsideration”


The ESIA and IEE regulations require public disclosure of informationrelated to the project developers, the social and environmental impacts; theobligations to mitigate the environmental and social impact; the ESIA reportincludingotherreportsthathavebeensubmittedtotheagencies;themonitoringresultofthemitigationmeasures;ESMMPbudget;andotherrelatedinformationrequestedtobedisclosedbytheagencies.

All hydropower projects larger than 15 MW will comply with theinformation disclosure as required by the ESIA/IEE regulations and othergovernment guidelines related to information disclosure. All projectsdocuments such as: EIA, SIA, the environmental management and monitoringplans,thesocialmanagementandmonitoringplanandtheapprovedECC,willbepublicly disclosed. Project developerswill be required to establish informationcentersintheprojectareaandinVientiane.InformationmightbedisclosedbothinLaoandEnglish,asthecasemightbe,andappropriatemethodswillbeusedtocommunicate with ethnic groups. During implementation of the project, the

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project developers will be required to make public progress reports on theproject.Third-partyreviewisencouraged.Grossprojectrevenuesandspendingonenvironmentalandsocialsafeguardsshouldbedisclosed.


TheDESIAof theMONREand theprovinces are responsible for ensuringcompliance with the ESIA and IEE regulations and other guidelines related toinformationdisclosure.

5.11 Water Resource and Watershed Management and Conservation

“Natural conserved habitat area losses due to hydropower development projectsshall be avoided and mitigated as much as possible. Where avoidance is notpossible,itmustbecompensatedandrestoredbytheprojectdevelopersaswellasprovidefundingtohelpmanageandeffectivelyconservethewatershedareaaswellasnearbywatershedsandotherimportantconservationareas.Mustalsodevelopasustainablebiodiversitymanagementplan,considercompensationorhelpmitigatetheimpactonthelocalnaturalresourcesbase”


Allhydropowerprojectslargerthan15MWwillcomplywiththeProtectionForestDecree(2010),thewaterlaworitsrevision,theNationalProtectedAreaDecree(draft),andotherconcernedregulations.Lawandregulationsregardingwaterandwatershedprotectionandmanagementincludingwateruseandwaterpollution controlwill be applied. Analysis on the potential project impacts onwater resources and watershed will be made according to basin and/or sub-basinapproachincludingpotentialimpactsandrisksontheupstreamwatershedanddownstreamareaandcommunities. Fortheproject locatedinthebasinorsub-basin that accommodatesmore than1 hydropowerplant, the analysiswillincludecumulativeand/or transboundary impactsas requiredby theESIAandIEEregulations.Collectionofprimarydataonmajorlanduses,wateruses,waterquality,andpotentialwaterpollutionsources(includingsediment)upstreamanddownstreamoftheprojectareaaswellastheconsultationwithkeystakeholdersareconsiderednecessaryduringthepreparationofanESIAreport. Applicationof hydrological model will be used for assessing the potential impacts on thewater users, water pollution, and risks due to flood, drought, and disaster indownstreamareaincludingthepreparationofanemergencypreparednessplan.

Any loss of natural terrestrial habitat will be offset, where possible, by

funding and implementing effective conservation management in nearbyprotected and/or critical watershed areas. A watershed adaptivemanagementand participatory planning strategy will be developed to stabilize land use,maintainvegetationcoverandmanageNationalandProvincialProtectedAreas

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withinthecatchmentarea,andtoenhancetheproductivityandsustainabilityofaquatic resources within the reservoir and its tributaries. Sustainablebiodiversitymanagementplanswillbeconductedtakenintoaccounttheneedtocompensatepopulationsresidingwithinprotectedareasforeventualrestrictiontotheresourcebaseonwhichtheydependandtodevelopalternativemeansoflivelihoods.

The proposed compensation andmitigationmeasures will be consideredpartoftheenvironmentalandsocialmanagementandmonitoringplansand/orESO. Implementation of the approved environmental and socialmanagementandmonitoring plans and full complywith the conditions specified in the ECCand/or the environment and social obligation (ESO) to be included in theconcessionagreementwillbenecessary.


TheDepartmentofForestResourcesManagement(DFRM)oftheMONREisresponsible for facilitating the planning and implementation of watershedprotection upstream of the project and ensuring compliance with the relatedpolicy,decrees,andregulations.TheprojectdeveloperwillberesponsibleforallthecostsrelatedtothepreparationofthereportsaswellasforthereviewandmonitoringbytheresponsibleagenciesasstipulatedintheEIAdecree.

5.12 Compliance Monitoring

“Regular monitoring, inspection and reporting will be undertaken by relevantgovernment lineagencies,which includesappropriatethirdpartymonitoringandinspection to ensure that all large hydropower projects are implemented inaccordancewithallrelevantobligationsset-outunderthelawofLaoPDR,policies,strategies,contractsandotherimplementationplans”


All hydropowerprojects larger than15MWwill complywith all relevantobligations under Lao national law, policies,ministerial instructions, strategiesandactionplans,andinternationalconventions,andthiswillbeensuredthroughregular inspection,monitoring, andreportingby the responsibleagencies,withoversightfromathirdpartyagenciesasstipulatedintheElectricityLaw(2012),the ESIA and IEE regulations, and/or other regulations. A grievance/disputemechanismaccessibletoproject-affectedpeoplewillalsobeestablished.

Special attention will be given to ensure compliance with the ElectricityLaw (2012), theESIAand IEE regulations, theCompensationandResettlementDecree,andthetechnicalguidelinespreparedbytheresponsibleagencies.Thisincludes specific engineering and technical obligations to be required and

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monitoredbytheMinistryofEnergyandMinesandtheStandardEnvironmentaland Social Obligations (SESO) to be required and monitored by MONREaccording to the Environmental Protection Law and its regulations and/orguidelines.

Compliance monitoring and/or inspection may include the following

aspects: procedures and time schedule for electricity business operation;economic, technical, and financial feasibility study; design, construction,installation, and management of electrical facilities, including technical safetystandardsand/orstandardsforelectricalequipment;lawandregulationsand/oragreements on electricity business including actions plans (if any);implementation of measures to mitigate negative environment and socialimpacts; compensation for damage to life, health, property of the people andenvironment; financial,policy, andsocialwelfare systems;andregistrationandrecords of the electricity consumptions figure. All expenses for undertakingtechnical inspectionandaudit relating to electricitybusinesswill be calculatedandincludedintheprojectcosts.

a) Roles and responsibilities

TheresponsibleagenciesoftheMEMandtheMONREwillberesponsibleforcompliancemonitoringwithanaimtoensurethattheelectricitybusinessisoperatedinaccordancewiththelaws,regulations,andtechnicalrequirementsaswell as are effective, safe, and do not create adverse impacts on naturalenvironmentandlocalpeople.

The project developers will report to agencies and local authorities

regularly regarding the design, construction, operation, and safety related toelectricityasrequiredbyregulations.5.13 Revenues and Benefit Sharing “Project developer shall pay taxes, royalties and fees that is set-out in theregulations, laws and project specific agreements/contracts, aswell as paying incash or share benefitswith the local communities through Community Funds forenvironmental protection and other Funds for watershed protection anddevelopmentofbasicsocio-economicinfrastructurewithintheprojectareas”


The project developers will be responsible for paying royalty, taxes, andfees as required by the Electricity Law and/or other laws, decrees, andregulations. Detailswill be established by the responsible agencies. A certainportionof the revenues fromeachprojectwillbeallocated togeneral fundsorspecialfinancingwindowswithintheEnvironmentProtectionFund(EPF).These

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funds will be used to support nation-wide environmental protection andconservationeffortsinthecountry.

Inadditiontothepaymentofroyalty,duty,andtax, theprojectdeveloperhastoalsopayitscontributionfortheFundforenvironmentalprotectionwithinthe concession areas and surrounding areas, for watershed protection anddownstreamofprojectareasandforsocio-economicinfrastructuredevelopmentof the localitywhere the project is located as stipulated in the Electricity Law(2012). These actions will be considered as the “benefit sharing” with localcommunities and environment and the “company social and environmentalresponsibility”(CSER)whichisagoodpracticefornormalbusinessdevelopmentat international level. Thedevelopersareencouragedtoapplygreenandcleantechnologyapproachduringtheplanning,design,construction,andoperationofthefacilities;adoptingthe“EquatorPrinciples”;and/orapplyinggoodpracticesand/or standard procedures established by the International HydropowerAssociation.


Theprojectdeveloperwillberesponsibleforpayingroyalty,taxes,andfeesas requiredby theElectricityLawand/orother laws,decrees, and regulations.Detailswillbeestablishedbytheresponsibleagencies.

5.14 Existing Projects

“Existingprojectswillbereviewedandassessedbyresponsibleagenciesbasedonthecurrent legislationand institutional framework. Implementationplanshallbepreparedforconsultationwiththeprojectdeveloperonacase-by-casebasis”


Thecompliancestatusof theprojectsconstructedand/oroperatedbeforetheeffectivedateofthispolicywillbereviewedandassessedbytheresponsibleagenciesinthecontextofthecurrentlegalandinstitutionalframeworksandanactionplanwillbepreparedfordiscussionwiththeprojectdevelopersonacasebycasebasis.

Applicationofeachspecificlawwillbeinaccordancewiththeeffectivedatedescribedbythelawsand/ordecreeassummarizedbelow:

• TherevisedElectricityLaw2012(No.03/NA):Effective60daysafterthesigningdate(20December2011)

• TheEnvironmental Protection Law (EPL2012): effective 90days afterthesigningdatewhichis18December2012;

• MONREMinisterial Instruction on ESIA and IEE regulations (dated 17December2013);

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• The decree on protection forest (Decree 333/PM): Effective on thesigningdatewhichis19January2010.

• Thedecreeoncompensationandresettlement(Decree192):Effectiveonthesigningdatewhichis7July2005oritsrevision.

• TheRiverBasinCommittee(RBC)decree(Decree293):Effectiveonthesigningdatewhichis15June2010.


The DEPP will be responsible for the review and assessment of thecompliance status of existing projects in close cooperation with DEB, DEM,DESIA,andDFRM.5.15 Institutionalization

“The implementation of this policy will be effective for the legislations andinstitutionsthathavebeenupdatedbythegovernmentinthepastfiveyearsonly”


The legaland institutional reformsundertakenby thegovernmentduringthepastfiveyearswillbeappliedduringtheimplementationofthePolicy.

Internalproceduresandregulationsduringtheplanning,construction,andoperation stages of large hydropower projects including clarity on theindependentpowerproduction(IPP)processwillbeestablishedbytheagenciesof the Ministry of Energy and Mines in line with the legal provision of theElectricitylaw(2012).PromulgationofthedecreeontheRiverBasinCommitteein2010providesamechanismforpromotionofsustainabledevelopmentinthecontext of a river basin management. Implementation of the ESIA processincluding consultation and informationdisclosure, the compensation toprojectaffected population, and the watershed conservation will be governedrespectivelybytheESIAandIEEregulations,thecompensationandresettlementdecree , and the forest reserve decree (draft) and their technical guidelinesestablishedbytheMinistryofNaturalResourcesandEnvironment.

Compliancemonitoringofthespecificlawsandregulationswillbecarriedoutbytheresponsibleagencieswhilecompliancemonitoringofthepolicywillbecarriedoutby theDepartmentofEnergyPolicy andPlan in close coordinationwith concerned agencies as appropriate. These arrangements will beperiodically reviewed thereafter on the basis of lessons learned fromimplementingthispolicy

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The Department of Energy Policy and Planning will be responsible forensuring effective coordination and cooperation amongkey agencies and forgeeffectiveimplementationofthepolicy.

5.16 Reporting

“The implementation this policy shall be reported to the inter-ministerialcommittee established by Ministry of Energy and Mines. Close advice on theimplementationwillbeundertakenonaperiodicbasis”


The MEM has established an inter-ministerial committee to oversee theimplementationofthisPolicyandtheDEPPservesasthesecretariat.TheDEPPwill prepare and disclose an annual or biannual Status Report on theimplementationprogressofthispolicytothepublic.Thereportwillbesubmittedtothenationalcommitteebeforedisclosure.


TheDEPPwillprepareanddiscloseanannualorbiannualStatusReportontheimplementationprogressofthispolicytothepublic.

6. Performance Evaluation

Since the PSHD requires actions both from GOL agencies (central andprovinces) and the project developers therefore measuring PSHDimplementation performance to these agencies will be periodically monitoredand evaluated by the DEPP. According to the CA, the budget for performanceevaluation for individual project will be supported by individual projectdevelopers.

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Annexes

Annex 1: Organization and Management Structure for PSHD Implementation

1.1 OverallOrganizationStructure

1.2 ManagementProcess-beforeMOU.

Ad-hoc Committees

MOF MONRE MEM

Provincial Authorities

District Authorities

LHSE

IPPs

DESIA

MPI & others

DEPP

DEB

DEM

DFRM

GOL

DMH

EdL

EdL-Gen

ECI

Up to 15 MWDEB DEPP DEM PDEM

IPP Developer MPI MNREMEM

More than 15 MW

Potential Study anddata collection

Potential Study anddata collection

Preliminarystudy

Applicationof MOU

Acceptance

Acceptance

Signing of Memorandum of Understanding (MOU)

Signing of MOUMOU witness

Committee for Promotion and Management of Investment (CPMI)

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1.3 ManagementProcess-MOU/PDAStage

1.4 ManagementProcess-PDA/CAStage


MNREMEM

More than 15 MWIPP Developer MPI

Signing of Memorandum of Understanding (MOU)

Signing of MOUMOU witness

Submission of draft FS and EIA

scoping report

Acceptance

Examination of scoping report &

TORExamination of FS

Issuing Interim Letter

Applicationof PDA

Acceptance

Signing of Project Development Agreement (PDA)

PDA witness

Progress (regular) report

Acceptance

Examination of FSTechnicalconfirmation

Up to 15MWDEB DEPP DEM PDEM


More than 15MWOfftakerShareholder

(LHSE/ EDL/Privates)

Signing of Project Development Agreement (PDA)

PDA witness

Submission of final FS & EIA report

Acceptance

Examination of EIA

Final Letter of Approval

Submission of BD Acceptance

Examination of BD

Approval

Signing of TariffMOU

Signing of Tariff MOU

Applicationof CA

Acceptance

Signing of Concession Agreement (CA)

CA witness


Acceptance

Examination of BD

Approval

Examination of FS

Signing of Share Holder Agreement (SHA)

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1.5 ManagementProcess-CAOperationStage



More than 15 MWOfftakerShareholder

(LHSE/ EDL/Privates)

Signing of Concession Agreement (CA)

CA witness

Power Purchase Agreement(PPA)

Signing of EPC Contract, Loan Agreement, Financial Close

Acceptance Inspection

Certificate ofInspection


Acceptance

Commercial Operation Date (COD)

Regular report on LEPTS


Acceptance

Acceptance

COD

Inspection

Certificate ofInspection

ESMMP andMonitoring

ESMMP andMonitoring

Commencement ofconstruction

Applicationof Inspection(s)

policy guidelines for the implementation of policy on

Documents