China Three Gorges South Asia Investment Limited

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IFC is considering an equity investment of up to US$125 million in China Three Gorges South Asia Investment Limited (“the company” or “CSAIL”), an investment holding company formed in September 2011 that will acquire, develop, build, own and operate renewable power generation projects in Pakistan. The pipeline of CSAIL’s projects described in this ESRS is only indicative at this stage, but IFC participation in subsequent individual investments to be developed by CSAIL is likely. Before investing in any single CSAIL asset to be developed, IFC would undertake further E&S due diligence on that specific project. Even where IFC does not participate in future CSAIL-developed project, the terms of IFC’s equity investment obligate CSAIL to conduct full E&S due diligence of each project under development and to demonstrate compliance of these projects with IFC’s Performance Standards. The primary concern of IFC’s E&S review before making the investment in the CSAIL holding company is to ensure that CSAIL will have the required E&S capacity to meet its obligations on individual projects. Given the advanced state of preparation of the three projects already being developed by CSAIL (enumerated above), a preliminary review of their potential E&S impacts and risks has been possible and is summarized in this ESRS.The company’s current multi-stage project pipeline totals about US$5.5 billion of assets, comprising of solar, wind and hydro projects with a cumulative capacity of over 2,000 MW, including 1820 MW in two large hydro projects. To date, only one (wind) project is under construction; all other projects are at various stages of project identification and/or development. CSAIL aims to become the largest renewable power company in Pakistan. The project marks the entry of a large and experienced sponsor into Pakistan''s electricity market, a sector that is estimated to require investments of US$15-20 billion over the next five years to develop the 10,000MW of additional generation capacity needed to overcome the present supply shortfall.CSAIL is a wholly owned subsidiary of CWE Investment Corporation (“CWEI”) through CWEI Hong Kong Investment Company Limited. Founded in August 2011, CWEI is a wholly owned subsidiary of CTGC and serves as its dedicated overseas investment platform, responsible for investment, construction, operation and management of the international businesses of the state owned China Three Gorges Corporation (CTGC), one of the largest power companies in the world, which owns and operates multi-stage hydro, solar and wind generation projects in China and globally, with a cumulative capacity of over 50,000 MW. Leveraging on the financial strength and technical capabilities of CTGC, CWEI is pursuing the development of hydro, wind and solar generation projects across South Asia, Southeast Asia, Europe, America and Africa. CWEI is also the largest shareholder in Energias de Portugal (“EDP”), an integrated utility company that generates, distributes, and supplies electricity in Portugal and, through EDP Renovaives, is one of the largest wind power producers in the world. CWEI will maintain a majority 51% equity stake in CSAIL. In addition to IFC, other regional and international institutional investors, including development financial institutions, sovereign wealth funds and private equity funds are expected to take minority shareholdings in CSAIL.CSAIL’s renewable power projects currently under development in Pakistan include the following. (a) Three Gorges First Wind Farm Pakistan (PVT) Ltd or “TGF” (a Special Purpose Vehicle (SPV) 90% owned by CSAIL) to develop a 50 MW Three Gorges First Wind Farm Project in Sindh Province. It has 33 wind turbines of 1.5 MW each with 77 meter (m) rotor diameter (85m hub height) manufactured by Goldwind, a large Chinese turbine producer, with total capacity of 49.5 MW. E&S status: The Initial Environmental Examination (IEE) required by Pakistan regulation was approved by Sindh Environmental Protection Agency in February 2011. No Environmental Impact Assessment (EIA) was required under the Pakistan EIA Regulations. Construction started in January 2013 and commercial operation is expected to start in October 2014. The Hyderabad Electric Supply Company LTD (HESCO), one of the nine electricity distribution companies in Pakistan, was requested by TGF to complete construction of a short transmission line to connect the project to the grid by April 2014. The TGF site is located within the Jhimpir Wind Corridor, where multiple wind farms are being developed (including two farms in which IFC has invested) by the Alternative Energy Development Board. Although the IEE was not prepared to meet IFC Performance Standards, TGF is managing the construction phase E&S risks and impacts (occupational health and safety, waste disposal, erosion, transport of heavy equipment, workers accommodations) effectively. No occupational injuries so far at their construction site. (b) Wind Eagle Limited (“Wind Eagle” or “WEL” an SPV 90% owned by CSAIL) to develop a 100 MW wind project in Sindh Province. The project will be developed in two farms (Farm A and B, 50 MW each).E&S status: The site has been identified in the same Jhimpir Wind Corridor as the TGF site. The first version of the feasibility study was conducted in 2013 and an Environmental and Social Impact Assessment (ESIA) is being prepared at this stage. CSAIL will upgrade the ESIA to meet IFC Performance Standards.(c) A 50 MW PV solar power plant called “First 50 MW Solar PV Power Project in Cholistan, Punjab Province”.E&S status: The IEE and EIA were submitted to the Punjab Environmental Protection Agency and were approved in 2012 with a No Objection Certificate. A Project Design Document (PDD) for the Clean Development Mechanism under the United Nations Framework Convention on Climate Change has been prepared for submission. The timing of submission is not determined yet. (d) Karot Power Company (Private) Limited being sponsored 93% by CTGC and 7% by its local partner Associated Technologies (Pvt) Limited (Pakistan) to develop a 720 MW run-of-river Hydroelectric Power Plant. The power house will be located in Punjab Province, and the dam will be built on the Jhelum River. Initially the project was planned by the Pakistan government’s Water and Power Development Authority (WAPDA), but it was taken over by Private Power Infrastructure Board (PPIB), and was awarded to Karot Power Company (Private ) Limited to develop the project. E&S status: The initial ESIA was prepared by a consortium of international and Pakistani consultants in September 2009, based on an original project design consisting of a concrete dam (initially proposed at a height of 91m) and an underground power house. This ESIA was submitted to, and approved by, the relevant environmental authorities in Pakistan in 2010 to 2011. After CTGC took over the project, the project’s design was reviewed and is likely to be modified to use a rock fill dam (98.5m in height) and a surface power house. CSAIL plans to update the ESIA in 2014 to reflect the final design and to meet IFC Performance Standards, including preparation of the Resettlement Plan.(e) The 1,100 MW run-of-river Kohala Hydroelectric Power Plant project. The project company has not been established yet. WAPDA initially identified the project and conducted a feasibility study. PPIB issued a Letter of Interest to the CTGC group in 2009 and the project is in the process of being transferred to CSAIL. E&S status: The initial ESIA was prepared for WAPDA by a consortium of international and Pakistani consultants and was submitted to the relevant environmental authority in 2009. The relevant environmental authority provided initial comments to WAPDA related primarily to the method for determining ecological flow. The project is designed to intake water from Jhelum River and discharge back to the same river at a point downstream. CSAIL, the relevant environmental authority and IFC are of the view that cumulative impact of multiple hydro projects on the ecology and ecosystem services of the Jhelum River is one of the key E&S issues that will need to be considered in the context of the Kohala plant. CTGC’s hydropower engineers are currently working to assess the cumulative impacts and to determine an acceptable ecological flow level for the Kohala project. The ESIA prepared for WAPDA has not yet been transferred to CSAIL. CSAIL will update the ESIA for the project in line with IFC Performance Standards.(f) 300 MW 3rd Wind Farm Project and 50 MW Solar PV Project, both in Sindh Province. A single site has been identified to accommodate both projects, but detailed feasibility studies are still to be conducted. E&S status: CSAIL is communicating with the Alternative Energy Development Board aiming to achieve an early implementation of this project. The site identified for the two projects has not yet been allocated to CSAIL. An ESIA is to be initiated in 2014.