PDD 8MW Cabulig River Minihydroelectric Power Project

PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) - Version 03
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CLEA DEVELOPMET MECHAISM
PROJECT DESIG DOCUMET FORM (CDM-SSC-PDD)
Version 03 - in effect as of: 22 December 2006

COTETS

A. General description of the small scale project activity

B. Application of a baseline and monitoring methodology

C. Duration of the project activity / crediting period

D. Environmental impacts

E. Stakeholders comments

Annexes

Annex 1: Contact information on participants in the proposed small scale project activity

Annex 2: Information regarding public funding

Annex 3: Baseline information

Annex 4: Monitoring Information


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Revision history of this document

Version
Number
Date Description and reason of revision
01 21 January
2003
Initial adoption
02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect
guidance and clarifications provided by the Board since
version 01 of this document.
As a consequence, the guidelines for completing CDM SSC
PDD have been revised accordingly to version 2. The latest
version can be found at
<http://cdm.unfccc.int/Reference/Documents>.
03 22 December
2006
The Board agreed to revise the CDM project design
document for small-scale activities (CDM-SSC-PDD), taking
into account CDM-PDD and CDM-NM.

SECTIO A. General description of small-scale project activity

A.1 Title of the small-scale project activity:

8 MW Cabulig River Mini-Hydroelectric Power Project
Document Version 2.0
Date Completed: March 23, 2010

A.2. Description of the small-scale project activity:

The proposed project is a mini-hydroelectric power project located in northern Plaridel, Misamis
Oriental, about 30 kilometers northeast of Cagayan de Oro City in Mindanao Island (see Figure 1). The
plant will have a nominal installed capacity of 8.0 MW and a projected yearly average generation of
49.253 Gigawatt hours (GWh). The main components of the run-of-river type hydropower plant
includes a low concrete dam to allow the diversion of water onto the headworks, an intake weir, headrace
canal, forebay and desilting basin, penstock, a powerhouse that encloses two (2) Francis-type turbines
connected to two (2) generators, and a tailrace canal.

The purpose of the Project is to produce clean renewable energy by harnessing the waters of the Cabulig
River to generate electricity. The resulting power will be exported to the Mindanao grid via
interconnection with the distribution lines of the Cagayan Electric Power and Light Company, Inc.
(CEPALCO) located in Barangay Natubo, Jasaan, Misamis Oriental. By doing so, the Project is
expected to displace 223,736 tons of carbon dioxide equivalent (tCO
2
e) in the first 7-year crediting
period, generating an equivalent amount of certified emission reductions (CERs).

The project proponent for the Cabulig river mini-hydroelectric power project is Mindanao Energy
Systems, Inc. (MINERGY), an Independent Power Producer (IPP) established in 1992. Under an Energy

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Conversion Agreement approved by the Energy Regulatory Board, MINERGY partially supplies the
power requirements of its sole customer and part-owner, the Cagayan Electric Power & Light Company,
Inc. (CEPALCO). The balance of CEPALCOs power needs is sourced from National Power
Corporation (NPC). CEPALCO is the electric distributor serving Cagayan de Oro City and the
municipalities of Tagoloan, Villanueva and Jasaan in Misamis Oriental.

The project activity will contribute to the sustainable development of the country in the following ways:
Promote the use of an indigenous and renewable energy resource for power generation that helps
reduce the countrys reliance on imported fuel, thereby enhancing the overall energy independence
of the region and country, in general;
Optimize the use of natural resources through clean technology that avoids emissions of harmful
gases or effluents;
Employ run-of-the-river technology that minimizes negative impacts to the surrounding environment
commonly associated with hydroelectric projects having large dams and reservoirs, such as
displacement of local residents and modifications to the natural drainage system of the area;
Contribute to social and economic development for the local residents and the Indigenous People
Community through the creation of direct and indirect jobs during construction and operation,
investments in businesses and local services, increases in local government tax revenues, and
implementation of social and livelihood development activities by the project developer.

A.3. Project participants:

ame of Party Involved
Private and/or Public
Entity(ies) as Project
Participants
Kindly indicate if the Party
involved wishes to be
considered as a Project
Participant
Republic of the Philippines Mindanao Energy Systems, Inc. No
(*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of
validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by
the Party(ies) involved is required.
Note: When the PDD is filled in support of a proposed new methodology (forms CDM-BM and CDM-MM), at least the host
Party (ies) and any known project participants (e.g. those proposing a new methodology) shall be identified.

A.4. Technical description of the small-scale project activity:

A.4.1. Location of the small-scale project activity:

Cabulig River, Plaridel, Claveria, Misamis Oriental, Mindanao Island, Philippines

A.4.1.1. Host Party(ies):

Republic of the Philippines

A.4.1.2. Region/State/Province etc.:

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Northern Mindanao / Misamis Oriental

A.4.1.3. City/Town/Community etc:

Municipality of Claveria

A.4.1.4. Details of physical location, including information allowing the
unique identification of this small-scale project activity :

The 8 MW Cabulig River Mini-hydroelectric Power Project is situated in northern Plaridel within the
municipality of Claveria, Province of Misamis Oriental. The power plant is located about 3 kilometers
north of Baranggay Plaridel and approximately 12 kilometers northeast of the mouth of the Cabulig River
at Macajalar Bay (see Figure 2). The dam site is located about 3 kilometers upstream of the powerhouse
and 500 meters downstream of the confluence of the Gumpot Creek and Cabulig River.

Table 1. Geographical coordinates of the power plant and dam site.
Power plant Dam / Intake Site
Latitude 8 4130 8 4120
Longitude 124 4845 124 5015

The Cabulig river system is located at the periphery of Central Cordillera Mountain Range and Lanao-
Bukidnon Plateau. The entire length of the river is estimated to be about 40 kms from the headwaters at
Mt. Sumagaya and Balatukan Range to the east and flows towards the west before discharging into the
Macajalar Bay. The river drains a relatively steep topography, with a total watershed area of about
24,951 hectares and with an estimated annual runoff of 597 million cubic meters.

Figure 1. Regional location of the proposed project.


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Figure 2. Satellite photo showing the location of the proposed power plant and dam/intake site.

A.4.2. Type and category(ies) and technology/measure of the small-scale project activity:

The Project falls into the following type and category:
Type I : Renewable Energy Projects
Category D : Electricity generation for a system.

The traditional run-of-river hydropower generation technology will be adopted, utilizing a low head dam
to achieve an effective head of 58 meters and a flow rate of 13 cubic meters per second. The flow of
water is conveyed onto a 15-m high diversion weir structure and through a 3-km open channel
conveyance and penstock. The powerhouse will host 2 Francis turbines with an approximate total
installed capacity of 8 MW.


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Figure 3. Schematic diagram of proposed development plan for the Cabulig hydro project.

A 10MVA, 13.8kV/34.5kV, 3-phase substation facility will be constructed near the powerhouse to
convey electricity from the Project to CEPALCOs 34.5kV distribution lines located 10 kilometers away
at Barangay Natubo, Municipality of Jasaan. Ultimately, the CEPALCO distribution lines will connect
to CEPALCOs 69kV/34.5kV substation facility that is interconnected to the 138/69kV transmission
facilities of Mindanao Grid, owned and operated by TRANSCO.

A.4.3 Estimated amount of emission reductions over the chosen crediting period:

A 7-year crediting period, renewable for 3 crediting periods, has been selected. The first crediting period
is expected to run from 1 May 2011 to 30 April 2018.

Table 2. Estimated Emission Reductions during the First Crediting Period.
Years
Annual estimation of emission reductions
(tCO
2
e)
2011 (01 May to 31 December 2011) 21,308
2012 31,962
2013 31,962
2014 31,962
2015 31,962
2016 31,962
2017 31,962
2018 (01 January to 30 April 2018) 10,654
Total estimated reductions (tCO
2
e) 223,736
Forebay Spillway
Closed conduit
Dam
Silt Trap
Bench Flume
Powerhouse
Penstock
Spillway
500 0 500 1000 1500 2000
SCALE
Forebay Spillway
Closed conduit
Dam
Silt Trap
Bench Flume
Powerhouse
Penstock
Spillway
500 0 500 1000 1500 2000
SCALE
500 0 500 1000 1500 2000
SCALE

Meters

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Total years of the first crediting period 7
Annual average over the first crediting
period of estimated reductions (tCO
2
e)
31,962

A.4.4. Public funding of the small-scale project activity:

The Project has not received and is not seeking any type of public funding or public financial help.

A.4.5. Confirmation that the small-scale project activity is not a debundled component of a
large scale project activity:

Following Annex C of CDM Small Scale Modalities and Procedures, the Project is not considered to be a
debundled component of a large project activity because there is not a registered small-scale CDM
project activity or an application to register another small-scale CDM project:
with the same project participants;
in the same project category and technology/measure;
registered within the previous 2 years; and,
whose project boundary is within 1 kilometer of the project boundary of the proposed small-scale
activity at the closest point.

Hence, the Project is eligible as a small-scale CDM project and can use the simplified modalities and
procedures for small-scale CDM project activities.

SECTIO B. Application of a baseline and monitoring methodology

B.1. Title and reference of the approved baseline and monitoring methodology applied to the
small-scale project activity:

The approved baseline and monitoring methodology applied to the project is:
TYPE I Renewable Energy Project
AMS I. D. Grid connected renewable electricity generation (V. 15, EB 50, October 2009)

B.2 Justification of the choice of the project category:

The Project conforms to the above category because it is a power plant that will supply electricity from a
renewable energy resource to a grid and which will displace part of the electricity otherwise supplied by
fossil fuel-fired power plants. The project involves the construction of a reservoir with an area of 67,000
sq. m.
1
, and a power density of 119 W/m
2
, accordingly. As the power density is calculated above 4
W/m
2
, the project activity satisfies the conditions under the chosen project category and is therefore
eligible to apply said methodology. The Projects installed capacity is 8.0 MW and will not increase
beyond 15 MW over time and will comply with CDM rules for small-scale project activities every year

1
The reservoir area was determined using topographic map analysis and GIS techniques by the Engineering and Development
Corporation of the Philippines (EDCOP).

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over its 21-year crediting period. In addition, the Project is not a de-bundled component of a larger
project activity, as explained in Section A.4.5.

The chosen baseline calculation method following AMS I.D. (V. 15, EB 50, October 2009) is the
combined margin (CM) approach, consisting of the average of operating margin (OM) and build margin
(BM), following the latest version of the Tool to calculate the emission factor for an electricity system
(Version 2.0, EB 50). The calculation of the Operating Margin emission factor for Mindanao was
determined using the Simple Adjusted OM analysis method.

B.3. Description of the project boundary:

The project boundary, as specified in the methodology AMS I.D. (V. 15, EB 50, October 2009),
encompasses the physical, geographical site of the renewable generation source. Thus, the project
boundary is the area of the Project site, where the 8 MW Cabulig River Mini-hydroelectric Power Project
and its substation are located. Since the Project's facilities will reach the Mindanao grid via
interconnection with CEPALCOs distribution line and substation, the Mindanao Grid is included in the
projects boundary. Currently, no interconnection exists between the Mindanao and Luzon-Visayas
grids.

B.4. Description of baseline and its development:

The Project will generate electricity without emitting GHGs and supply it to the Mindanao grid,
displacing fossil-fuel based electricity generation that would otherwise be supplied to this grid.

The formula used to estimate the anthropogenic emissions by sources of GHGs in the baseline is detailed
in section B.1, with additional substantiating data provided in Annex 3 on Baseline Information. The
Projects baseline emissions calculation is drawn from guidance in Small-scale Methodology AMS I.D.
(V. 15, EB 50, October 2009), for a system where not all generators use exclusively fuel oil and/or diesel
fuel. Following this baseline methodology, the Project uses the combined margin approach according to
the Tool to calculate the emission factor for an electricity system. Based on these procedures, the
Project is estimated to generate 223,736 tCO
2
e of ERs during the initial 7-year crediting period. A
detailed analysis of additionality is presented in section B.5.

B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below
those that would have occurred in the absence of the registered small-scale CDM project activity:

Demonstration and assessment of additionality of the project activity shall be carried out following the
Attachment A to Appendix B of the simplified modalities and procedures for small-scale CDM project
activities. The following barriers are presented to illustrate why the project would not have occurred in
a business-as-usual case and, therefore, is additional.

Investment Barrier
Investment costs associated with hydroelectric power plants are significantly higher than those of fossil
fuel-fired thermal power plants. The table below compares the turnkey cost associated with hydroelectric
power plants and other viable power generation alternatives that are available in the Philippines.


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Table 3. Cost comparison by technology.
Simple Cycle Gas Turbine Diesel Engine Small / Mini-Hydro
Boyce
2

(2006)
World Bank
3

(2006)
Boyce
(2006)
World Bank
(2006)
Boyce
(2006)
World Bank
(2006)
Cabulig
River MHPP
Size Range
(MW)
0.5 450 50 0.02 25.00 5.00 0.02 1.00 5.00 8.00
Capital Cost
No heat
recovery
($/MW)
300,000 to
650,000
490,000
200,000 to
500,000
600,000
750,000 to
1,200,000
1,800,000 1,404,385*
*Does not include contingencies

In the case of Cabulig, the projects capital cost is about 116% higher than the maximum cost for a
simple cycle gas turbine or diesel engine investment. Estimates from Boyce (2006) and the World Bank
(2006) studies confirm that mini-hydro power projects have a higher capital cost than conventional
fossil-fired power schemes. Thus, it is clearly demonstrated that when taking into account the investment
cost, building a natural gas or a diesel plant is more cost-effective, and thus would be the preferred
choice from a rational investors standpoint, rather than building a mini-hydro power plant.

In addition to barriers posed by capital costs, the project activity also faces a financial barrier with
respect to return on investment. To establish this conclusion, the Project IRR was calculated in order to
provide a comparison with established norms and expectations in the Philippines for comparable
investment projects. The assumptions used in the analysis are given in the table below.

Table 4. Financial Details (Source: Project Proponent).
Item Value
Foreign exchange rate (PhP / 1USD) 53.00
Investment Cost (PhP) 729,602,000
Annual net generation (kWh)
4
49,253,083
Electricity Price (PhP/kWh)
5
2.5277
Annual Electricity sales (PhP) 124,497,000
O&M costs/yr 25,648,000
Corporate Tax
6
32.00%
Franchise Tax
7
2.00%
Project life 30 Years
Project IRR 10.89%

2
Source: Meherwan P. Boyce, Ph. D., P.E. (2006): Gas Turbine Engineering Handbook,3
rd
ed., p. 4
3
Source: The World Bank Group, September 2006, Technical and Economic Assessment of Off Grid, Mini-Grid, and Grid
Electrification Technologies Summary Report, Energy Unit, Energy and Water Department, 155 pages.
(http://siteresources.worldbank.org/EXTEERGY/Resources/336805-
1157034157861/ElectrificationAssessmentRptAnnexesFIAL17May07.pdf
4
Technical Feasibility Study Report for Cabulig River Mini-hydro Plant by ITPower, Table 25, page 69
5
Electricity tariff is benchmarked on the ERC approved grid rate for Mindanao at the time of investment decision (ov 2008),
http://www.napocor.gov.ph/Power%20Rates/eff_rates_for_mindanao_grid.htm
6
Chapter 4, Sec. 27 of Republic Act o. 8424 http://www.chanrobles.com/legal6nationalinternalrevenuecodeof1997.html
7
As provided by Sec 36 of EPIRA, http://www.doe.gov.ph/E-
desk%20web/energy%20savings%20&%20safety%20tips/English%20Brochures/Unbundling%20of%20Rates.pdf

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According to the Methodological Tool, discount rates and benchmarks shall be derived from Government
bond rates, the estimated cost of financing, the required return on capital, or company internal
benchmarks. The project sponsor uses an internally established Weighted Average Cost of Capital
(WACC) of 13.45% to serve as a benchmark to measure the feasibility of all its projects. However,
evidence is unavailable to further substantiate how the company WACC was derived.

By nature, the investment analysis of greenfield power generating projects are specific to each project
and there is no commonly accepted financial benchmark. Equity investment in a greenfield, run-of-river
hydroelectric generating plant, involves much more risks including, but not limited to, equity risk, water
resource risk, early stage development risk, counterparty payment risks and specific country risk. These
risks force the projects equity investors to require significantly higher returns than the risk-free
government bond. As many of these risks are project and investor specific, it is difficult to provide a
commonly calculated benchmark risk premium, except for applying non specific commonly used
investment risk premium. In general, a risk-free rate is established and risk premiums added on to
account for investment specific risks. The base risk-free rate is usually associated with investment in US
Government securities, i.e. US Treasury bonds/bills. The risk free rate for this purpose is 3.53%
8

(November 18, 2008). Once established, country and equity premiums are added to the risk-free rate.
For the Philippines, the country risk premium over and above the US risk-free rate is 9.75%
9
and the
generally accepted risk premium for a mature/transparent equity market would be between 3.00% and
6.00%
10
. The Philippine risk-free rate would then equate to 13.28% and the resulting equity benchmark
return would be from 16.28% to 19.28%.

For the purposes of this PDD, and to be conservative, the project sponsor starts with the 10-year
Philippine Government bond rate of 8.875%
11
. As this is an objective rate offered in the Philippines, this
may serve as the risk-free return benchmark. For a renewable energy project with greater uncertainty
than a conventional energy project, but to remain conservative, a risk premium is added, which is taken
from the historical country risk classification rates
12
published since 1999 by the Organization for
Economic Cooperation and Development (OECD), and is given as 4.000% at the time of investment
decision. As a result, an investor in the Philippine equity market should require a conservative minimum
return before specific project risks (i.e. resource, development, counterparty, etc.) of 12.875%.

The Project IRR is compared to the benchmark to examine the financial attractiveness of the project.
From Table 4, the Project IRR of 10.89% compares poorly to the 12.875% expected return. The low IRR
illustrates that the Project is not financially attractive without CDM assistance and that the low return
does not justify taking high risks associated with implementing this new renewable energy project. Based
on this analysis in approximately November 2008, the project sponsors determined that they could not
proceed with the project in the absence of CER revenues to increase the financial viability.

8
http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield_historical_2008.shtml
9
http://www.stern.nyu.edu/~adamodar/pc/archives/ctryprem08.xls
10
http://www.stern.nyu.edu/~adamodar/pdfiles/papers/ERPfull.pdf
11
http://www.bsp.gov.ph/statistics/sdds/sddstbond.htm
12
http://www.oecd.org/dataoecd/9/12/35483246.pdf, page 41

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A sensitivity analysis was performed to measure the impact of positive or negative changes in the
specific performance parameters related to the projects performance. The three key parameters
examined were investment costs, revenue, and O&M costs. The sensitivity analysis showed that
beneficial changes of 10% would not result in a project IRR that is close to or reaches the hurdle rate of
12.875%. The sensitivity on the pessimistic side of the same parameters also results in very low returns.

Table 5. IRR sensitivity analysis
Base +10% inv. -10%inv. +10% rev. -10%rev +10% O&M -10%O&M
10.89% 9.73% 12.29% 12.47% 9.28% 10.56% 11.22%

The sensitivity parameters were further iterated to determine the level at which they would enable the
project to reach the 12.875% benchmark; the results are summarized in the table below:

IRR Marginal at:
Investment Revenue O & M
-14% 13% -61%

In practical terms, the probability of reaching this level of change in any of these individual parameters is
considered to be impossible because:

i) The project investment cost required to reach the benchmark was calculated taking into account
quotations for the major technical components that represent the most economical market prices
to make the project financially feasible. These capital expenditures have already been budgeted
as part of obtaining upper management approval of the project. A reduction of 14% in basic
capital costs is simply not considered to be attainable for a hydropower project, where the
majority of capital costs represent years of project experience and cost containment.
ii) Revenue is closely associated with electricity price, and the iteration showed that a 13% increase
would be required to reach the benchmark. As the electricity price is a function of all units in
service in a given grid, it is not expected to increase dramatically. Further, this iteration would
assume that an immediate increase of 13% would occur, which is not considered possible under
even very pessimistic economic assumptions.
iii) O&M cost variations within a reasonable range do not have a significant effect on the Project
IRR; i.e. zeroing out the O&M budget entirely does not have a significant impact on financial
returns, and does not approach the benchmark. As O&M costs are based on decades of
experience, reducing O&M coverage by a significant amount would impact the sustainability of
the project much more than it would increase IRR. Removal of all O&M is not possible and is
not realistic.

It can be concluded that the Project is not financially attractive for the project developer without CDM
benefits, and requires additional revenues from the sale of CERs to become viable. The project developer
decided to proceed with the 8MW Cabulig River Mini-hydro Power Project as a CDM activity not only
because CDM revenues would make the Project more financially attractive, but also because the CDM
status would highlight the Projects environmental attributes in the Mindanao region.

Barriers due to prevailing practice

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Prior to 2001, the prevailing practice in the Mindanao Grid was the construction of thermal power plants
or large-scale hydroelectric power. All of the large hydroelectric plants in Mindanao, with installed
capacities ranging from 40 to 255 MW, are government-owned
13
and were constructed with the aid of
special loan agreements. The only project activity that is comparable to the existing large hydro projects,
and which received CDM status on 06 June 2008, is the Hedcor Sibulan 42.5 MW Hydroelectric Power
Project. In contrast, hydroelectric plants below 15MW accounted for only 1% of the total installed
capacity in Mindanao Island.

The Philippines began its own process of power industry restructuring and deregulation with the passage
of Republic Act No. 9136 otherwise known as Electric Power Industry Reform Act of 2001 (EPIRA)
14
in
2001. It was expected that with EPIRA, a greater reliance on competition and market forces in the
generation sector would increase efficiency and enhance investment. However, since the implementation
of the EPIRA, the only major power investment in Mindanao Island has been the 232 MW coal-fired
power plant of STEAG State Power Inc. under a Build-Operate-Transfer (BOT) scheme with NPC
(Table 7).

Table 7. Capacity additions to the Mindanao Grid since 2001.
Plant ame
Installed Capacity
(MW)
Plant
Classification
Date
Commissioned
Mindanao Coal II 116 Coal Nov. 2006
Mindanao Coal I 116 Coal Sept. 2006
PB104 32 Diesel (Barge) 2005
Solar 1 Solar 2004
Source: Department of Energy Power Statistics, 2007

Based on the Philippine Energy Plan which shows the demand-supply outlook for 2005-2014 (see Figure
3), the Department of Energy (DOE) reported that Mindanao would experience a significant power
deficiency beginning in 2009. Due to a lack of investor interest, and amidst a looming power crisis in the
south, government planners determined to address the low reserve margin and capacity shortfall by
transferring diesel power barges and through promotion of the 232 MW coal plant as these plants were
viewed as having a lower initial capital cost than hydropower. The shift towards thermal power plants,
regardless of their emission impact, was viewed as a quick remedy in mitigating the energy crisis in
Mindanao, and has impacted heavily on the future of hydropower development in the region.

13
http://www.napocor.gov.ph/2007Annual/PC2007AR.pdf, page 33
14
http://www.doe.gov.ph/popup/RA%209136.pdf


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MW
0
500
1000
1500
2000
2500
3000
Req'd Cap Add. 150 100 100 50 50 50 50 100 50 150
Committed 75 0 210 0 0 0 0 0 0 0
Existing 1515 1566 1681 1681 1681 1681 1681 1681 1681 1681
Peak Demand 1,371 1,458 1,535 1,615 1,697 1,784 1,883 2,001 2,124 2,256
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
SUPPLY DEMAND PROFILE SUPPLY DEMAND PROFILE
Mindanao, 2005 2014
Mindanao Coal 200 Transfer of PB
101, 103 & 104
Additional Capacity Needed

Figure 3. Power supply and demand profile for Mindanao Grid
Source: Philippine Energy Plan (2005-2014), PDOE

OTHER BARRIERS
Terrorism: Mindanao has been saddled with long-standing problems of economic underdevelopment;
ethnic and religious divides; unmet demands for autonomy, social, political and cultural rights; as well as
faced with an increasingly fragmented armed secessionist movement that includes varying political
demands
15
. The region has also been perceived as the second frontline of the terrorism battlefield with 4
Muslim rebel groups: 1) the Moro National Liberation Front (MNLF); 2) Moro Islamic Liberation Front
(MILF), a Muslim separatist group from the ruling MNLF; 3) the Abu Sayyaf, a fundamentalist Muslim
group; and 4) Jemaah Islamiyah, a regional organization with ties to al Qaeda, posing challenges to the
government of a predominant Catholic population
16
. Together, the Minority Muslim groups and
communist insurgencies two of the world's longest-running conflicts have killed at least 160,000
people and have displaced up to 2 million people since 1970
17
. Armed conflicts will continue to haunt
Mindanao as long as the interest of the ruling Muslim parties is not satisfied. Mindanao is therefore
viewed by many Filipinos and foreigners as a dangerous place. With only 3 energy projects established
during the last 7 years, the on-going conflict continues to be a serious impediment in improving
Mindanaos business climate and threatens to prolong the entry of private investors to the region.
Development projects and businesses located in remote areas (such as the proposed project) are most
vulnerable to attacks and extortion where rebel, communist, and/or militant Islamic groups operate.

Because investing in more financially viable alternatives than the project would have led to higher
emissions, the Project is considered to be additional according to Attachment A to Appendix B of the
Simplified Modalities and Procedures for small-scale CDM project activities.

Prior Consideration of CDM

15
http://www.asiasource.org/asip/mindanao2004.cfm
16
http://www.ploughshares.ca/libraries/ACRText/ACR-PhilippinesM.html
17
http://www.alertnet.org/db/crisisprofiles/PH_SEP.htm?v=in_detail

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Representatives of the project proponent were made aware of CDM sometime in June 2007 during the
Asian Clean Energy Forum sponsored by the Asian Development Bank. The chronology of events
shown below presents how due consideration of the benefits of CDM was taken into account and real
action to develop and implement the proposed project under the CDM facility:

Date Activity
31 Jan 2008 MINERGY requests ahlcarbono to send a proposal to register proposed project to the
CDM facility.
27 Mar 2008 Ahlcarbono makes a presentation to MINERGY about the CDM process
17 Jun 2008 MINERGY signs Contract to Provide Consulting Services with ahlcarbono
30 Nov 2008 MINERGY sends advertisement calling for bidders for the EPC contract of the Cabulig
MHPP
27 Feb -
28 Mar 2009
PDD webhosted at UNFCCC website for comments
03 Mar 2009 Minergy submits CDM Letter of Intent (LOI) to the DNA
19 Jun 2009 Letter of Approval (LOA) granted to MINERGY by the Host Country through the DNA
06 Nov 2009 MINERGY signs contract with Sta. Clara International Corp. for the civil works
construction of the project signifying start of project activity

B.6. Emission reductions:

B.6.1. Explanation of methodological choices:

In accordance with the Baseline Methodology (AMS I.D., V. 15), the emission reductions are calculated
in the following manner:

ER
y
= BE
y
PE
y
LE
y
(1)

Where:
ER
y
= Emission reductions in year y (tCO
2
e/y)
BE
y
= Baseline Emissions in year y (tCO
2
e/y)
PE
y
= Project emissions in year y (tCO
2
/y)
LE
y
= Leakage emissions in year y (tCO
2
/y)

Project Emissions
The proposed activity will not give rise to project emissions, as no fossil fuel will be combusted in the
project activity. Likewise, as prescribed in paragraph 14 of the baseline methodology, due consideration
has been made for emissions from hydro-electric power project activity that result in new reservoirs,
following the procedure described in the most recent version of ACM0002 (V.11, EB52). Since the
project activity involves the construction of a reservoir with an area of 67,000 sq. m., this would result to
a power density of 119 W/m
2
. As per the latest version of ACM0002, if the power density of the project
activity is greater than 10 W/m
2
, PE
y
= 0.

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Leakage
Per paragraph 15 of the methodology, if the energy generating equipment is transferred from another
activity, leakage is to be considered. As no equipment transfer occurs for the proposed activity, no
leakage emissions is identified for the project (LE
y
= 0).

Baseline Emissions
Following paragraph 10 of the methodology, the baseline emissions are calculated by multiplying the
kWh of electricity produced by the renewable generating unit by an emission factor.

BE
y
= EG
BL,y
EF
CO2
(2)

Where:
BE
y
= Baseline Emissions in year y (tCO
2
)
EG
BL,y
= Energy baseline in year y (kWh)
EF
CO2
= Emission Factor in year y (tCO
2
e/kWh)

Paragraph 11 of the baseline methodology states that the Emission Factor be calculated in a transparent
and conservative manner, either as:

(a) A combined margin (CM), consisting of the combination of operating margin (OM) and build
margin (BM) according to the procedures prescribed in the Tool to calculate the Emission
Factor for an electricity system.
OR

(b) The weighted average emissions (in kg CO2e/kWh) of the current generation mix. The data of
the year in which project generation occurs must be used.

The Emission Factor for this project activity is therefore calculated as a combined margin (CM) emission
factor, consisting of the combination of operating margin (OM) and build margin (BM) emission factors.
Calculations are based on data from official sources and can be made publicly available.

Operating Margin (OM) Emission Factor
The calculation of the operating margin emission factor is based on one of the following methods:
a) Simple OM
b) Simple adjusted OM
c) Dispatch Data Analysis OM
d) Average OM

The Dispatch Data Analysis OM, which should be the first methodology of choice, can not be used
because hourly dispatch data and dispatch order is not publicly available in the Philippines.

The Simple OM methodology would be the next option and is used if the low-cost/must-run resources
are less than 50% of the total grid generation in either: 1) the average of the five most recent years, or 2)
based on long-term averages for hydroelectricity production. For the Mindanao grid, the low-cost/must-

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run resources make up 69.44%, or more than 50% of the total grid generation (see Table A3-1, page 33).
Therefore, this methodology can not be applied. The remaining options are simple adjusted OM and
average OM. The average OM method is the option to choose only when all the others cannot be
applied.

Therefore, the method selected to calculate the operating margin emission factor is the Simple Ajusted
OM based on the following justifications: a) low cost/must-run resources constitute more than 50% of
the total grid generation, and b) chronological load data for each hour of the year is available.

The simple adjusted OM emission factor is calculated ex-ante, using a 3-year generation-weighted
average based on the most recent data available at the time of submission of the CDM-PDD (ex-ante
Option).

The Simple Adjusted OM is a variation of the simple OM method, where the power sources are separated
into low-operating cost/must-run resources and other resources. The weighted average of these two sub-
components are calculated where the weights are given by the part of the year when low operating
cost/must-run resources are on the margin and by the part when other resources are on the margin. Since
this method is a variation of the Simple OM, analogous variables and procedures in calculating the
Simple OM emission factor will apply and are summarized as follows:

1) The simple adjusted OM is calculated based on the net electricity generation of each power unit and
an emission factor for each power unit, and where the power plants / units are separated in low-
cost/must-run power sources (k) and other power sources (m), as follows:

(3)

Where,

EF
grid,OM-adj,y
= Simple adjusted operating margin CO
2
emission factor in year y
(tCO
2
/MWh)
y
= Factor expressing the percentage of time when low-cost/must-run power
units are on the margin in year y
EG
m,y
= Net quantity of electricity generated and delivered to the grid by power unit
m in year y (MWh)
EG
k,y
Net quantity of electricity generated and delivered to the grid by power unit
k in year y (MWh)
EF
EL,m,y
= CO
2
emission factor of power unit m in year y (tCO
2
/MWh)
EF
EL,k,y
= CO
2
emission factor of power unit k in year y (tCO
2
/MWh)
m = All grid power units serving the grid in year y except low-cost/must-run
power units
k = All low-cost/must run grid power units serving the grid in year y
Y = The relevant year as per the data vintage chosen


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2) Determination of EF
EL,m,y
There are three (3) options to determine the emission factor of each
power unit m. Option A2 is used. Under Option A2, the emission factor of each power unit is
resolved based on the CO
2
emission factor of the fuel type used and the efficiency of the power unit,
as follows:

(4)

Where,

EF
EL,m,y
= CO
2
2
/MWh)
EF
CO2,m,i,y
= Average CO
2
emission factor of fuel type i used in power unit m in year y
(tCO
2
/GJ)
m,y

= Average net energy conversion efficiency of power unit m in year y (ratio)
m = All power units serving the grid in year y except low-cost/must-run power units
y = The relevant year as per the data vintage chosen

Build Margin (BM) Emission Factor

According to the Baseline Methodology, the Build Margin (BM) emissions factor is defined as the
generation-weighted average emission factor of a sample group of power units m that consists of either:
(1) the 5 most recently built power plants, or (2) the most recently built power plants accounting for 20%
of all power generation, whichever groups annual generation is greater. Power plants that are registered
as CDM projects are excluded from the sample group m.

To calculate the Build Margin, the most recently built power plants that account for 20% of the total
power generation in the Mindanao Grid is applied using the Ex-ante approach (Option 1 in the Tool to
calculate the emission factor for an electricity system, Ver. 2.0, page 15). For the first crediting period,
the Build Margin Emission Factor (EF
BM,y
) is calculated based on the most recent information available
on units already built (as of 2007) at the time of PDD submission for validation.

The formula applied to the selected sample is:

(5)

Where,

EF
grid,BM,y
= Build margin CO2 emission factor in year y (tCO2/MWh)
EG
m,y
= Net quantity of electricity generated and delivered to the grid by power unit m
in year y (MWh)
EF
EL,m,y
= CO
2
2
/MWh)
m = Power units included in the build margin
y = Most recent historical year for which power generation data is available

Combined Margin (CM) Emission Factor

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The combined margin emission factor is determined as follows:

(6)
Where,
EF
grid,CM,y
= Combined margin CO
2
emission factor in year y (tCO
2
/MWh)
EF
grid,OM,y
= Operating margin CO
2
emission factor in year y (t CO
2
/MWh) = EF
grid,OM-adj,y

EF
grid,BM,y
= Build margin CO
2
emission factor in year y (t CO
2
/MWh)
w
OM
= Weighting of operating margin emissions factor (%)
w
BM
= Weighting of build margin emissions factor (%)

The key information and data used in determining the baseline emissions are taken from the following
sources:
Since data of the amount of fuel consumed (in a mass or volume unit) by relevant power sources are
not available in the Philippines, it has to be established indirectly by calculating it from electricity
produced and assuming realistic net energy conversion (NEC) efficiencies;
As plant-specific efficiency data is not publicly available, the net energy conversion (NEC)
efficiencies or default efficiency factors for power plants are adopted from Annex 1 of the Tool to
calculate the emission factor for an electricity system, Version 2, EB 50, page 25.
Information on the cohort of plants in the Mindanao Grid and their respective annual net electricity
generation (MWh) for the last 3 years is provided by the National Power Corporation, TRANSCO,
and the Philippine Department of Energy (PDoE). Information on capacity additions to the grid over
the most recent years is obtained from the Power Planning Department of the PDoE;
Mindanao system load data from 2005 2007 is provided by the Systems Operations Department of
the National Transmission Corporation (TRANSCO);
CO
2
emission factors for the various fuel types used by power plants connected to the Mindanao grid
are taken from the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, using the
lower limit values at 95% confidence interval.

B.6.2. Data and parameters that are available at validation:

Data / Parameter: Carbon Emission Factor (CEF
electricity,y
)
Data unit: Tons of CO
2
/MWh
Description: CO
2
emissions intensity of the electricity displaced
Source of data used: Official statistics. Department of Energy
Value applied: 0.6489
Justification of the
choice of data or
description of
measurement methods
and procedures
actually applied :
The CEF
electricity,y
is calculated according to the equations given in the Tool to
calculate the emission factor for an electricity system, Ver. 2.0, based on fuel
consumption and electricity generation data for plants connected to the grid,
provided by Philippine Official Statistics.

Any comment: CEF calculation approach is described in Section B.6.3 on Ex-ante calculation
of emission reductions. Additional data is provided in Annex 3 on Baseline

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Information.

B.6.3 Ex-ante calculation of emission reductions:

The ex-ante emission reductions values and calculations are given in Table 8. Details of the calculations
are provided in Annex 3.

Table 8. Summary of emission reductions calculations.
Parameter Formula Value Unit
EF
grid,OM-adj,y
Eqs. 2 & 3 provided in Section B.6.1 0.6651 tCO
2
e/MWh
EF
grid,BM,y
Eq. 4 provided in Section B.6.1 0.6328 tCO
2
e/MWh
EF
grid, y
Eq. 5 provided in Section B.6.1 0.6489 tCO
2
e/MWh
ER
y
Eq. 1 provided in Section B.6.1 31,962 tCO
2
e

B.6.4 Summary of the ex-ante estimation of emission reductions:

Table 9. Ex ante emission reduction estimations for first 7-year crediting period.
Year
18

Estimation of
project activity
emissions
(tons of CO
2
e)
Estimation of
baseline
emissions (tons of
CO
2
e)
Estimation of
leakage
(tons of CO
2
e)
Estimation of
overall emission
reductions
(tons of CO
2
e)
2011 0 21,308 0 21,308
2012 0 31,962 0 31,962
2013 0 31,962 0 31,962
2014 0 31,962 0 31,962
2015 0 31,962 0 31,962
2016 0 31,962 0 31,962
2017 0 31,962 0 31,962
2018 0 10,654 0 10,654
Total 0 223,736 0 223,736

B.7 Application of a monitoring methodology and description of the monitoring plan:

B.7.1 Data and parameters monitored:

Data / Parameter: EG
y

Data unit: MWh
Description: Net Electricity supplied by the project activity to the grid
Source of data to be used: Mindanao Energy Systems, Inc.
Value of data 49,253
Description of
measurement methods
and procedures to be
Hourly measurement and monthly recording of net electricity supplied to the
grid.

18
For the Project the year will run from 1 May to 30 April, the first year of the first crediting period being 1May 2011 30
April 2012, and the last year of the first crediting period being 1May 2017 30 April 2018.

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applied:
QA/QC procedures to be
applied:
Electricity supply will be monitored and double checked by means of
electricity sales receipts.
Any comment: Electricity figure is ex-ante estimate; actual production will be monitored.

Data / Parameter: A
PJ

Data unit: m
2

Description: Area of the reservoir measured in the surface of the water, after the
implementation of the project activity, when the reservoir is full
Source of data to be used: Mindanao Energy Systems, Inc.
Value of data 67,000
Description of
measurement methods
applied:
Measured from topographical surveys, maps, satellite pictures, etc.
applied:
Reservoir area will be monitored on a yearly basis.
Any comment: --

Data / Parameter: Cap
PJ

Data unit: kW
Description: Installed capacity of the hydro power plant after the implementation of the
project activity
Source of data to be used: MINERGY Project Site
Description of
measurement methods
applied:
Determine the installed capacity based on recognized standards
applied:
--
Monitoring frequency: Yearly
Any comment: Per reference to ACM 0002 by AMS I.D.; this parameter is included as it is
used to calculate power density as a function of the capacity of generation
divided by the reservoir area, with the result noted on page 7 as a power
density of 119 W/ m
2
, accordingly, well above the threshold of 4 W/ m
2
,
The project, as designed, is 8 MW installed capacity but at the time of
validation project procurement has not yet occurred; thus the exact
turbine/generator rating is not known ex-ante but will be approximately
8MW within recognized standards which would in no event reduce the
power density of the project below the 4 W/ m
2
threshold.

B.7.2 Description of the monitoring plan:

The monitoring methodology follows the AMS I.D. (V. 15, EB 50, October 2009) definition, which
states: The monitoring shall consist of metering the electricity generated by the renewable energy
technology. However, for more accuracy and to be consistent with the Tool to calculate the emission

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factor for an electricity system, Ver. 2.0 the emission factor will be calculated ex-ante and will remain
fixed for the first 7-year crediting period.

No special monitoring equipment is needed. Endesa Carbono will provide Minergy with a Monitoring
Plan and pre-programmed spreadsheets such that the Project sponsor will only need to collect the
information as described and apply the formulas as instructed in the Monitoring Plan. TRANSCO and
the PDoE will be the data providers for the annual ex-ante calculation of the Projects ERs. The
designated project staff will confirm these data with their own records, which they will cross check with
sales receipts.

All data collected as part of the monitoring will be archived at least for 2 years after the end of the last
crediting period.

The integrity and credibility of the electric meters shall be overseen and guaranteed by the Energy
Regulatory Commission (ERC) under the guidelines stipulated in Chapter 9 (Grid Revenue Metering
Requirements)
19
of the Philippine Grid Code of 2001.

B.8 Date of completion of the application of the baseline and monitoring methodology and the
name of the responsible person(s)/entity(ies)

The Baseline and monitoring methodology were completed on March 23, 2010 by:
Francisco Fernndez-Asn
Endesa Carbono
E-mail: francisco.asin@endesacarbono.com
Website: www.endesacarbono.com

Endesa Carbono is not a participant of the project.

SECTIO C. Duration of the project activity / crediting period

C.1 Duration of the project activity:

C.1.1. Starting date of the project activity:

11/06/2009

C.1.2. Expected operational lifetime of the project activity:

The Project is expected to have an operational lifetime of 30 years.

19
http://www.doe.gov.ph/Downloads/Final_Grid_Code.pdf

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C.2 Choice of the crediting period and related information:

C.2.1. Renewable crediting period

C.2.1.1. Starting date of the first crediting period:

5/1/11 (May 1, 2011) or the date of registration with the EB, whichever is latest

C.2.1.2. Length of the first crediting period:

Seven (7) years with the option of two renewal periods.

C.2.2. Fixed crediting period:

C.2.2.1. Starting date:

N/A

C.2.2.2. Length:

N/A

SECTIO D. Environmental impacts

D.1. If required by the host Party, documentation on the analysis of the environmental impacts
of the project activity:

An Environmental Impact Assessment (EIA) Study conducted in March 2006 provided a comprehensive
assessment of the projects environmental and socio-economic impacts. The report also identified the
environmentally critical issues and the corresponding measures adopted by the Project Developer. The
results are summarized in the table below.

Table 10. Summary of Environmental Impacts and Mitigation Measures
Environmental
Parameters /
Issues
Impact Description Mitigation measures
Impacts during Construction
Surface
hydrology
High

Fluctuation in river
discharge between the
intake and the tailrace;
changes in river
morphology by increased
erosion and sedimentation.

Ensure minimum ecological
flow downstream of the river
diversion.


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Natural hazards High Erosion and slope instability
resulting from removal of
vegetation due to
construction of access roads
and related infrastructure.

Strict compliance to codes of
practice in road construction;
apply landslide mitigation
measures.
Soil and water
quality

Low to
Moderate
Contamination of soil and
water resulting from
construction waste material
such as chemicals, oil, and
other solid waste.

Implement best practice in
hazardous and solid waste
management; identify different
types of solid and liquid wastes
from construction activities and
ensure proper treatment of waste
material to prevent pollution.

Environmental Impacts
Flooding Low Reservoir inundation and
sedimentation

Proper site selection and design
of the intake; implement proper
maintenance of dam and weir

Aquatic Biota Low Changes in fish population
and habitat downstream that
could result from modifying
the natural flow of water.
Maintain good water quality and
provide for minimum ecological
flow of water (not less than
0.41m
3
/s).

Terrestrial
Wildlife and
Vegetation
Low Loss of terrestrial and
wetland habitats and
resources

Preservation of natural forest,
promote vegetation and erosion
control

Socio-Economic Impacts
Land ownership Low Right-of-way (ROW) during
construction of the project
and its access roads.
Conform to government policies
on land acquisition and provide
compensation for any
disruptions or disturbances that
may result from the
implementation of the Project.

Resettlement Moderate Possible influx of people
resulting from increased
opportunities for
employment and creation of
access roads

Accommodate qualified
personnel with priority given to
the Indigenous People
community and local residents


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D.2. If environmental impacts are considered significant by the project participants or the host
Party, please provide conclusions and all references to support documentation of an environmental
impact assessment undertaken in accordance with the procedures as required by the host Party:

Environmental law in the Philippines requires all projects to prepare an Environmental Impact
Statement
20
(EIS) Study for the Department of the Environment and Natural Resources (DENR) before
an approval and an Environment Compliance Certificate (ECC) could be issued. However, according to
a Memorandum of Agreement signed between DENR and Department of Energy (DOE), mini-hydro
projects with rated capacities between 1 to 10 megawatts, or with less than twenty (20) million cu. m.
water impoundment, need not secure an EIS but instead, submit an Initial Environmental Examination
(IEE), which is a simplified version of an EIS
21
.

Rather than fulfilling the minimum requirement of presenting an IEE, the project developer sought to
fully comply with the EIS system by submitting a credible environmental impact assessment (EIA) due to
the environmental sensitivity of the project. Some of the conclusions that can be drawn from the EIA are
as follows:
Although the overall rating on environmental and social impact is low to moderate, the Project is still
considered to be environmentally sound and socially acceptable;
During construction, there will likely be environmental impacts resulting from civil works, use of
heavy machinery, and increased human activity which could result to adverse changes in the
environment and induce natural hazards such as erosion and landslides;
During construction and operation, there will likely be impacts due to solid and liquid waste
disposal;
There is a perceived social impact from in-migration or influx of people from neighboring towns or
municipalities as a result of employment opportunities being offered by the project activity that could
stir up undue competition and unrest between local residents and immigrant workers.

In general, the proposed projects impacts do not detrimentally affect environmentally sensitive areas.
The Project Developer has given due consideration to all possible adverse environmental and social
impacts of the Project and has committed to adopt mitigation measures as well as implement an
Environmental Management program involving the following plans, which will be monitored throughout
the construction, operation, and abandonment phases of the project:

Reforestation Plan: Every tree cut or removed due to construction activity will have to be
compensated for by planting a replacement tree. A management plan for clearing of vegetation
and reforestation will be prepared. The plan shall establish the protection of vegetation along the
river banks and its environs. Cutting of hardwood species will be avoided as much as possible,
and these trees will have to be clearly identified prior to initiation of construction activities.

20
http:// www.emb.gov.ph/laws/environmental%20impact%20assessment/PD%201586.doc
21
http://www.doe.gov.ph/pecr2005/petroleum/PETROLEUM%20jpg/4.0%20FISCAL-
LEGAL/4.2%20LAWS%20AD%20ISSUACES/4.2b%20LAWS_CIRCULARS/4.2b.13%20%20PD1586.pdf


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Watershed Management and Protection Plan: Includes activities such as reforestation,
bamboo planting, agroforestry, assisted natural regeneration, erosion control and protection
system especially for significant flora and fauna in the area.
Construction/contractors Environmental Program: Implement careful engineering, planning,
and supervision program to ensure proper management of excavation materials, river and
drainage crossings, and reduction of nuisances such as dust, noise, and traffic.
Social Development Plan: Includes programs for education, environmental, health, labor and
infrastructure development of the community
Disaster Preparedness Plan: Covers the installation of a flood warning device that would be
activated during abnormally high flows; and a
Monitoring Plan: Proper implementation of the mitigation measures and enhancement plan
mentioned earlier. The plan will cover the different phases of the project from construction to
operation and maintenance.

In accordance with Presidential Decree No. 1586 and Department Administrative Order No. 2003-30, an
Environmental Impact Statement was submitted to the Department of Environment and Natural
Resources Region 10 office in Macabalan, Cagayan de Oro City on March 2006. An Environmental
Compliance Certificate [ECC 10(43)08 01-22 4596-4010] was subsequently issued on 22 January 2008.
The ECC signifies that the project has given careful consideration to its environmental impacts and that
due mitigation measures will be carried out in effect.

SECTIO E. Stakeholders comments

E.1. Brief description how comments by local stakeholders have been invited and compiled:

Documents provided by the Project Developer reveal that the stakeholders process was initiated around
September 2005 with the Project Developer conferring with representatives of the host community
(Baranggay Plaridel) to endorse and allow the development of the hydropower resource along the
Cabulig River for power generation. Coordination and consultations continued during the conduct of the
Environmental Impact Assessment (EIA) in 2006.

The stakeholder process involved not only the communities surrounding the Project but also the
indigenous cultural communities in the area and the National Commission on Indigenous Peoples
(NCIP), which is responsible in enforcing the Indigenous Peoples Right Act (IPRA)
22
. The Indigenous
Peoples Reform Act (IPRA) requires that a Free and Prior Informed Consent (FPIC) from the local tribal
leaders be secured before an endorsement from the NCIP can be issued. A certificate of FPIC signifies
the consensus of all members of the indigenous peoples community in accordance with their respective
customary laws and practices, given freely without any external manipulation, coercion and in a process
and language understandable to the community. In order to obtain the FPIC, coordination with the NCIP
for all stakeholder consultations was undertaken as follows:

Table 11. Summary of consultative meetings for the 8 MW Cabulig River Mini-hydro Power Project.
Date/Venue Activity Scope/Agenda Attendees / Composition

22
http://www.sipo.gov.cn/sipo/ztxx/yczyhctzsbh/zlk/gglf/200509/P020060403599030158748.pdf


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07 May 2007
CEPALCO
Office, Cagayan
de Oro City
(CDO)
Pre-FPIC
Conference
Pre-consultative meeting Conference to
discuss matters relating to Minergys
application for hydro power plant located at
Plaridel, Claveria, Misamis Oriental.

16 persons / IP
representatives, Natl
Commission on Indigenous
People Free & Prior
Informed Consent (NCIP-
FPIC) Team, Project
Developer
21-22 May
2007 Plaridel
Tribal Hall,
Plaridel,
Claveria
Community
consultative
assembly
Consultative meeting Presentation of
proposed hydropower project, its socio-
economic benefits, and mitigation measures
by the project developer as mandated by the
Indigenous Peoples Republic Act (IPRA)
Law.
21 persons / Community
Consultative Assembly,
NCIP Team, and the Project
Developer
23-24 May
2007 Plaridel
Tribal Hall,
Plaridel,
Claveria
Consensus
building
Consultative meeting Consensus
building on the project sponsors
responsibilities and commitments as well as
the individual and community demands of
the stakeholders.
Community Consultative
Assembly, NCIP Team, and
the Project Developer
08 Jun 2007
Dynasty Court
Hotel, CDO

Decision
meeting
Consultative meeting Project developers
response to demands of stakeholders and
drafting of Memorandum of Agreement
(MOA).
21 persons / IP Community
representatives, NCIP Team,
and the Project Developer
06 Aug 2007 &
10 Aug 2007
Dynasty Court
Hotel, CDO

Consultative meeting Forum for
stakeholders and project developer to
provide comments to the draft MOA.
IP Community
15 Aug 2007
Grand Caprice,
Limketkai,
CDO

MOA
signing
Consultative meeting MOA signing

61 persons / IP Community

The Memorandum of Agreement between the proponent and the IP community covers the results of all
the consultative meetings conducted. The MOA between the indigenous peoples group, the NCIP and
the proponent is proof that due account was taken in response to the issues and concerns raised during
the consultative meetings.

E.2. Summary of the comments received:

In the course of the consultation meetings conducted with the stakeholders, some concerns were raised
regarding the Project:

Possible impacts of water level rise to the plants along the river banks
Land titling and ancestral domain
Livelihood and employment opportunities for local residents, particularly the IP community
Supply of basic services such as water, electricity, education and health services
Infrastructure and road access
Emergency preparedness measures


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The following comments summarize the issues and concerns raised by the local community during the
consultation activities:

Table 12. Summary of stakeholder comments.
Issues and Concerns Proponents Response
On the nature of assistance and benefits
CEPALCO could provide with regards to the
ancestral domain process
The project developer will provide all social and
economic benefits covered under Republic Act
8371 (the Indigenous Peoples Right Act). The
project developer recognizes the rights of the
Indigenous Peoples (IPs) to their Ancestral
Domain and has requested to conduct further
consultative meetings with the NCIP to ensure the
realization of these rights and corresponding
benefits, subject to the provisions and limitations
defined in the IPRA Law.

On the issue regarding methods of assessment and
valuation in case of crop damage
The assessment of crop damage as a direct or
indirect result of the project will be based on an
economic valuation scheme currently being
adopted by the local government.

On the request regarding special assessment and
valuation for primary crops such as coconut and
banana

The local government will also take into account
asset losses, income reduction and reconstruction
costs during the damage assessment for these
staple crops. Subject to provisions and limitations
under the IPRA law, this would result to a higher
compensation compared to its original assessed
value for the affected landowners.

On the nature of assistance the project developer
could provide to land owners directly or indirectly
affected by the project, e.g. areas affected by
increase in water level or inundation attributed to
dam construction

Environmental mitigation measures will be
strictly enforced to ensure the well-being of the
affected communities. Financial assistance and
just compensation will also be provided by the
project developer.

On the issue of compensation to owners whose
lots are occupied by CEPALCOs transmission
line posts

Lot owners will be recompensed or their lots
leased.
On the nature of assistance and benefits
MINERGY could provide with regards to the
ancestral domain process
In terms of financial assistance to facilitate the
conduct of the social preparation, MINERGY has
committed to provide 100,000 pesos as a
counterpart contribution.

On the issue of crop damage as a result of hazards
brought about by the project

Aside from the strict implementation of mitigation
measures to minimize natural hazards, MINERGY
is committed to pay for crop damages that are

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28
directly or indirectly attributed to the project,
subject to provisions and limitations of the IPRA
law.

On the issue of educational assistance

The project developer will provide educational
benefits and related financial assistance to
qualified dependents from the IP community.

On the issue of medical assistance and health
program
In cases of emergency, IP community
beneficiaries can avail of the clinical facility and
services provided by MINERGY for its workers
during construction period. The project developer
will also establish a health program for the benefit
of the IP community.

On the suggestion to include the Tribal Chieftain
in the committee in charge of hiring people for the
company to give priority to IPs in the area
This suggestion is duly noted and will be strongly
considered by the project developer. The project
developer is fully commited to help promote
social and economic well-being by initiating and
facilitating new livelihood and energy project
proposals to the Department of Energy (DOE) and
NCIP on behalf of the IP community.

Taking into account all the comments received, the local government, IP communities and the NCIP
expressed their overall support to the implementation of the Project.

E.3. Report on how due account was taken of any comments received:

All the comments and requests received in the course of conducting the stakeholder consultations were
duly noted. These served as the basis for the provisions contained within the Memorandum of
Agreement between the proponents and the people of Plaridel and Claveria. Listed below are the
documents to signify how due account was taken of the comments received:

FPIC report dated November 5, 2007
NCIP Provincial Officer endorsement of CEPALCO/MINERGY FPIC Report to the NCIP
Regional Director dated November 9, 2007
NCIP Regional Director endorsement of CEPALCO/MINERGY FPIC Report to the NCIP
Central Office dated March 31, 2008
Certification from the Local Government Unit of Claveria recognizing implications of the
CEPALCO project issued on April 18, 2007 at Claveria, Misamis Oriental signed by Mayor Paul
Douglas Calingin
Certification from the Local Government Unit of Jasaan recognizing implications of the
CEPALCO project issued on March 29, 2007 at Jasaan, Misamis Oriental signed by Mayor
Redentor Jardin

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Resolution from the Barangay of Plaridel (Resolution No. 08S-2008) allowing MINERGY to
develop the mini-hydro project along the Cabulig River
Resolution from the Town of Claveria (Resolution Nos. 108 & 109) endorsing the development
and implementation of the proposed mini-hydro project along the Cabulig River
NCIP Certificate of Compliance issued on June 30, 2008
Memorandum of Agreement issued on August 30, 2007
Documentation of proceedings of all consultation meetings conducted (minutes, photos,
attendance)

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Annex 1

COTACT IFORMATIO O PARTICIPATS I THE PROJECT ACTIVITY

Organization: Mindanao Energy Systems, Inc.
Street/P.O.Box: Emerald Avenue
Building: 8F Strata 100 Building
City: Ortigas Complex, Pasig City
State/Region: Metro Manila
Postfix/ZIP:
Country: Philippines
Telephone: +6326311581
FAX: +6326348149
E-Mail:
URL:
Represented by: William U. Lim
Title: Senior Vice-President
Salutation: Mr.
Last Name: Lim
Middle Name: U.
First Name: William
Department:
Mobile:
Direct FAX:
Direct tel:
Personal E-Mail: wulminergy@cepalco.com.ph


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Annex 2

IFORMATIO REGARDIG PUBLIC FUDIG

The Project has not received any type of public funding or public financial help.

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Annex 3

BASELIE IFORMATIO

According to the latest version of the AMS I.D. methodology (V. 15, EB 50, October 2009), for a system
where not all generators use exclusively fuel oil and/or diesel fuel, the baseline is described as the kWh
produced by the renewable generating unit multiplied by an emission coefficient (measured in kg
CO2e/kWh) calculated in a transparent and conservative manner as:
(a) A combined margin (CM) consisting of the average of the operating margin (OM) and the
build margin (BM), according to the procedures prescribed in the Tool to calculate the
emission factor for an electricity system, Ver. 2.0 or,
(b) The weighted average emissions (in kg CO2e/kWh) of the current generation mix, wherein
data of the year in which project generation occurs must be used.

The combined margin approach (Option A) is chosen. The estimated anthropogenic emissions were
calculated for the Project, applying the following 6-step process:

Step 1 Identify the relevant electricity systems.
Step 2 Choose whether to include off-grid power plants in the project electricity system (optional).
Step 3 Selection of Method to determine the Operating Margin.
Step 4 Calculation of the Operating Margin (OM) emission factor according to selected method.
Step 5 Identify the group of power units to be included in the build margin (BM).
Step 6 Calculation of the Build Margin (BM) emission factor.
Step 7 Calculation of the Combined Margin (CM) emission factor.

Step 1 Identify the relevant electric power system.

According to the Philippine Grid Code
23
, there are 3 national grids in the country: Luzon, Visayas and
Mindanao grids. The Luzon and Visayas Grids are physically linked by a submarine cable. The
Mindanao Grid remains to be isolated from the 2 other grids and, therefore, electricity is neither exported
nor imported to and from the island
24
.

The project is located in the province of Misamis Oriental in Mindanao Island. The spatial extent of the
project boundary includes the project site and all power plants physically connected to the Mindanao
Grid. Therefore, the emission factors which would be determined shall be applicable for the Mindanao
Grid.

Step 2 Choose whether to include off-grid power plants in the project electricity system

This step is optional and allows project participants to calculate the operating margin and build margin
emission factors by considering only grid power plants in the calculations (Option I) or by considering
both grid power plants and off-grid power plants in the calculations (Option II). The OM and BM

23
http://www.doe.gov.ph/Downloads/Final_Grid_Code.pdf , page 121
24
http://www.ngcp.ph/gridmap/2k6gridmap.pdf


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emission factors will therefore be calculated based on data from grid-connected power plants only
(Option I).

Step 3 Selection of Method to determine the Operating Margin (OM)

Any of the four procedures to calculate the OM can be chosen, but the restrictions in using the Simple
OM and the Average OM methods were taken into account.

As explained in Section B.6.1., the Simple Adjusted Operating Margin method was selected out of the
four options for the OM because it constitutes the only methodological choice for which data is available
for the Project. The Dispatch Data Analysis OM cannot be applied because detailed dispatch data is not
publicly available. The Simple OM method cannot be used since low cost, must-run resources constitute
more than 50% of total grid generation in Mindanao (see Table A3-1)

Table A3-1. Mindanao Grid Power Generation by Source from 2003 to 2007.
2003 2004 2005 2006 2007
Oil based 1,713,692 1,915,799 2,319,927 1,671,619 1,478,868
Natural gas - - - - -
Coal - - - 476,245 1,570,872
Hydro 3,989,013 4,261,525 4,028,352 4,419,049 3,971,927
Geothermal 861,016 909,815 892,863 845,660 867,308
Solar - - 1,517 1,376 1,309
Wind - - - - -
total 6,563,721 7,087,139 7,242,659 7,413,949 7,890,284
Total LC/MR 4,850,029 5,171,340 4,922,732 5,266,085 4,840,544
% LC/MR 73.89% 72.97% 67.97% 71.03% 61.35%
Data supplied by the DOE in Philippines
Mindanao Total Energy Generation (MWh)

In terms of data vintage, the Ex-ante option is chosen, i.e. a 3-year generation-weighted average, based on
the most recent data available at the time of submission of the CDM-PDD to the DOE for validation,
without requirement to monitor and recalculate the emissions factor during the first crediting period.

Step 4 Calculation of the Operating Margin (OM) emission factor according to selected method

As explained in Section B.6.1, the Simple Adjusted OM approach is selected, following the ex-ante
option. The simple adjusted OM is calculated as the generation-weighted average CO
2
emissions per unit
net electricity generation (tCO
2
/MWh) of all generating power plants serving the system based on the net
electricity generation and a CO
2
emission factor of each power unit and where the power plants / units
are separated in low-cost/must-run power sources and other power sources (Equation 3). A 3-year data
vintage from 2005 to 2007 is used to determine the Lambda,
y
, in Equation 3, calculated as follows:

y
= (7)

Step 4-1a. Plot a Load Duration Curve

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Collect chronological load data (typically in MW) for each hour of the year y, and sort the load
data from the highest to the lowest MW level. Plot MW against no. of hours in the year, in
descending order.

2005 Mindanao Grid System Load
-
200
400
600
800
1,000
1,200
1,400
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve

Figure A3-1. 2005 load duration curve for the Mindanao grid.

-
200
400
600
800
1,000
1,200
1,400
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve



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-
200
400
600
800
1,000
1,200
1,400
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve


Step 4-1b. Collect power generation data from each power plant/unit
Calculate the total annual generation (in MWh) from low-cost/must-run power plants (i.e.
k
EG
k,y
).

Table A3-2. Annual net electricity generation of all power plants connected to the Mindanao Grid.


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2005 2006 2007
Source
Net Electricity
Generation
Net Electricity
Generation
Net Electricity
Generation
MWh MWh MWh MWh
COAL - 432,898 1,409,947 1,842,845
1 Mindanao Coal NPC - 432,898 1,409,947 1,842,845
OIL-BASED 2,146,328 1,535,456 1,340,816 5,022,600
2 PB104 NPC 8,720 59,804 66,306 134,830
3 Gen Santos (SPPC) NPC 244,380 192,635 174,933 611,948
4 Western Mindanao Power Corp. NPC 401,229 224,667 157,146 783,043
5 Mindanao Energy Systems PDOE 771 845 385 2,001
6 Cotabato Light PDOE 155 242 93 491
7 Davao Light PDOE 1,401 1,699 4,445 7,545
8 Power Barge 117 NPC 629,006 490,024 402,607 1,521,637
9 Power Barge 118 NPC 676,179 528,054 497,945 1,702,179
10 NMPC II NPC 120,037 5,205 - 125,242
11 NMPC I (Iligan Diesel Plant) NPC 64,450 32,282 36,953 133,685
GEOTHERMAL 844,460 802,872 824,717 2,472,049
12 Mindanao I (Mt. Apo) NPC 423,174 396,507 413,398 1,233,079
13 Mindanao II (Mt. Apo) NPC 421,286 406,365 411,319 1,238,970
HYDRO 4,011,354 4,401,620 3,954,714 12,367,689
14 Agus 1 Unit 1 & 2 NPC 258,769 295,548 267,307 821,624
15 Agus 2 NPC 683,289 740,343 607,706 2,031,337
16 Agus 4 NPC 753,332 817,941 713,740 2,285,013
17 Agus 5 NPC 280,905 299,142 248,550 828,597
18 Agus 6 NPC 1,028,414 1,122,358 969,405 3,120,176
19 Agus 7 NPC 209,780 229,990 192,413 632,183
20 Agusan NPC 1,582 - - 1,582
21 Pulangi 4 NPC 747,492 844,948 905,061 2,497,501
22 Bubunawan PDOE 24,523 24,474 22,215 71,212
23 Talomo HEPP PDOE 23,270 26,876 28,317 78,463
SOLAR 1,517 1,376 1,309 4,202
24 Solar Photovoltaic PDOE 1,517 1,376 1,309 4,202
TOTAL Mindanao 7,003,659 7,174,223 7,531,503 21,709,385
TOTAL Low Cost / Must Run 4,857,331 5,205,869 4,780,740 14,843,940
TOTAL NOT LC/ MR 2,146,328 1,968,354 2,750,763 6,865,445
*Note: NPC - National Power Corporation, PDOE - Philippine Department of Energy
Power Plant
Total Generation
(2005-2007)

As hydro, geothermal and solar power sources are considered to be low cost / must run (shaded
blue in Table 3-2), total generation from these plants for 2005, 2006, and 2007 are 4,857,331
MWh, 5,205,869 MWh, and 4,780,740 MWh, respectively. The total generation from these
plants from 2005 to 2007 amount to 14,843,940 MWh.

Step 4-1c. Fill load duration curve
Plot a horizontal line across the load duration curve such that the area under the curve (MW
times hours) equals the total generation (in MWh) from lowcost/must-run power plants/units
(i.e.
k
EG
k,y
).


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-
200
400
600
800
1,000
1,200
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve
LC/MR curve

Figure A3-4. Fill curve (horizontal line) with low-cost/must-run generation (MWh) for 2005.

-
200
400
600
800
1,000
1,200
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve
LC/MR curve


-
200
400
600
800
1,000
1,200
1 1001 2001 3001 4001 5001 6001 7001 8001
Hours
M
W
Load curve
LC/MR curve


Step 4-1d. Determine the number of hours for which low-cost/must-run sources are on the
margin in year y.

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First, locate the intersection of the horizontal line plotted in Step (iii) and the load duration curve
plotted in Step (i). The number of hours (out of the total of 8760 hours) to the right of the
intersection is the number of hours for which low-cost/must-run sources are on the margin. If the
lines do not intersect, then one may conclude that low-cost/must-run sources do not appear on the
margin and y is equal to zero. Lambda (
y
) is then calculated by using Equation 7.

Lambda (
y
)
2005 2006 2007
0.0040 0.0191 0.0023
Lambda (
y
)
AVE
= 0.0084

The next step is to calculate the Simple Adjusted OM emission factor using Equation 3. In the Mindanao
grid, low-cost/must-run power sources k constitute hydro, geothermal, and solar resources, wherein
emissions from these sources are considered zero. Thus, Eq. 3 is further simplified into:

(8)

Table A3-3 below illustrates how the OM emission factor for the Mindanao grid is computed.

Table A3-3. Calculations to determine Operating Margin power plants.

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Source
MWh % TJ/GWh TJ tCO2/TJ tCO2
1 Mindanao Coal NPC 1,842,845 39.0% 3.60 17,010.88 89.5 1,522,473
2 PB104 NPC 134,830 39.0% 3.60 1,244.59 72.6 90,357
3 Gen Santos (SPPC) NPC 611,948 37.5% 3.60 169.99 72.6 12,341
4 Western Mindanao Power Corp. NPC 783,043 37.5% 3.60 7,517.21 72.6 545,749
5 Mindanao Energy Systems PDOE 2,001 37.5% 3.60 19.21 72.6 1,395
6 Cotabato Light PDOE 491 37.5% 3.60 4.71 72.6 342
7 Davao Light PDOE 7,545 37.5% 3.60 72.43 72.6 5,258
8 Power Barge 117 NPC 1,521,637 37.5% 3.60 14,607.71 72.6 1,060,520
9 Power Barge 118 NPC 1,702,179 37.5% 3.60 16,340.91 72.6 1,186,350
10 NMPC II NPC 125,242 37.5% 3.60 1,202.33 72.6 87,289
11 NMPC I (Iligan Diesel Plant) NPC 133,685 37.5% 3.60 1,283.38 72.6 93,173
12 Mindanao I (Mt. Apo) NPC 1,233,079 - - -
13 Mindanao II (Mt. Apo) NPC 1,238,970 - - -
14 Agus 1 Unit 1 & 2 NPC 821,624 - - -
15 Agus 2 NPC 2,031,337 - - -
16 Agus 4 NPC 2,285,013 - - -
17 Agus 5 NPC 828,597 - - -
18 Agus 6 NPC 3,120,176 - - -
19 Agus 7 NPC 632,183 - - -
20 Agusan NPC 1,582 - - -
21 Pulangi 4 NPC 2,497,501 - - -
22 Bubunawan PDOE 71,212 - - -
23 Talomo HEPP PDOE 78,463 - - -
24 Solar Photovoltaic PDOE 4,202 - - -
TOTAL Mindanao 21,709,385 4,605,248
TOTAL Low Cost / Must Run 14,843,940
TOTAL NOT LC/ MR 6,865,445
* Note: NPC - National Power Corporation, PDOE - Philippine Department of Energy
** Efficiencies are Default efficiency factors for power plants (Annex 1) in Tool to calculate the emission factor for an electricity system_V2
*** CO2 emission factors taken from Table 2.2 of Chapter 2 of Vol. 2 (Energy) of the 2006 IPCC Guidelines on National GHG Inventories
using the lower limits of the 95% confidence intervals for diesel and sub-bituminous coal
CO2 Emissions
Power Plant
Total Generation
(2005-2007)
Plant
Efficiency**
Conversion
Factor
Fuel
Consumption
CO2 Emission
Factor of fuel***

Applying the Lambda (
y
)
AVE
of 0.0084 to Eq. 8, the Simple Adjusted OM emission factor results to:

EF
grid,OM-adj,y
= (1- 0.0084) x 0.6708 tCO
2
e/MWh
= 0.6651 tCO
2
e/MWh

Step 5 Identify the group of power units to be included in the build margin (BM).

To determine the group of power plants that would be included in the Build Margin calculation,
reference is made to information provided by the PDOE on the most recent plants that have been added
to the Mindanao grid, as of end 2007. From this group of power plants and in accordance with the
Baseline Methodology procedure, the Build Margin will be calculated using either as:
(a) The set of five power units that have been built most recently, or
(b) The set of power capacity additions in the electricity system that comprise 20% of the system
generation (in MWh) and that have been built most recently.

The Build Margin is established using Option (b) or the set of power capacity additions in the electricity
system that comprise 20% of the system generation (in MWh) and that have been built most recently.
The BM emission factor is calculated ex ante based on the most recent information available at the time

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of PDD submission (Option 1 of Step 5 in the Tool to calculate the emission factor for an electricity
system, Ver. 2.0). The year in which information is available for this group of plants is 2007.

Based on the analysis of the most recently built power plants connected to the Mindanao Grid, the net
electricity generation for 5 most recent additions (Table 3-4) represents about 25.37% (or more than
20%) of the total generation of the Mindanao Grid in 2007. In addition, the list of Build Margin power
plants does not include any project that is registered as a CDM activity.

Table A3-4. Build Margin power plants.
Plant ame
Date
Commissioned
Plant
Classification
et Electricity
Generated
Units Year - MWh
Source PDOE PDOE PC
Mindanao Coal 2006 Coal 1,409,947
PB104 2005 Diesel Barge 66,306
Solar 2004 Solar 1,309
Bubunawan 2001 Hydro 22,215
Mt Apo II 1999 Geothermal 411,319
Total Generation of recent plants 1,911,096
Total Generation of Mindanao Grid (2007) 7,531,503
% of Total Generation 25.37%

Step 6 Calculate the Build Margin (BM) Emission Factor

The emission factor for the Build Margin is therefore calculated using Option A2 for determining the
Simple OM emission factor and following Equation 4 in the following manner:

Table A3-5. Calculation of the Build Margin.
A B C D=(A/1000)/B*C E F=D*E
2007
Net Electricity
Generation
Plant
Efficiency**
Conversion
Factor
Fuel
Consumption
CO
2
Emission
Factor of
fuel***
CO
2
Emissions
NPC, PDOE
Default plant
eff. factors
Calculated IPCC 2006 Calculated
MWh % TJ/GWh TJ tCO2/TJ tCO2
1 Mindanao Coal 2006 1,409,947 39.0% 3.6 13,015 89.5 1,164,833
2 PB104 2005 66,306 39.0% 3.6 612 72.6 44,435
3 Solar Photovoltaic 2004 1,309
4 Bubunawan 2001 22,215
5 Mindanao II (Mt. Apo) 1999 411,319
1,911,097 13,627 1,209,269
BM = Total F/Total A
BM = 0.6328
* Data provided by the Power Planning Group of the Philippine Department of Energy
** Efficiencies are Default efficiency factors for power plants (Annex 1) in Tool to calculate the emission factor for an electricity system_V2
*** CO2 emission factors taken from Table 2.2 of Chapter 2 of Vol. 2 (Energy) of the 2006 IPCC Guidelines on National GHG Inventories using the
lower limits of the 95% confidence intervals for diesel and sub-bituminous coal
MOST RECENT POWER PLANTS BUILT IN MINDANAO*
Power Plant
Date
Commissioned
TOTAL Most Recent Plants

The BM emission factor for the Mindanao grid is 0.6328 tCO
2
e/MWh.


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Step 7 Calculate the Combined Margin (CM) emission factor
The Baseline Emission Factor was calculated as a Combined Margin (CM) emission factor using
Equation 5, which is the simple average of the OM and the BM. All margins are expressed in
tCO
2
/MWh.

CM = 0.5*OM + 0.5*BM (9)
CM = 0.5*(0.6651) + 0.5*(0.6328) = 0.6489 tCO
2
/MWh

The resulting Baseline Emission Factor is 0.6489 tCO
2
e/MWh, and will remain fixed for the first
crediting period.

Calculate the Projects Emission Reductions
As detailed in Section B.6.1., the Project itself does not lead to any GHG emissions. Furthermore, no
equipment was transferred to the project from another project, so leakage is also considered to be zero.
Therefore, the estimated annual project emission reductions are calculated follows:
ER
y
= BE
y
PE
y
LE
y
= BE
y
0 0
ER
y
= BE
y

Estimated Annual ERs = Estimated Baseline Emissions = CM x (Est. Annual Generation in MWh)
= 0.6489 tCO
2
/MWh x 49,253 MWh
= 31,962 tCO
2
for the first crediting period


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Annex 4

MOITORIG IFORMATIO

TABLE OF COTETS

I. Background information

II. Purpose of the Monitoring Plan

III. Use of the Monitoring Plan by the Operator

IV. Organizational, Operational and Monitoring Obligations
A. Obligations of the Operator
B. Emissions Reductions Calculation Procedure and Required Spreadsheets

V. Annexes
The ERCP Organizational Structure and Quality Assurance and Control Procedure

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I. Background Information
The proposed project is a run-of-river hydropower plant, located in northern Plaridel within the
municipality of Claveria, province of Misamis Oriental, about 30 kilometers northeast of Cagayan de Oro
City in Mindanao Island. The plant will have an nominal installed capacity of 8.0 MW and a projected
yearly average generation of 49.253 Gigawatt hours (GWh). The purpose of the 8 MW Cabulig River
Mini-Hydroelectric Power Project is to produce clean renewable energy by harnessing the waters of the
Cabulig River to generate electricity. As a run-of-river hydropower project, the project activity does not
produce GHG emissions; on the contrary, it will therefore help to reduce the Philippines overall GHG
emissions since the project activity displaces fossil fuel-based electricity generation that would have
emitted additional carbon dioxide. The resulting power will be exported to the Mindanao grid via
interconnection with the distribution lines of the Cagayan Electric Power and Light Company, Inc.
(CEPALCO) located in Barangay Natubo, Jasaan, Misamis Oriental. By doing so, the Project is
expected to displace 223,736 tons of carbon dioxide equivalent (tCO
2
e) in the first 7-year crediting
period, generating an equivalent amount of certified emission reductions (CERs).

Because the existing Project equipment is neither transferred to another activity nor comes from another
activity, there is no need to monitor leakage since leakage in this Project is zero. The project boundary is
the area of the concession where the facilities of the project are located. As the power generated by the
facility will reach the Mindanao grid via interconnection with CEPALCOs distribution line and
substation, the Mindanao Grid is included in the projects boundary.

The baseline methodology and monitoring methodology for the 8 MW Cabulig River Mini-Hydroelectric
Power Project is in accordance with the approved small-scale project methodology AMS I.D., which is
applicable to renewable electricity generation for a grid. The Projects baseline methodology and
monitoring methodology use the most recent version (V. 15, EB 50, October 2009). As per procedures
prescribed in AMS I.D. and the Tool to calculate the emission factor for an electricity system, Ver. 2.0
a simple adjusted OM analysis was used to calculate the operating margin, and the Build Margin (BM)
was calculated based on the generation-weighted average emission factor of the most recently built
power plants accounting for 20% of all power generation; the Mindanao grid Emission Factor (EF) for
the project is the Combined Margin (CM) emission factor and was calculated as the simple average of
the OM and BM. This EF is calculated on an ex-ante basis and will remain fixed for the first crediting
period.

II. Purpose of the Monitoring Plan
The CDM defines monitoring as the systematic surveillance of a projects performance by measuring and
recording performance-related indicators relevant to the project activity. This report presents the
Monitoring Plan (MP) for the Project. The MP defines a standard against which the performance in
terms of the Projects ERs will be monitored and verified, in conformance with all relevant requirements
of the CDM of the Kyoto Protocol. Both the Baseline and the MP are subject to verification procedures.

III. Use of the Monitoring Plan by the Project Operator
The MP identifies key performance indicators of the Project and sets out the procedures for metering,
monitoring, calculating and verifying the ERs generated by the Project annually. Adherence to the
instructions in the MP is necessary for the project operator
25
(the Operator) to successfully measure and

25
Mindanao Energy Systems, Inc. (MIERGY)

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track the impact of the Project, and to prepare all data required for the periodic audit and verification
process that must be undertaken to confirm the attainment of the corresponding ERs.

The MP can be updated and adjusted to meet operational requirements. The Verifier approves such
modifications during the process of initial or periodic verification. In particular, any shifts in the
baseline scenario may lead to such amendments, which may be mandated by the Verifier. Amendments
may also be necessary as a consequence of new circumstances that affect the ability to monitor ERs, as
described here, or to accommodate new or modified CDM rules.

IV. Organizational, Operational and Monitoring Obligations
A. Obligations of the Operator

Monitoring performance of the Project requires the fulfilment of operational data collection and
processing obligations by the project operator (the Operator) throughout the crediting period of the
Project. The Operator is obligated to ensure that sufficient and accurate information is available to
calculate ERs in a transparent manner, and that adequate information is collected and maintained to
facilitate successful verification of accounted ERs.

Key responsibilities: The ERCP Organizational Structure dictates that the ERCP Manager will be
responsible for performing the ERCP (monthly), and the MP Steering Committee will be responsible for
supervising the ERCP Managers monitoring work (monthly). The ERCP Manager will report to the MP
Steering Committee (monthly), and the ERCP Manager and MP Steering Committee will coordinate in
reporting to the DOE at Verification.

Training of monitoring personnel: The team established in the ERCP Organizational structure, and
composed of the MP Steering Committee and the ERCP Management will be trained by Endesa Carbono
in a one day workshop on a comprehensive set of tools and knowledge required to implement the
monitoring plan. The training on the MP and associated responsibilities will build the capability of the
MP Steering Committee and the ERCP Management to replicate, on an ex-post basis, an equivalent
process that has been demonstrated in this PDD for an ex-ante emissions avoidance calculation. All
relevant staff will be provided with a comprehensive set of tools and knowledge required to implement
the monitoring plan, including: (a) accurate monitoring of the performance and output characteristics of
the plant to record and keep accurate data; (b) incorporation of these data sets into spread sheets pre-
prepared by Endesa Carbono, and (c) consistently calculating verifiable CERs as a function of measured
plant output against a the calculated emission factor that serves as a recognized proxy for emissions
displaced from the grid.

Equipment Required: Adequate computer services and file storage are required, and maintenance of
computers and data contained therein are described under the following section. Aadequate metering
and logging equipment will be procured for measuring electricity generation by the plant, and net levels
of electricity dispatched for sale to the grid. As explained in section B.7.2 of the PDD, no other special
monitoring equipment is needed for this project. Procedures for maintenance and installation of
equipment will be performed in accordance with manufacturer specifications of equipment and under the
guidance of Philippine Grid Code of 2001. Meter calibration, as specified in Chapter 9 (Grid Revenue
Metering Requirements), Section 9.4 (Metering Equipment Testing and Maintenance), Item 9.4.2 (Meter
Testing and Calibration) of the aforementioned Grid Code, shall be conducted at least once a year. All
measurements, data gathering, record keeping, and procedures for dealing with possible monitoring data

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adjustments will be performed in specific consideration of the data gathering requirements of the MP and
as determined as adequate for meeting the baseline and monitoring requirements described in baseline
methodology AMS I.D. (V. 15) and the Tool to calculate the emission factor for an electricity system
(Ver. 2.0).

Data Collection and Integration: It is required that the Operator calculate the Projects ERs based on
most recent available information, following the ERCP presented in this report. The Operator must
gather and process information needed to monitor ERs. The Operator shall supply, install, operate and
maintain a metering system to measure the net level of electricity delivered to CEPALCO and sold to the
grid. The metering system shall be installed at the agreed point of delivery where the net power and
electricity exported to CEPALCO shall be measured. CEPALCO may install and maintain a check meter,
adjacent to the revenue meter of MINERGY to serve as monitoring meter and as back-up billing meter in
case the Operators billing meter is not available.

The metering system shall consist of bi-directional revenue meter, instrument transformers with an
accuracy class of 0.3% or better, lightning protection and all interconnecting cables, wires and associated
devices and protections. Both Minergy and CEPALCO meters will have the following specifications:
a) Type: kV2c+
b) Current Class: Class 20A (transformer rated)
c) Meter Form: Form 48A (bottom connection)
d) Accuracy Class as per ANSI C12.20: 0.3
e) Meter Construction: 3 element, 4 wire
f) Service: 3 phase, 4 wire (wye)

MIERGY-CEPALCO Current Metering and Invoicing Set-up

Every 25th of the month, a meter reading is jointly conducted by MINERGY and CEPALCO official
representatives to verify the actual quantity of electricity delivered to CEPALCO. The accuracy of the
meter reading data gathered are then confirmed through signing of the meter billing form by both parties
before the same is sent to MINERGY Accounting Department for the preparation of billing invoice. Final
review of the correctness of the inputted data is undertaken before copies are sent to CEPALCO.
Payment is collected within 30 days after the issuance of billing invoice.


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MINERGY
Revenue Meter
CEPALCO
Check Meter
Gen 1
Power
Meter
CEPALCO
34.5kV Line
Power
Meter
Gen 2
Auxilliary
MINERGY
Revenue Meter
CEPALCO
Check Meter
Gen 1
Power
Meter
CEPALCO
34.5kV Line
Power
Meter
Gen 2
Auxilliary
MINERGY
Revenue Meter
CEPALCO
Check Meter
Gen 1
Power
Meter
CEPALCO
34.5kV Line
Power
Meter
Gen 2
Auxilliary

Figure A4-1. Project operators proposed metering scheme.

From a pre-determined monthly billing schedule, a meter reading will be jointly conducted by the
Operator and CEPALCO official representatives to verify the actual quantity of electricity delivered to
CEPALCO. The accuracy of the meter reading data gathered are then confirmed through signing of the
meter billing form by both parties. A final review of the correctness of the net electricity measured is
done before a billing invoice is sent to CEPALCO.

Data gathering and processing should be done monthly by the Operator, as follows:

Monthly Data collection

Table A4-1: Monthly Data Collection: Division of Labor
I. Electricity distributor
final client(s)
(Data Provider)

Provide the Project Operator with written proof of the Projects
hourly generation purchased/sold.

Frequency: Monthly

II. Grid Operator
(Data Provider)

Provide the Project Operator with written proof of the Projects
hourly generation registered.

Frequency: Monthly


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III. Project Operator
(Data Processor)

Directly measure the electricity generated following the Tool to
Calculate the Emission Factor for an Electricity System and
AMS. I.D.
Perform the monthly calculation of ERs following the ERCP.
Keep receipt of sales of electricity.
Prepare and submit the annual report of the total project ERs to
the DOE.
Establish the necessary agreements with the Grid Operator and
final clients to assure that they all provide a monthly written
report of the Projects hourly generation registered/bought.

Source: Endesa Carbono

On an annual basis, the project sponsor shall summarize from its record keeping on CERs the annual
generation and tons of CO2 displaced by the operation of the project, the number of employees (part-time
and full-time) engaged in the project operation, approximate taxes paid to National and/or local
jurisdictions, and, on a qualitative basis, shall summarize any other infrastructure, economic,
employment, social, or other benefits that can be attributed to the project.

As the primary purpose of Verification is independent inspection and validation of ERs actually achieved
by the Project, the ERCP Management will seek to establish and maintain a strong and efficient
relationship with the Verifier, i.e. the Designated Operational Entity (DOE), in order to ensure a
dependable and transparent outcome. In doing so, the ERCP Management will:

provide all necessary monitoring information about ERs to facilitate the verification work
and cooperate with the DOE on all data requests and questions;
during the crediting period, always take into account requests by the CDM Executive Board
and conduct preparatory work for the Verification to obtain high quality results and
efficiency; and,
ensure that ERCP Management and ERCP Steering Committee review all monitoring reports
before they are transmitted to the DOE.
It is believed that the monitoring approach presented in this MP will result in an accurate yet
conservative calculation of ERs. However some uncertainties, especially errors in the data monitoring
and processing system, may result in a discrepancy between the monitored ERs and the verified ERs.
The Operator is expected to prevent such errors and the verification audits are expected to uncover any
possible errors. As CERs can only be granted ex-post verification, there is a significant internal incentive
for the Operator to perform all steps related to data collection and calculations as accurately as possible.

Procedures for review of reported results data and internal audits: quality control and inspection
procedures are established in the ERCP to ensure monitoring accuracy. Such procedures will include,
but will not be limited to, the following:


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48
Spreadsheets will be reviewed during yearly consolidation of monthly calculations;
Corrective actions will be taken in the case of malfunction or breakdowns, or simply for more
accurate monitoring and reporting;
An internal audit will be performed by the ERCP Steering Committee once a year to see if the
MP has been performed according the guidelines established in the PDD; and,
A project performance review will be performed every year, in accordance with the PDD.
Independent verification of monitoring results and achievement of the ERs as calculated in the PDD is a
critical outcome for all CDM projects. The ERCP Management should work closely with the DOE to
assure a dependable and transparent outcome, and to that end they will follow the procedures below for
project performance reviews and corrective actions:
Keep efficient contact with the DOE who verifies the Projects ERs;
Provide all necessary monitoring information about the ERs to facilitate the verification work;
During the crediting period, always take into account requests by the CDM Executive Board and
conduct preparatory work for the verification to obtain high quality results and efficiency;
The monitoring report should be reviewed by the ERCP Steering Committee before verification;
and,
The projects management and operators also should cooperate to answer all questions raised by
DOE during the Verification process.
All data will be archived for a period of 2 years from the end of the crediting period
Upon detecting a problem or being informed of a discrepancy, ERCP Management will take immediate
action to rectify it. Should CEPALCO as customer fail to provide adequate information, the ERCP
Steering Committee will file a claim with CEPALCO to obtain the information. If a major investment is
required, the ERCP Management will notify the ERCP Steering Committee to ask MINERGYs
management to invest in the monitoring personnel or/and equipment.

B. Emissions Reductions Calculation Procedure and Required Spreadsheets

The ERCP is the basic instrument for gathering, recording and processing information that will result in
the measured ERs. The Project Operator shall consider the Projects ERCP as a manual. The ERCP
should contain: (i) data gathered from the Grid Operator information system, and (ii) data processed by
the Project Operator. All data processing should be done using Excel software. The ERCP is designed
for monthly and yearly calculation, based on final monthly Grid Operator reports and monthly recording
and continuous recording of the meters installed. Entering the data monthly in the required spreadsheets
will provide the opportunity to review formulas, minimize errors and have data readily available for the
DOE at any time during the year.
For effective data management, Endesa Carbono will provide the Project Developer with an MP and pre-
programmed spreadsheets such that the Project Developer will only need to collect the information as
described and apply the formulas as instructed in the MP.
The Project Operator will calculate the ERs on the basis of the MP, following the ERCP. Calculations
will follow AMS I.D. (V. 15, EB 50, October 2009) to calculate ERs from electricity displacement when
the Project provides electricity to the grid due to the plant efficiency improvement.

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There will only be one spreadsheet to be reviewed by the DOE, namely Cabulig ERs at yearly period in
question.xls. However, as the DOE may require preliminary calculations, the staff person designated
as the ERCP Manager should keep the name of the files, and every time he/she works on the files, should
follow by the date when the latest adjustment was made. Doing so would allow old versions to be saved
on disk and kept as a record to show to the Verifier, if the need arises.
When the ER calculation for the month is completed, the files should be named Cabulig ERs at month
in question.xls in order to differentiate drafts from final monthly calculations. Likewise, after the
calculation of the ERs of the last month of the year, the file name should be changed to Cabulig ERs at
yearly period in question.xls.

Worksheet 2 should contain historical data as it was provided by the Grid Operator, on a CD or in email,
arranged in months of the electricity actually delivered to the grid before the project activity
implementation. The ERCP Manager should not manipulate this data other than to copy and paste it
from the file in which it was handed. The CD or e-mail through which the data came from the provider
should also be kept as proof for the DOE

Spreadsheet 2, Cabulig ER at yearly period in question.xls will be composed of two worksheets:
Worksheet# 1: Original Data from Grid operator, Worksheet# 2: Organized Data, Processed Data and
Result.

Worksheet 1 should contain data as it was provided by the Grid Customer, on a CD or in email, arranged
in months of the electricity actually delivered to the grid. The ERCP Manager should not manipulate this
data other than to copy and paste it from the file in which it was handed. The CD or e-mail through
which the data comes from the provider should also be kept as proof for the DOE.

For Worksheet 2, the ERCP Manager should put in one column per month the monthly project
generation. In this same Worksheet, the ERCP Manager should calculate monthly ERs in tCO
2
e by
multiplying the generation in MWh times 0.6489 tCO
2
e/MWh (the Baseline Emissions Factor for the
Mindanao Grid calculated ex-ante as described in Annex 3) and which will be used for the first 7-yr
crediting period. Rounding off is not necessary when calculating monthly ERs since the monthly
calculation is only for measuring progress. At the end of the year, the ERCP Manager should sum up the
resulting monthly ERs from electricity displacement to obtain the yearly project ERs from electricity
displacement ready for Verification. Resulting yearly ERs from electricity displacement must be
rounded off to the nearest integer. Once the calculation of yearly ERs from electricity displacement is
completed in the Cabulig ERs at December.xls
26
, this file should become Cabulig ERs at yearly
period in question.xls.

Worksheet 2 also allows the ERCP Manager to calculate the cumulative generation and cumulative ERs
from electricity displacement throughout the year and be aware of the progress of the Projects
environmental benefits accrued due to ERs from electricity displacement.

The ERCP Quality Control and Organizational Structure can be seen in the annex section of this MP.

26
December is the last month of the year, for the MP.

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V. Annexes

The ERCP Organizational Structure and Quality Assurance and Control Procedure

Monitoring plan (MP) Emissions Reductions Calculation Procedure (ERCP)

ERCP Organizational Structure

MP Steering Committee

WILLIAM U. LIM
Seniot Vice-President

ERCP Management
ROALD ZARAGOZA
Asst. Vice-President

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51

Monitoring Plan (MP)
Emissions Reductions Calculation Procedure (ERCP)
Quality Control for Electricity Displacement

The Project Operator will perform monthly recording and check calibration of electric meters periodically. Only
one person will be responsible for the ERCP: Mr. Ronald Zaragoza.

Quality of Data Collection:
Data: Monthly generation from Grid Operator from provider, remaining information from the
Project Operator.
Format: Summarized in Excel.
Frequency: Monthly

Quality of Data Processing:
Original Data
Organized Data
Entered Data
Processed Data
Results

Quality of Data Storage:
Prevent Excel version problems by updating Excel software packages every year in PCs used for
the ERs calculations
Keep all data for 2 years after the first crediting period, i.e. for a total of 9 years
Assign a password to Excel spreadsheets used for the ERCP
Save the document with the last date in which an alteration was made so that old versions are
kept on disc
Keep all written documentation in a folder that will be provided to the DOE together with the
data collected in Excel

Quality of Data Delivery:
Provide to the DOE the e-mails/CDs through which Data Provider delivered the original data
Provide to the DOE the sales receipts
Provide to the DOE evidence of all calculations made showing all preliminary versions of
spreadsheets saved on disc.

Monthly calculations involve 5 data points.
All must be recorded and manipulated in Excel
with records of data points and electricity sales
receipts.
Yearly consolidation of monthly calculations.

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