Measures to improve environmental and social performance

GET FiT expectations
Projects are expected to comply with national regulations as well as international standards, particularly the environmental and social Performance Standards (PS) of the International Finance Corporation (IFC). The IFC PS act as a global benchmark and are widely applied by international financing institutions, which also make these a convenient common reference point in multi-donor funded initiatives. The standards are widely applied by private investors seeking international finance. Importantly, the Ugandan regulations and the IFC PS overlap greatly. GET FiT acknowledges that compliance with these requirements is a demanding process. 


Environmental and social performance
GET FiT has experienced that most of its project developers have limited practical experience with both Ugandan regulations and particularly IFC PS. Also, developers have often been unable to scrutinise and recruit capable consultants and thereafter guide the consultants. 

It is important to note that some developers have made considerable progress over the past 1-2 years. This progress illustrates that commitment to integrate these issues into projects can produce beneficial results for local people and for nature. However, there is still considerable variation in terms of internal developer capacity to manage environmental and social issues, as well as variation among the competence of their consultants.

The first GET FiT request for proposals (RfP1) saw an average score of 57 % on environmental and social issues. Several projects scored below the 50 % cut off and were not approved. RfP2 saw an average score of only 45 %, probably because some of the more mature projects were approved in RfP1, while some less mature projects with poor project documentation applied in RfP2. The average score of 61% in RfP3 was a thus a positive surprise.

 

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Figure 7 – Average E&S scores in RFP round 3.
 

It is worth noting that some applicants (developers) in RfP3 had experience from projects in RfP1 or RfP2, as did their consultants. Some of these developers addressed environmental and social risks more competently and proactively in their RfP3 projects, which resulted in higher scores. At the same time it should be noted that some technically and economically attractive projects in RfP3 failed on the environmental and social score and were therefore not approved by the GET FiT Investment Committee.


Conditions precedent
Low environmental and social scores resulted in GET FiT approvals with extensive conditions precedent (CPs). CPs were most frequently concerned with preparing more practical and specific environmental and social management plans, including resettlement action plans and livelihood restoration plans. Aquatic ecology studies, including assessments of environmental flows, were another recurring weakness in the project documentation. In total, more than 50 environmental and social CPs have been defined by the GET FiT Investment Committee across the three RfPs. Slightly more than half of these CPs had been cleared by the end of 2015.

The large number of CPs and the overall moderate environmental and social capability of project developers continue to require more resources from the Program than anticipated, as projects require considerable follow up.


Environment and social workshop
Building on experiences from the two GET FiT environment and social workshops in June 2014, GET FiT organised a very well attended two-day workshop for hydropower developers and their consultants in Kampala, 19-20 October 2015. The Electricity Regulatory Authority (ERA) and the Directorate of Water Resources Management (DWRM) also participated in the workshop and gave valuable advice to projects. 

The purpose of the workshop was to improve developers’ ability to manage a selection of priority environmental and social issues during project construction, the project phase most projects are now going into. Ultimately, this increases the chances of projects reaching the commercial operation date in a timely manner. Issues covered in the workshop were informed by a small survey among project developers prior to the workshop. Some findings from this survey are included in the text box below. Back-to-back with this workshop, developers were offered bilateral meetings with the GET FiT Implementation Consultant to discuss project specific issues in more depth. 

In addition to the workshop, the GET FiT Implementation Consultant has continued to follow up developers through document reviews, discussions, meetings and supervision visits.
 

Some results from an environmental and social survey among GET FiT project developers
 
  • The majority of developers did not have pre-GET FiT experience from external due diligence with reference to IFC Performance Standards.
     
  • Developers need support to develop good ToRs for baseline studies, ESIA, ESAP, RAP, LRP and monitoring plans.
     
  • Developers need support to manage community expectations and relations.
     
  • GET FiT technical support through reviews, comments and at times assistance in resolving specific issues beyond review and comments had been helpful to developers.
     
  • Due diligence processes by lenders had been facilitated and aided due to GET FiT.
     
  • Progress could have been faster if GET FiT had adopted more of a facilitation role and engaged with developers beyond review and comments.
     
  • There is considerable variation among projects in terms of the degree to which lenders do environmental and social due diligence.
     
  • Rough budget estimates indicate very large variations in budget for environmental and social studies between projects.


Revocation of support on environmental and social grounds
One of the bagasse co-generation projects had their GET FiT approval of support revoked in second half of 2015. This 6.9 MW project was approved by the Investment Committee in March 2014 with several associated conditions precedent. 

After a lengthy process of trying to improve management of a range of environmental and social risks, and despite external support provided to the project through the KfW-supported UECCC project preparation facility in form of studies and development of various management plans, the developer failed to adequately integrate important measures into project operation and ensure compliance with regulations and standards.

At the time when the recommendation to revoke support was made, not all the necessary Ugandan approvals related to environment and water resources were in place. For some of the approvals that had been secured, important conditions had not been met. Compliance with the IFC Performance Standards was not a management priority when it came to the actual operation of the project. GET FiT did not see adequate engagement and commitment by the developer to address the practical and operational aspects and considered it unlikely that the project would become compliant with the expected standards in the relatively near future.

The GET FiT Steering Committee thus decided to revoke the GET FiT support.