HSBC Bank plc ("HSBC") has requested MIGA to provide coverage for financing of Phase II of a three phased rehabilitation and expansion project of the Cambambe Hydroelectric power station 180 km east of Luanda, Angola. Phase I, which was completed in December 2012, involved the rehabilitation of the four existing turbine generators, which were not operational. Phase II, which the MIGA guarantee will cover, involves the construction of a second powerhouse with four additional turbine generators, initially rated at 120MW each or 480MW in total and construction of a concrete spillway on the basis of a contract awarded to Odebrecht SA of Brazil. Phase III, which is also underway, involves the heightening of the dam wall from 102m to 130m in elevation, which will result in a final capacity of 700 MW, a further increase of 220 MW from the original power plant.

Odebrecht has selected Voith Hydro GmbH & Co. KG ("Voith") of Germany and Elecnor SA ("Elecnor") of Spain as sub-contractors for the provision of mechanical and electrical equipment and services respectively. The total value of the contract to be financed with MIGA's support is EUR560 million and the Ministry of Finance of Angola mandated three banks, HSBC, Societe Generale S.A. and BHF-BANK Aktiengesellschaft, to structure a financing package for the project costs (with HSBC acting as Coordinating Arranger).

The U.S. Government abstained from approving this guarantee.

Risk Categorization

According to MIGA Project documentation, "This project is Category A according to MIGA's policy on social and environmental sustainability, as it has potentially significant adverse social or environmental impacts that are diverse, irreversible, or unprecedented. The rehabilitation and expansion of the existing infrastructure, the increase in the height of the dam wall and associated infrastructure, could potentially result in diverse negative environmental and social impacts related to: landscape, underground water quality, surface water quality, air quality, noise levels, waste water, solid waste, hazardous waste, biodiversity, worker health and safety and communities health and safety during construction and operation. Cumulative impacts on the Kwanza River will be considered."

Applicable Social and Environmental Standards

According to Project documentation:

"While all Performance Standards are applicable to this investment, our current information indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

PS1: Social and Environmental Assessment and Management Systems
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety & Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation & Sustainable Natural Resource Management
PS8: Cultural Heritage

The findings of MIGA's due diligence confirmed that there are no Indigenous Peoples (PS7) impacted by the project."

According to MIGA Project documentation:

"Community engagement during the EIS process was limited to a public hearing which was convened prior to submission of the final EIS. Following the review of the community consultation by SRK, it was concluded that the consultation was not sufficiently comprehensive and therefore revisions to the community engagement plan are required to ensure a complete process of public consultation is followed. This will be completed in the next 6 months. Odebrecht has already begun consultation with the people of Cambambe, Terra Nova and Cambingo villages, the villages closest to the site and directly impacted by the project, through the community development program called 'Chaleno Kiambote." However, engagement with the wider community and the region is limited. A more comprehensive community engagement plan will be developed to include villages further afield. A grievance mechanism for the communities will also be developed."

ENVIRONMENTAL AND HUMAN RIGHTS IMPACT

This project presents a number of potentially serious environmental and human rights impacts. An Environmental and Social Due Diligence report prepared for HSBC by international consulting firm SRK Consulting notes that "An ESIA was prepared by Holisticos in order to fulfil a number of Angolan environmental regulatory requirements". However, the SRK report states that "A number of relatively major changes to the project, notably placing of surplus material (rock) in the Kwanza River (to create a platform for a new access road) and relocation of the surplus materials dump, are neither described nor assessed in the ESIA." The SRK report lists a number of deficiencies that exist between the ESIA on which the Angolan government approved the Project and IFC Performance Standards, the Equator Principles, and the World Commission on Dams and World Bank Safeguard Policy for Dams.

SRK Consulting considers that all of the deficiencies are capable of being remedied, and their report includes a Corrective Environmental and Social Action Plan (ESAP). It will be important, however, both to ensure that remedial actions proposed in the ESAP are adequate, and that they are followed through. Particular areas of concern are listed below.

RIGHT TO A HEALTHY ENVIRONMENT

According to the SVK report:

"Waste treatment and disposal facilities in Angola are known to be inadequate and the fate of many (hazardous) wastes is uncertain, and it is not clear where they will be disposed or to what extent third parties will be used. Limited application of energy and water use efficiency principles is evident;

The series of rapids on the Kwanza River could be regarded as a unique ecosystem under threat from the cumulative impacts of the series of eight dams planned for this reach of the river. Cumulative impacts were not assessed and PS1 is clear that the Project should consider cumulative impacts; and

A number of species registered on Angola's Red List of Endangered Species and on the International Union for Conservation of Nature (IUCN) Red List occur in the area. However, there is no Biodiversity Action Plan or Biodiversity Management Plan, and most efforts are or will be focused on rehabilitation.

Cumulative basin-wide impacts are not considered."

Furthermore, MIGA Project documentation notes that "Based on recent works, approximately 100,000 litres of used oil are produced annually along with approximately 1,000 used filtres."

With these matters in mind, the following questions may be relevant:

• Has the company adequately analyzed the potential environmental impact of its proposed operations?
• What means do you have to seek redress if the environmental impact of the proposed operations become a problem for local communities and/or the local ecosystem?
• Where will solid waste, hazardous waste, and other waste products be disposed of and what impact is this likely to have on the local environment?

RIGHT TO WATER

The SRK report notes that:

"Villagers use the Kwanza River for their water supply. Key economic sectors in the area include agriculture, animal husbandry, hunting, fishing, charcoal burning and some trade. Malaria and waterborne diseases and infections are common in the area.

The river beach, used by residents of Dondo, Alto Dondo and Vila de Cambambe for recreational purposes, drawing water, fishing and for the loading of charcoal onto boats for transport, will be inundated.

Water quality is compliant with World Health Organisation (WHO) standards except for significant levels of bacterial contamination associated with anthropogenic activities and /or discharges on or near the river. High metal concentrations occur on the river beaches, with both cadmium and mercury concentrations above permitted levels. High iron concentrations are likely caused by the dissolution of rocks with high iron content.

A number of relatively major changes to the project, notably placing of surplus material (rock) in the Kwanza River (to create a platform for a new access road) and relocation of the surplus materials dump, are neither described nor assessed in the ESIA" placing of waste rock in the Kwanza River was not anticipated or assessed in the ESIA and is considered a gap. Grievance mechanisms need to be formalised and made known to the community, as well as to workers and sub-contractors. ENE's capacity is difficult to gauge and a program to build capacity and systems is recommended;"

With these matters in mind, the following questions may be relevant:

• Do you have access to water that is safe, affordable and available in sufficient quantity?
• Have you been informed of any potential changes that could affect your access to water?
• Are there mechanisms through which you can file a complaint and/or obtain a remedy when your right to water has been affected?
• Where will wastewater and other effluent be released and what impact is this likely to have on the local environment and water supply?

LABOR RIGHTS

According the SVK Report:

"Labour and workplace health and safety impacts are not included or assessed in the ESIA, but it is evident that Odebrecht has the skills and capacity to ensure sustainable HSE management during construction;

There is no system or audit trail which demonstrates that the EHS guidelines have systematically been incorporated into Odebrecht's management system."

With these matters in mind, the following questions may be relevant:

• Are working conditions at the Cambambe Project safe and healthy?
• Are all employees provided with the protective equipment and training (in a language workers understand) necessary to safely perform the functions of their position, and are workers and managers trained to respond effectively to workplace emergencies?
• Is overtime voluntary, and are workers allowed to leave the premises at the end of a shift?
• If a worker gets injured on the job, what sort of relief can he or she expect from the company and/or contractor?
• Do women receive the same pay as men for work of the same value?
• Are women considered equally for promotion into managerial roles?
• Are workers treated with equality, respect, and dignity?
• Are contracted workers treated with the same respect and afforded the same protections and benefits as employees?
• Are all workers free to form a union and join the union of their choice?

RIGHT TO HOUSING AND PROPERTY

MIGA Project documentation notes that:

"The Cambambe plant is located within 500 metres of Cambambe Village (1,210 inhabitants). There are two other villages within 10 km of the site, including Terra Nova (95 inhabitants and 5 Km away) and Cambingo (207 inhabitants and 10 Km away).The larger town of Dondo, (30,000) inhabitants) is located 11 km downstream of the site."

"Explosions take place [at the Project site] once every 2 days at specified times (07:30, 14:00 and 17:30). The villagers of Cambambe are evacuated to the Cambambe club house during controlled explosions which usually last approximately 30 minutes." There is no discussion in the Project documentation of compensation to villagers for this considerable disruption to their daily lives. With this in mind, the following questions may be relevant:

• Are there human settlements adversely affected by the presence of the Cambambe project?
• Are there mechanisms through which you can file a complaint and/or obtain a remedy when your right to adequate housing has been affected?

RIGHT TO FREEDOM OF EXPRESSION, ASSEMBLY AND ASSOCIATION

According to MIGA Project documentation:

"The project site is fenced and has one main entrance which is controlled by police, the army and private security = 350 army personnel (armed), 200 National Police personnel (armed), and 57 private security personnel (unarmed). Odebrecht security (unarmed) protects equipment and facilities procured by Odebrecht. There are contractual arrangements between ENE and Odebrecht regarding security. Security arrangements are guided by principles of proportionality and Good International Industry Practice (GIIP). A community grievance mechanism will be developed and implemented for all external stakeholders and a procedure will be in place to investigate incidences of unlawful or abusive acts of security personnel."

Considering this heavy security presence (a total of more than 500 personnel, compared to a village of a little over 1,000 people), the following questions may be relevant:

• Have you ever been physically abused?
• Have some groups in your community ever been specifically targeted for physical abuse?
• Have women ever been targeted for physical abuse?
• Have you ever been arbitrarily arrested and/or detained?
• Has the company inquired about possible cases of arbitrary use of force, arbitrary arrest and/or detention (by the police, government security forces, paramilitary forces, private security forces, armed groups, mercenaries, etc.) in the planned investment project area?
• Are you able to freely give out, seek or receive information or ideas (including information or ideas about the company and/or the planned investment project)?
• If you believe that the planned investment project could affect your right to freedom of opinion and expression, is the government aware of the situation?

This summary covers financing by HSBC Bank Plc. and other international lenders to be identified to the Ministry of Finance of Angola for the expansion of the Cambambe hydroelectric power station. The lenders have applied for MIGA guarantees of up to $470 million ($605 million equivalent) covering their non-shareholder loans including interest. The coverage is for a period of up to 15 years against the risk of non-honoring of sovereign financial obligations.

The U.S. Government abstained from approving this guarantee.

*No contacts available at time of writing

CONSULTATION PROCESS

The SVK report notes that "the Public Consultation and Disclosure Plan (PCDP) and stakeholder engagement may have satisfied Angolan requirements, but are considered deficient in terms of Good International Industry Practice (GIIP). Early and prior disclosure to all parties did not occur and/or was inadequately documented, and was not sufficiently ongoing; and a grievance mechanism for the community is not adequately defined, documented and disclosed."

ACCOUNTABILITY MECHANISM OF MIGA

The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/