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RETA 7329: PROMOTING ACCESS TO RENEWABLE

ENERGY IN THE PACIFIC


SOLOMON ISLAND COMPONENT
Technical Assistance
(ADB RETA 7329)

MINI HYDRO PRE-FEASIBILITY


STUDIES

Prepared for

Asian Development Bank


TA 7329- Promoting Access to Renewable Energy in the Pacific
MINI HYDRO PRE-FEASIBILITY STUDIES

Contents

Executive Summary i

1. Introduction 1
1.1 Background 1
1.2 Problems and Objectives 1
1.3 Objectives and Scope of Report 2
1.4 Limitations of the Report 2
1.5 Structure of Report 3
1.6 Project Team 4
1.7 Acknowledgements 4

Part I 5

2. Methodology 6
2.1 Overview 6
2.2 Review of Existing Data and Information 7
2.3 Financial Analysis 8
2.4 Stakeholder Analysis: Unserved Potential Customers 8
2.5 Counterparts, Capacity Building and Training 9
2.6 Data Availability and Data Quality 9

3. Mini Hydropower in Solomon Islands 10


3.1 Definitions 10
3.2 Hydrology and Hydro Resources 10
3.3 Collection of Hydrological Data 12
3.4 Ongoing Data Collection 13
3.5 Project Design 14

4. Implementation and Financing Modalities 21


4.1 The Choices 21
4.2 Independent Power Producer 21
4.3 Enabling Environment 22
4.4 Risk Management in Hydro IPPs 23
4.5 Procurement and Implementation of IPP Projects 26

5. Financial Viability of Mini Hydropower in SI 28


5.1 Analysis of SIEA’s Financial Situation 28
5.2 Fuel Supply Cost at SIEA Outstations 30

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5.3 Supply Cost and Benefits of Hydropower 31


5.4 Carbon Finance 32

Part II 34

6. Identification of Sites 35
6.1 Overview 35
6.2 Consultations and Preliminary Site Selection 36
6.3 Site Specific Investigations and Field Missions 36

7. Auki Malaita 38
7.1 The Auki Power System 38
7.2 Auki Load Forecast 41
7.3 System Expansion Planning Auki 44
7.4 Hydro Options for Malaita Province and Auki 45
7.5 General Description Fiu 47
7.6 Hydrology 48
7.7 System Layout 48
7.8 Variations 50
7.9 Cost Estimates 51
7.10 Financial Analysis 52

8. Lata, Temotu 55
8.1 The Lata Power System 55
8.2 Lata Load Forecast 58
8.3 System Expansion Planning Lata 62
8.4 Hydro Options for Lata 64
8.5 General Description Luembalele 64
8.6 Hydrology 65
8.7 System Layout 66
8.8 Cost Estimates 68
8.9 Financial Analysis 68

9. Ringgi, Noro and Munda, Western Province 71


9.1 The Noro/Munda Power System 71
9.2 Load Forecast 73
9.3 Noro/Munda System Expansion Planning 77
9.4 Hydro Options for Western Province 79
9.5 General Description Vila 80
9.6 Hydrology 82
9.7 System Layout 84
9.8 Variations and Least Cost Option 86

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9.9 Cost Estimates 86


9.10 Financial Analysis 87
9.11 IPP Financial Analysis: Bulk Energy Transfer Price 91

10. Taro 94
10.1 The Taro Power Supply 94
10.2 Load Forecast 95
10.3 Taro System Expansion Planning 98
10.4 Hydro Options for Taro 99
10.5 Hydrology 100
10.6 System Layout 101
10.7 Cost Estimates 104
10.8 Financial Analysis 105

11. Mataniko and Lungga, Honiara 108


11.1 The Honiara Power System 108
11.2 Load Forecast 111
11.3 System Expansion Planning 116
11.4 Hydro Options for Honiara 116
11.5 General Description Mataniko 117
11.6 Hydrology 118
11.7 System Layout 118
11.8 Variations 120
11.9 Cost Estimates 122
11.10 Financial Analysis 123

12. Environmental Aspects 128


12.1 Methodology 128
12.2 Project Description 129
12.3 Local Environment Auki, Malaita Province 129
12.4 Local Environment Taro, Choiseul Province 131
12.5 Local Environment Lata, Temotu Province 133
12.6 Local Environment Ringgi, Western Province 135
12.7 Local Environment Mase River, Western Province 136
12.8 Local Environment Mataniko River, Guadalcanal 138
12.9 Screening of Environmental Impacts 138
12.10 Environmental Management Plan and Monitoring 143
12.11 Conclusion and Recommendations 144

13. Social and Poverty Analysis 145


13.1 Introduction 145

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13.2 Methodology 145


13.3 Stakeholder Analysis 146
13.4 Poverty and social exclusion 147
13.5 Management of Social risks and Vulnerabilities 150
13.6 Social safeguards 151
13.7 Site Specific Findings 153

14. Conclusions and Recommendations 160

Picture Index
Picture 3.1: Data Recording Equipment 12
Picture 3.2: Features of SI Rivers 14
Picture 7.1: Auki Power Generation 39
Picture 7.2: Pulalaha Limestone Gorge at Afio 46
Picture 7.3: Fiu River 47
Picture 8.1: Luembelele River, Santa Cruz 65

Table Index
Table 2.1: Sites Selected for Pre-Feasibility Studies 6
Table 2.2: Shortlisted Sites and Variants 7
Table 4.1: Risks for a Hydro IPP during Construction 24
Table 4.2: Risks for a Hydro IPP during Operation 25
Table 5.1: Summary of Operational Financial Results for all Stations,
($SBD) 2003-2007 30
Table 5.2: Delivered Diesel Fuiel Cost by Outstation (SBD$/litre, June 2010) 31
Table 6.1: Potential Impact of Hydro Projects on Electrification Rates of Provinces 37
Table 7.1: Generation Assets Auki Power Plant, April 2011 38
Table 7.2: New Domestic Loads Expected in Auki following System Extension 41
Table 7.3: Auki System Load Forecast, Generation Requirements,
Fuel Requirements and Generator Scheduling 43
Table 7.4: Potential Loads in Afio 45
Table 7.5: Characteristics Ruala’e Site Auki 46
Table 7.6: Design Variations for Fiu Hydro Site 50
Table 7.7: Design Parameters of Variations 51
Table 7.8: Investment Cost Fiu River Hydropower Scheme 51
Table 7.9: Sensitivity Analysis, Auki 53
Table 8.1: Population, Lata 55
Table 8.2: Generation Assets - Lata Power Pant 56
Table 8.3: New Loads expected in Lata following System Upgarde 59
Table 8.4: Lata System Load Forecast, Generation Requirements, Fuel
Requirements, and Generator Scheduling 61

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Table 8.5: Distribution Cost Summary Option B 63


Table 8.6: General Information - Luembelele Hydro Plant 67
Table 8.7: Variations 67
Table 8.8: Cost Estimates 107 kW Hydro Scheme 68
Table 8.9: Sensitivity Analysis 70
Table 9.1: Industrial Demand Growth Noro by end of 2011 74
Table 9.2: Ringgi System Load Forecast (Varian A), Generation Requirements, Fuel
Requirements and Backup Generator Scheduling 75
Table 9.3: Ringgi Noro Munda System Load Forecast (Variant B), Generation
Requirements, Fueld Requirements and Backup Generator
Scheduling 76
Table 9.4: Options for Ringgi, Munda and Noro 80
Table 9.5: Location of Intakes and Powerhouses 82
Table 9.6: Catchment Run Off Vila River 83
Table 9.7: Capacity and Energy of Vila Options 84
Table 9.8: Cost Estimates 87
Table 9.9: Sensitivity Analysis, Ringgi (Variant A) 89
Table 9.10: Sensitivity Analysis, Ringgi (Variant B) 91
Table 9.11: Calculation of a Bulk Energy Price (SBD/kWh) that Achieves FIRR=15% 92
Table 9.12: SIEA Analysis, Hydro Energy Purchase from IPP (Ringgi, Variant B) 93
Table 10.1: Installed Generation in Taro 95
Table 10.2: Load Forecast Taro 97
Table 10.3: Calculated Runoff for Sorawe Catchments 100
Table 10.4: Characteristics of Sorawe Alternatives 104
Table 10.5: Cost Estimates Tarp Hydro 105
Table 10.6: Sensitivity Analysis, Taro 107
Table 11.1: Honiara Generator Status May 2011 109
Table 11.2: Honiara System Load Forecast, Generation Requirements, Fuel
Requirements, and Backup Generator Scheduling (With Tina) 113
Table 11.3: Honiara System Load Forecast, Generation Requirements, Fuel
Requirements, and Backup Generator Scheduling (Without Tina) 114
Table 11.4: Design Variations of Lungga Low Head Scheme 116
Table 11.5: Technical Characteristics of Mataniko Variations 121
Table 11.6: Cost Estimates Mataniko Hydro 121
Table 11.7: Sensitivity Analysis, Mataniko (with Tina) 125
Table 11.8: Sensitivity Analysis, Mataniko (without Tina) 126
Table 12.1: Public Consultations 127
Table 12.2: Environmental Categorisation 143
Table 13.1: Summary Stakeholder Analysis 146
Table 14.1: Summary of Hydro Projects 159

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Figure Index
Figure 3.1: Lata Rainfall 25 Years 10
Figure 3.2: Flow Duration Curves Lungga River 11
Figure 3.3: Typical Intake Structure 16
Figure 3.4: Recommended Sand Trap Design 17
Figure 3.5: Headrace Canal Cross Section 17
Figure 3.6: Peak Ground Acceleration 20
Figure 6.1: Location of Sites Considered and Studied 35
Figure 7.1: Auki Load Profile 39
Figure 7.2: Auki Load Forecast 41
Figure 7.3: Auki Capacity Requirements 44
Figure 7.4: Location of Fiu 47
Figure 7.5: Flow Duration Upper Fiu River 48
Figure 7.6: Fiu Branch Profile 48
Figure 7.7: Fiu Hydro Scheme Layout 49
Figure 7.8: Levelized Cost versus Installed Capacity 50
Figure 7.9: Auki Hydro Scenario 52
Figure 7.10: Auki All-Diesel Scenario 52
Figure 7.11: Profit/(Loss) after Tax and Finance Charges, Auki 53
Figure 8.1: Load Profiles, Lata 57
Figure 8.2: Lata Existing 415 V AC LV Distribution Single Line Diagram 57
Figure 8.3: Lata Power System Load Forecast 59
Figure 8.4: Generation Mix Lata with Hydro 60
Figure 8.5: Lata Peak Load, Installed Capcity and Firm Capacity 62
Figure 8.6: Location of Luembelele Hydro Site 65
Figure 8.7: Assumed Flow Duration Curve for Luembelele 66
Figure 8.8: System Layout 66
Figure 8.9: Revenue vs Expenses Lata Hydro 69
Figure 8.10: Revenue vs Expenses Lata All Diesel 69
Figure 8.11: Lata Profit and Loss Diesel and Hydro 70
Figure 9.1: Load Profiles Noro on Two Consecutive Weekdays 71
Figure 9.2: Load Forecasts Variant A and B 74
Figure 9.3: Mase and Vila Hydro Sites 79
Figure 9.4: Rainfall Pattern Ringgi 80
Figure 9.5: Possible Developments on Vila River 81
Figure 9.6: Monthly Rainfall for Ringgi Station 82
Figure 9.7: Rainfall Duration Curve Ringgi 83
Figure 9.8: Flow Duration Curves Vila Catchments 83
Figure 9.9: Exploitable Catchments of Vila River 85
Figure 9.10: Levelized Production Cost as a Function of Installed Capacity 86
Figure 9.11: Revenues vs Operating Expenses Variant A 88

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Figure 9.12: Revenues vs Operating Expenses Variant A All-Diesel 88


Figure 9.13: Profit/Loss Variant A 89
Figure 9.14: Revenues vs Operating Expenses Variant B 90
Figure 9.15: Revenues vs Operating Expenses Variant B All-Diesel 90
Figure 9.16: Profit/Loss Variant B 91
Figure 10.1: Map Taro 94
Figure 10.2: Settlements Around Taro 95
Figure 10.3: Taro Load Forecast 96
Figure 10.4: Taro Generation Mix 96
Figure 10.5: Taro Capcity Requirements (Entire Taro Ward) 98
Figure 10.6: Hydro Options Taro 99
Figure 10.7: Rainfall Taro 100
Figure 10.8: Flow Duration Curve for Lower Catchment 101
Figure 10.9: Flow Duration Curve for Upper Catchment 101
Figure 10.10: Long Profile for Sorawe Lower 102
Figure 10.11: Layout Lower Scheme 102
Figure 10.12: Long Profile Sorawe 103
Figure 10.13: Sorawe Upper Alternatives 104
Figure 10.14: Revenues and Operating Expenses Hydro Taro 106
Figure 10.15: Revenues and Operating Expenses Diesel Taro 106
Figure 10.16: Profit/Loss Hydro and Diesel Taro 107
Figure 11.1: Single Line Diagram SIEA Honiara 110
Figure 11.2: Generation Requirements Honiara 111
Figure 11.3: Generation Mix With and Without Tina 112
Figure 11.4: Location of Lungga and Mataniko Projects 115
Figure 11.5: Flow Duration Curves for two Mataniko Catchments 117
Figure 11.6: Long Profile Mataniko River 118
Figure 11.7: Layout of Mataniko Scheme 119
Figure 11.8: Cost and Energy Production Analysis Mataniko Variations 120
Figure 11.9: Revenue versus Operating Expenses Mataniko with Tina 122
Figure 11.10: Revenue versus Operating Expenses Honiara with Tina 123
Figure 11.11: Profit/Loss SIEA Honiara with Tina 123
Figure 11.12: Revenue versus Operating Expenses Mataniko without Tina 124
Figure 11.13: Revenue versus Operating Expenses Honiara with Tina 124
Figure 11.14: Profit/Loss SIEA Honiara with Tina 124

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Annex 163
Annex 1: Automatic Stations Used on ADB RETA 7329 163
Annex 2 Legal Framework for Rural Electrification 168
Annex 3: Risk Analysis for Hydropower IPP in SI 179
Annex 4 Financial Analysis Profit and Loss 187
Annex 5: Financial Internal Rate of Return 194
Annex 6: Rapid Environmental Assessment Checklists 197
Annex 7: Social Analysis 223
Annex 8 Stakeholder Analysis 237

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GHD
Level 8, 180 Lonsdale Street
Melbourne Vic 3000

T: 61 3 8687 8000 F: 61 3 8687 8111 E: Liesl.Keam@ghd.com

© GHD 2012

Document Status
Rev Reviewer Approved for Issue
Author
No. Name Signature Name Signature Date
1 G Zieroth C French A Baker Oct 11

2 G Zieroth L Keam A Baker Feb 12

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Abbreviations and Acronyms


AC Alternate Current

ADB Asian Development Bank

ADO Automotive diesel oil

ACSR) Aluminium Conductor Steel Reinforced

Ah Ampere hours

ASL Above Sea Level

AusAID Australian Agency for International Development

AWLR Automatic Water Level Recorder

BOO Build Own Operate

BOOT Build Own Operate Transfer

BOT Build-Operate-Transfer

CA Concession Agreement

CDM Clean Development Mechanism

CNO Coconut Oil

CPI Consumer Price Index

DC Direct Current

DME Direct Micro Expelling (of Coconut oil) also referred to as ‘virgin CNO production’

DSM Demand-side management

EIA Environmental Impact Assessment

EIB European Investment Bank

EPC Engineer Procure Construct (Contract)

EU European Union

ENERCAL New Caledonia Electricity Company

FIRR Financial Internal Rate of Return

FOB Freight On Board

GIS Geographical Information Systems

GSI Government of the Solomon Islands

IC Internal Combustion (engine)

IEC International Electrotechnical Commission

IPCC Intergovernmental Panel on Climate Change

IPP Independent Power Producer

IUCN International Union for Conservation of Nature

KFPL Kolombangara Forest Company, Ringgi

kV Kilo Volts (thousands of volts)

kW Kilowatt

kWh Kilowatt Hour

kWp Kilowatt Hour peak for PV panels under standard conditions

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MoF Ministry of Finance

MJ Megajoule

MLA Multilateral Lending Agency

MWh Megawatt hour (1000 kWh)

MMERE Ministry of Mines Energy and Rural Electrification

MoA Ministry of Agriculture

MoE Ministry of Environment

MoU Memorandum of Understanding

NPV Net Present Value

NZAID New Zealand Agency for International Development

O&M Operation and Maintenance

PPA Power Purchase Agreement

PRIF Pacific Regional Infrastructure Fund

PV Photovoltaics

UNELCO Vanuatu Electricity Company

RE Renewable energy

SB$ Solomon Island Dollar

SICE Solomon Islands Copra Exporters

SIEA Solomon Islands Electricity Authority

SIWA Solomon Islands Water Authority

SME Small and Medium Scale Enterprise

SPC/SOPAC Pacific Community / Pacific Islands Applied Geoscience Commission

ToR Terms of Reference

UNDP United Nations Development Programme

UNFCCC United Nations Framework Convention on Climate Change

US United States (of America)

US$ United States Dollar

VCNO Virgin Coconut Oil

WAAC Weighted Average Cost of Capital

WB World Bank

Wh Watt hours

For the purposes of this report an exchange rate of 1 SB$ = 0.125 US$ has been used.

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Executive Summary

Background
In the Solomon Islands electricity is supplied to less than 20% of the population. Almost all
generation is based on imported diesel fuel. Apart from this high dependence on external
supply, the country also faces challenges in the development of the energy sector, including
maintaining reliability, ensuring commercial viability of the power utility Solomon Islands
Electricity Authority (SIEA) and increasing access to modern energy supply. With few
exceptions, electrification is confined to Honiara and the provincial centres. Outside of these
centres, only about 5% of the rural population has access to electricity through a small number
of off-grid and individual household systems. Against this background, the Government of the
Solomon Islands through its Ministry of Mines, Energy and Rural Electrification (MMERE) is
seeking to reduce both the cost of electricity supply and Solomon Islands’ vulnerability to oil
price shocks through an accelerated development of local renewable energy resources. With
support from the Asian Development Bank under the initiative ‘RETA 7329: Promoting Access
to Renewable Energy in the Pacific’ this report assesses the potential for developing alternative
energy sources for electricity generation, in particular small scale hydropower for the outstations
of the Solomon Islands Electricity Authority 1.
This report summarizes the findings of several field missions undertaken by the consultant. The
first mission took place from 24 August to 17 September 2010 and included preliminary
investigations at sites determined by the Ministry of Mines Energy and Rural Electrification. It
included field surveys in Auki, Afio, Taro, Ringi and Lata. A second mission from 25 April to 20
May 2011 allowed the expansion of data collection, installation of river level and rainfall gauging
stations and more detailed assessments of the proposed sites together with an analysis of
alternative sites such as Mase on New Georgia. It also included the review of two sites on
Guadalcanal indicated by the Ministry of Finance in response to a proposal by a prospective
private sector developer.
Community Consultations
Community consultations, focus group workshop discussions and individual discussions were
held to explore the attitudes and views of stakeholders towards a) hydropower development in
general, b) land and water use acquisition, c) environmental and social impacts, d) potential
participation in hydropower development of local communities, and f) the introduction of pre-
payment metering systems. Local communities were actively involved in project investigations
and the installations of measuring equipment. The results of these consultations and surveys
clearly suggested a broad support for the concept of the project, in particular for expanding
SIEA’s services into unserved areas. Both connected and prospective SIEA customers have
unequivocally welcomed the introduction of pre-payment metering.
Hydropower as an Alternative to imported Fuel
Most inhabited islands of the Solomon Islands have hydropower potential. Rainfall in higher
catchment areas is evenly distributed over the year and the rivers draining catchments have
often sufficient slope to allow the development of high or at least medium head schemes with
estimated specific investment cost in the range of 2,600 – 3,600 US$ per installed kW for plants
in the class 1 – 5 MW. Smaller schemes in the 100 kW class are typically costing around 6,000
– 7,000 US$ per installed kW but can be significantly higher where conditions are unfavourable.
These figures do not include land acquisition cost. Factors limiting hydropower development are
unfavourable geological conditions (porous limestone formations and thick layers of unstable
alluvium) and high flood levels associated with extreme weather events (cyclones). These

1
A separate report provides prefeasibility studies for five coconut oil sites in the Solomons

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constraints can, however, be overcome by appropriate designs that avoid dams and tunnelling.
Run off river plants with contour canals and steep, short penstock pipes seem to be cost
efficient and environmentally friendly as long as minimum flows are maintained in the respective
rivers. Another constraint is landowner resistance or unrealistic compensation claims made by
landowners. In addition, there is inadequate hydrological data to accurately forecast river run off
and energy potential of specific sites. This lack of data has been addressed in this TA through
the installation of 5 automatic river gauging and rainfall recording stations.
Costs and Benefits of Mini Hydropower
Despite the constraints mentioned above, hydropower is considered viable for most of SIEA’s
grids. SIEA’s plants in Buala (Santa Isabel) and Malu (Malaita) have already demonstrated that
hydropower is a reliable energy source with relatively low operating and maintenance cost. As it
requires no fuel input, electricity from hydropower is in most cases less costly than equivalent
diesel energy. It also avoids the expense and insecurity of fuel logistics. It is as effective in rural
supply areas as it is in urban supply areas, provided that local topological and hydrological
conditions (rainfall, catchment area, runoff) are adequate and landowner issues can be
resolved. Its capital cost can vary enormously from site to site, depending upon local topological
and geological conditions.
For the five sites investigated in this prefeasibility study, hydropower has considerable potential
to provide access to affordable, renewable electricity to rural areas. In the investigated load
centres and perhaps others, hydropower has good potential to turn loss-making rural diesel
stations into profitable operations or to create new rural power supply systems that are
profitable, either for SIEA or for an independent power producer (IPP). Assuming that the
willingness to pay for electricity it is at least equal to the national electricity tariff, hydropower will
benefit the rural population by raising the quality of life, widening the opportunities for improved
social services, and perhaps stimulating commercial development.
The following table summarises the results of our investigations for the five sites that have been
selected in close consultation with SIG and SIEA senior management.

Summary of Hydro Projects


Load Installed Annual Investment Levellized FIRR Approx Environmental
Center kW GWh US$m US$/kWh % US$/kW Category
Auki 1,160 9.8 4.2 0,08 35% 3,600 B
Lata 107 0.8 2.2 0.20 13% 20,300 B
Ringgi A 1,210 10.4 4.4 0.07 45% 3,600 A
Ringgi B 4,320 26.3 11.3 0.06 47% 2,700 A
Taro 260 2.1 1.7 0.12 18% 6,500 C
Honiara 2,740 12,7 7.2 0.08 40% 2,600 A
+Tina
Honiara 2,740 12,7 7.2 0.08 47% 2,600 A
-Tina
These preliminary cost estimates have been prepared for the purpose of prioritizing sites for
further investigation and must not be used for any other purpose. They are subject to the
limitations contained in section 1.4 of this report.
While specific investment cost vary considerably, the results show that for projects above 1 MW,
total costs (excluding land acquisition) are below US$ 3,000 per kW which results in robust
FIRR values in the 40% range and in levelized energy production cost below 10 US cents per
kWh.
Sensitivity analysis shows that even under pessimistic assumptions the projects turn out to be
competitive with diesel generation for which a real increase in fuel cost of 3% p.a. has been
assumed. Hydro development use will fundamentally change SIEA’s financial position in the

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centres investigated, in particular if SIEA invests in the projects. The larger projects (above 1
MW also seem to support development as privately financed IPPs with the benefits shared
between a developer and SIEA as an off-taker.
IPP Development
SIEA has expressed an interest in leaving hydropower development to private IPP investors.
The main reasons for this position are firstly a reluctance of SIEA to deal with landowner issues
that will inevitably arise in conjunction with hydro development and secondly the shortage of
investment funds. The IPP development modality can indeed overcome these two obstacles.
Landowners could be made shareholders in IPP developments with land acquisition
compensation paid as dividends tied to the performance of the projects. However, the IPP
modality requires effective and efficient risk management and an enabling framework that is
able to balance interests of investors, consumers and the off-taker SIEA. Such a framework or a
regulatory authority that could address risk management issues does not yet exist.
In case the IPP route is chosen for the hydro projects, it seems prudent to aim at preparing the
projects in the public sector (possibly with TA support from donors) and then competitively
procure the projects in international tenders. This means that funding needs to be located to
perform the feasibility and preliminary design studies for the priority locations.
Environmental Screening
The ADB’s Rapid Environmental Assessment (REA) checklist for hydropower was used to
determine the environmental categorization for each of the sites selected for this pre-feasibility
study. The screening and assessment of environmental issues in all project sites identified in
this pre-feasibility study demonstrate that the main impacts will stem from road construction and
the clearing of forest vegetation on steep terrain for head race canals, penstocks and ancillary
structures. While these are highly significant in those project sites on steeper terrain (Auki,
Mataniko) ensuring that environmental issues are an integral part of the design criteria can
substantially mitigate them.
The Environmental Management Plan (EMP) would cover key design considerations related to
sound construction and long term serviceability of infrastructure including provisions to mitigate
environmental effects during construction such disposal of debris and spoil instep terrain, noise
and dust nuisance, and safety. A Monitoring Plan would provide for community feedback,
linkage with ongoing water quality monitoring programs and monitoring for compliance with the
EMP.
The environmental categorisation of each of the project sites is summarised within the report
and is based on the summary of impacts in the REA checklists. Ringgi and Mataniko are the
only sites where there are significant environmental and public interest issues that require
special attention. These sites have been assessed as a category A and a full EIA is
recommended as part of the feasibility study work.
Social Screening
The principal purpose of the project is to improve and extent electricity supply in and around
provincial centres throughout Solomon Islands. The project is likely to also reduce poverty of
opportunity throughout Solomon Islands by improving the environment for pro-poor growth and
social development. Electricity supply can improve access to and the quality of education,
health, water supply, sanitation and other basic services, increase social and economic
opportunities especially for small businesses and other forms of income-generation, improve
living conditions, and reduce the physical and time work-load of women. The project will
contribute to the achievement of MDG-related non-income poverty goals in education; infant
and child survival; water and sanitation; and gender equity through greater access for women to
health, education and other services and livelihood opportunities, progress that is seriously
needed, but lacking, in Solomon Islands.

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Full realisation of this potential will not occur automatically, however. In order for it to happen,
the enabling environment for inclusive planning, gender equity, community development, small
enterprise growth and the like needs to be nurtured through other, supporting development
programs, some of which are already being implemented in Solomon Islands by provincial and
national governments, NGOs and aid partners.
While the project will benefit the whole community and region, access to electricity supply can
particularly benefit women through improved living conditions, reduced physical or time burden
of some household tasks; new opportunities for small businesses and other forms of income-
generation.
Indigenous people’s issues are significant in the project. Solomon Islanders have a strong
attachment to their ancestral lands. In some parts of the country, land has been alienated from
traditional to government ownership but even here landowner concerns must be addressed. Of
the proposed sites, four are on customary land and two (Ringgi and Lata) are on alienated land.
In Lata, the plant will be on alienated land but transmission lines will cross over customary land.
It is critical to the progress and sustainability of the project that landowner aspirations for project
benefits are fairly met. Project benefits, need to be included in the final land access and/or
acquisition agreement to be negotiated with the landowners through wide-based community
consultations. This agreement needs to acknowledge and calculate a value for the landowner’s
contribution to the improved electricity supply and the lower cost of generation. Principal
responsibility for these negotiations rests with the provincial governments. The poverty
alleviation and inclusive development outcomes of the project would be increased if proceeds
for resource use can benefit the whole community. An in-perpetuity return to landowning
communities, perhaps in the form of a development trust fund, could enhance both community
ownership and participation in the project and provide a fair distribution of returns to all of the
community by gender and age.
Priority Projects
This Report is subject to, and must be read in conjunction with, the limitations set out in section
1.4 and the assumptions and qualifications contained throughout the Report
From the consultant’s perspective, there is a clear merit order for the projects. The highest
priority should be given to the Ringgi project. It is not only the best performer in terms of FIRR, it
also has the highest quantitative impact in terms of kWh supplied. An additional advantage is
the absence of landowner issues, as the forest company owns the land where the hydropower
plant would be installed. It is recommended to focus on a variant that would not only supply the
demand of Ringgi, but also the demand of the demand centres Noro and Munda. SIEA will have
to restructure its power supply to these centres anyway and instead of building a new diesel
power plant, Noro and Munda could be supplied from Ringgi with diesel back-up provided by
the 3 MW of diesel capacity installed at the Soltai fish processing company in Noro. An
additional advantage of the Ringgi project is that the forest company has already all equipment
that would be necessary for the construction of the hydro plants on site. I.e. mobilization cost
would be low in comparison with other projects. This project has been classified as a category A
project due to environmental concerns related to the High Conservation Value Forests within
the Vila River catchment including the riparian buffer zones. Whilst KFPL have indicated that
the project would not compromise their environmental objectives, a full EIA would be required.
The Mataniko project shows equally high FIRR values, in particular under the assumption that
the Tina river project will not go ahead. Developing this project will, however, have to include
resolving some critical land acquisition issues as compensation demands for the installation of a
simple automatic gauging station were already quite substantial. A waterfall used as a tourist
site will be impacted and detailed environmental investigations would be required for this site.
The Fiu River hydro scheme on Malaita has the potential to provide low cost electricity for the
provincial capital Auki including surrounding areas. At 35% the FIRR is still significantly above
the Weighted Average Costs of Capital and the project should also be considered as a priority.

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The smaller projects Lata and Taro show significantly higher specific investment cost and while
still viable under standard assumptions taken, they may require some donor support to
materialize.

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1. Introduction

1.1 Background
In the Solomon Islands electricity is provided to less than 20 % of the population and almost all
generation is based on imported diesel fuel. The country also faces considerable challenges in
the development of the energy sector, including maintaining a reliability of energy supply,
ensuring commercial viability of the power utility SIEA, increasing access and improving energy
security by reducing dependence on imported fossil fuels. The poor performance of the power
industry also presents a major constraint to private sector development and economic growth.
Rural electrification coverage in the Solomon Islands is particularly limited. With few exceptions,
electrification is confined to Honiara and the provincial centres. Outside of these centres, only
about 5% of the rural population has access to electricity through a small number of off-grid and
individual household systems. To develop the economic potential of villages and to provide
social infrastructure to rural populations, greater emphasis on rural electrification is needed.
However, a scaling-up of rural electrification services through expansion of existing grids and
stand-alone systems is a substantial challenge. Though lack of funding is perhaps the dominant
constraint, weaknesses in policy, legislation, regulation and the lack of feasible models that
would allow the development of local, renewable energy resources also play their part in limiting
the rate at which access to electricity services is improved for rural communities.
Against this background the Government of the Solomon Islands through its Ministry of Mines,
Energy and Rural Electrification (MMERE) is seeking to reduce both the cost of electricity supply
and Solomon Islands’ vulnerability to oil price shocks through an accelerated development of
local renewable energy resources including hydropower and coconut based biofuels.
Opportunities to develop hydropower in the Solomon Islands have been investigated since the
60s, but despite a promising potential no larger development has taken place in the country.
While other Pacific island nations such as Fiji, PNG, Samoa and Vanuatu have been able to
exploit hydro resources; project development in the Solomon Islands could not overcome
serious challenges related to land and water right acquisition and difficult geological conditions.
The current Government of the Solomon Islands (GSI) recognises, however, that hydropower
remains an attractive alternative to diesel imports that have been burdening the economy and
undermine energy security of a country characterized by a very high vulnerability to external
shocks. While the development of the medium size Tina river project is currently under way for
the Honiara system, smaller sites in the outer islands may also represent an opportunity to
develop hydropower as a reliable and environmentally friendly alternative to diesel. Serious
challenges, remain. Questions that need to be addressed and answered include (i) how to
overcome resistance of local landowners and ensure their support for projects through
participative approaches and fair distribution of project benefits; (ii) how to arrive at project
designs that allow for difficult geological conditions, (iii) how to reduce planning and project
preparation costs to levels that do not render selected projects unviable, (iv) how to implement
and finance projects in a way that reconciles sometimes conflicting interests of GSI, SIEA,
consumers and potential private sector participants.

1.2 Problems and Objectives


The overall objective of Asian Development Bank (ADB) ‘RETA 7329: Promoting Access to
Renewable Energy in the Pacific’ is to support the development of alternative energy generation
in the Solomon Islands including Coconut Oil (CNO) and hydropower. This prefeasibility study
report considers alternative energy sources for electricity generation through mini hydropower.
The use of these resources is expected to improve reliability and financial viability of energy
supply, allowing expansion of electrification services to un-served communities. At the same
time, hydropower development is expected to increase income generation that would stimulate

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local cash economies and render the uptake of electricity supply more affordable for the local
communities.
The ADB RETA seeks to take a new look at small scale hydropower development that aims to
use innovative and inclusive approaches allowing stakeholders in both the public and private
sectors to participate in project identification and preparation from the beginning of the project
cycle. The analysis presented in this report includes a project pipeline for five individual sites at
pre-feasibility level, of which the Mataniko site would feed into the Honiara grid, two sites would
feed into existing SIEA outstations, one into an existing diesel system operated by a commercial
forest operation. For two sites new rural electrification grids would have to be established.

1.3 Objectives and Scope of Report


The objective of this report is to present pre-feasibility studies for five shortlisted selected mini
hydropower sites in Solomon Islands to assist with the identification and prioritization of sites for
further investigation. The pre-feasibility studies for each site are presented in Part II of this report
and include preliminary engineering and financial analysis of sites, plus initial social and
environmental screening to assist with the prioritization process. The assessment and analysis
is based on available documentation and hydrological data provided by SIEA, initial site
inspections, on-site surveys, broad stakeholder and community consultations, and preliminary
analysis of electricity demand in the potential project areas at the time.
Limited hydrological data for the schemes is available and automatic gauging stations have
been installed under this ADB RETA to adderss this issue. The analyses, conclusisions and
recommendations presented in this Report should be revised once more accurate and site
specific hydrological data is available for the shortlisted schemes.

1.4 Limitations of the Report


This Mini Hydro Prefeasibility Study (“Report”) has been prepared by GHD Pty Ltd (“GHD”) for
ADB and this report:
1. may only be used and relied on by ADB, SIEA and MMERE
2. must not be copied to, used by, or relied on by any person other than ADB, SIEA and
MMERE without the prior written consent of GHD;
GHD and its servants, employees and officers otherwise expressly disclaim responsibility to any
person other than ADB, SIEA and MMERE arising from or in connection with this Report.
To the maximum extent permitted by law, all implied warranties and conditions in relation to the
services provided by GHD and the Report are excluded unless they are expressly stated to
apply in this Report.
The services undertaken by GHD in connection with preparing this Report were limited to those
specifically detailed in Section 1.3 of this Report.
The opinions, conclusions and any recommendations in this Report are based on assumptions
made by GHD when undertaking services and preparing the Report, as detailed in the Report.
GHD expressly disclaims responsibility for any error in, or omission from, this Report arising
from or in connection with any of the Assumptions being incorrect.
GHD has prepared this Report on the basis of Information obtained from Solomon Islands
Electricity Authority (SIEA) and unless specified, GHD has not independently verified or checked
(“Unverified Information”) beyond the agreed scope of work. GHD expressly disclaims
responsibility in connection with the Unverified Information, including (but not limited to) errors
in, omissions from, the Report, which were caused or contributed to by errors in, or omissions
from, the Unverified Information.

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GHD has prepared the preliminary cost estimates for the five shortlisted hydropower schemes
as set out in sections 7 to 11 of this Report (“Cost Estimates”) using information reasonably
available to the GHD employee(s) who prepared this Report; and based on assumptions and
judgments made by GHD. The Cost Estimates are drawn from RETScreen4 2 and unit rates for
construction projects provided by SIEA.
The Cost Estimates have been prepared for the purpose of prioritizing sites for further
investigation and must not be used for any other purpose.
The Cost Estimates are a preliminary estimate only. Actual prices, costs and other variables
may be different to those used to prepare the Cost Estimates and may change. GHD does not
represent, warrant or guarantee that the projects can or will be undertaken at a cost which is the
same or less than the Cost Estimates. Further detailed investigations, including geotechnical
and hydrological investigations, would be required to firm up the cost estimates for budget
setting purposes.
Subject to the paragraphs in this section of the Report, the opinions, conclusions and any
recommendations in this Report are based on conditions encountered and information reviewed
at the time of preparation and may be relied on until 31st April 2012, after which time, GHD
expressly disclaims responsibility for any error in, or omission from, this Report arising from or in
connection with those opinions, conclusions and any recommendations.

1.5 Structure of Report


This Report summarizes issues, options and constraints related to the development of
hydropower at five potential sites in the Solomon Islands at prefeasibility level. The sites are
Lata, Temotu Province, Auki and Afio, Malaita Province, Ringi Western Province, Taro Choiseul
Province and Mataniko on Guadalcanal. The report contains two parts, Part I covers general
information on Hydrology resources and hydropower technology and Part II covers the site
investigations.

Part I
Section 2 briefly outlines the methodology used for consultation and analysis. Section 3 contains
a resource and assessment, starting with a review of SI’s hydropower resources followed by a
description of the situation found in the provinces where detailed investigations were
undertaken.
Section 4 assesses recent experiences with mini hydro project development in the Solomon
Islands and other developing countries. The section also presents a brief introduction into mini
hydropower technology. Section 5 addresses the issues associated with the competitiveness
mini hydropower versus conventional diesel fuel. It starts with an assessment of SIEA’s financial
situation in order to determine if the utility has room to subsidize a renewable power source.
Typical supply costs for hydropower are compared with other renewable energy sources
available in the Solomon Islands. The section also analyses non-financial benefits of mini
hydropower and tests if and under which market conditions the sale of emission reduction
certificates (carbon finance) could create an additional revenue streams that would be able to
enhance the attractiveness of mini hydropower development in the Solomon Islands.

2
http://www.retscreen.net/ RETScreen is a Canadian based decision support and costing tool, used worldwide, to evaluate the
energy production, costs, emission reductions, financial viability and risk for various renewable technologies including hydropower
projects

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Part II
Sections 6 to 11 present the results of a detailed pre-feasibility analysis for six sites (within Lata,
Auki, Ringi, Taro and Honiara) selected in close consultation with the Ministry of Mines and
Energy and SIEA senior management. For each site, the current power systems are analyzed
and possibilities are explored on how to expand electricity supply in order to improve access to
electricity generated from renewable energies. In the absence of detailed expansion planning for
the SIEA’s outstations, for each potential site a load forecast has been developed together with
system expansion planning that would ensures demand is met. The sections end with a financial
analysis for each site where profits and losses and FIRR are calculated for potential investments
in hydropower. Sections 12 and Section 13 present an analysis of environmental and social
impacts of hydropower development and operation. Section 14 summarizes findings and
outlines recommendations on how to approach mini hydropower development in the Solomon
Islands. It also describes strategies and actions required to overcome issues and constraints
which have hampered hydropower development in the past.

1.6 Project Team


The GHD study team consisted of Gerhard Zieroth (Rural Electrification Specialist and Team
Leader), Chris Cheatham (Economist), Arne Anderson (International Hydro Specialist), Margaret
Chung (Social SafeguardsSpecialist), Rene Weterings (Environmental Safeguards Specialist),
Nixon Silas (National Hydro Specialist) and Fred Conning/Francis Kapini (Power Systems
Engineer). GSI staff of the Ministry of Mines Energy and Rural Electrification actively
participated in site surveys and installation of measuring equipment included.
SIEA staff actively working on the project included Martin Sam (Deputy GM), John Kofela
(Manager Outstations) and Robinson Wood (GIS Manager) Abraham (Surveyor).

1.7 Acknowledgements
The consultant’s team conducted Field investigations and stakeholder consultations for this
study in April/May 2011. During the field investigations data was collected, including a number of
relevant reports, legal documents such as Power Purchase Agreements and project proposals,
which supported the analytical work required under the assignment. The consultant’s team
gratefully acknowledges the assistance provided by GSI, SIEA, donor agencies and some
private sector parties to obtain these data and information. The Provincial Governments their
Premiers, Provincial Ministers, and Heads of Agricultural and Forestry Departments also warmly
received the consultants. The local support by SIEA’s Officers in Charge for the outstations
visited is especially acknowledged. Special thanks are due to Chief David Mandua of Anatollo,
who assisted the ADB study team in installing a gauging station at the Fiu river and provided
much appreciated food during an exhausting day in the mountains.

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Part I

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2. Methodology

2.1 Overview
The consultant’s ToR initially required the study of five sites suitable for small-scale hydropower
development in the outer islands of the Solomons, based on a hydropower master plan study
carried out with support from JICA in 1999. In the inception phase of the project the Permanent
Secretary of the Ministry of Mines Energy and Rural Electrification and the Director of Energy
indicated that GSI’s priorities would be: Auki (Rualae river), Taro, Afio, Lata and Ringii. In
response to a proposal of a prospective private sector developer the Ministry of Finance
requested the inclusion of two more sites on Guadalcanal, namely Mataniko and Lungga rivers.
All nominated sites were subjected to an initial (remote sensing based) screening which
included both considerations of technical feasibility and economic viability. Field investigations
followed for all sites resulting in preliminary designs and preliminary cost estimates. In a third
step the consultant searched for alternatives for sites where field investigations showed that the
initial priority sites nominated by GSI would not result in competitive development. The long list
of projects and the selected five sites to be investigated at pre-feasibility level as shown in
Table 2.1 below.

Table 2.1: Sites Selected for Pre-Feasibility Studies

Load Center River Potential Remark


Suggeted By Ministry of Mines, Energy

kW

Auki/Malaita Rualele 180 Excluded due to small size and


difficult hydrology (spring), studied
by Hydro Tasmania
and Rural Electrification

Afio/Malaita Pualalaha 15 Excluded due to insignificant size


and difficult geology (limestone)

Lata/Temutu Luembalele 107 Included in shortlist

Ringgi/Noro Vila 4,320 Included in shortlist

Taro/Choiseul Sorave 260 Included in shortlist

Honiara/Guadalc Mataniko 2,740 Included in shortlist


anal
Suggeted By
Ministry of

Honiara/Guadalc Lungga 10,600 Excluded, technical feasibility in


Finance

anal doubt due to geotechnical


conditions

Noro/Munda Mase/New 3,400 Included in gauging program as a


Gerogia fall back site in case Ringgi is not
feasible
Suggetsed by
Consultant

Auki/Malaita Fiu 1,160 Included in shortlist

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As explained in more detail later in the report, the sites Afio (Pulalaha river) and the Lungga river
site in Honiara have been excluded as the consultant does not consider them feasible options.
Afio is only a 15 kW scheme that had to be built for a very small demand but would incur very
high specific cost due to a porous lime stone formation. The Rualae river site in Auki was also
excluded as the Rualae site has in the meantime been investigated under a different project 3. As
SIEA and GSI have indicated that hydro development for the Noro/Munda network would be a
priority, an additional site has been identified on the Mase River on New Georgia. This site could
be developed if the Vila River site on Kolombangara Island cannot be developed for
environmental or other reasons.
The remaining five sites for which the pre-feasibility studies are conducted are considered
optimal investments for the respective load centers. For both the Mataniko and Vila Rivers, two
variants have been analysed. Vila/Ringgi A refers to a version where only the demand of the
island of Kolombangara is served. Vila/Ringgi B is a larger investment where the load centers of
Munda and Noro are also supplied from this site. For the Mataniko site in Honiara two variants
of financial performance have been analysed: A version which assumes that the Tina hydro
projects goes ahead as planned and a version where the Mataniko project could operate at a
higher capacity factor due to the lack of contribution frm Tina. Table 2.2 summarizes the
selected sites.

Table 2.2: Shortlisted Sites and Variants

Load River Installed kW Annual GWh Investment FIRR Distance to


Center US$m Load kM

Auki Fiu 1,160 9.8 4.2 35% 9.6

Lata Luembalele 107 0.8 2.2 13% 11.2

Ringgi A Vila 1,210 10.4 4.4 45% 1.5

Ringgi B Vila 4,320 26.3 11.3 47% 22

Taro Sorave 260 2.1 1.7 18% 8.5

Honiara Mataniko 2,740 12,7 7.2 40% 4.0


+Tina

Honiara Mataniko 2,740 12,7 7.2 47% 4.0


-Tina

2.2 Review of Existing Data and Information


Traceable studies of hydropower resources in the Solomon Islands date back to the 60s when
Sir William Harcrow investigated sites on Gudalcanal and elsewhere. Since these first studies
more than 40 resources assessments, pre-feasibility and feasibility studies have been
undertaken. The consultant has reviewed accessible documents in particular more recent work
performed by the Japan International Cooperation Agency (JICA), Masterplan study of Power
Development in Solomon Islands, August. Solomon Islands Electricity Authority (SIEA) 2000,
and the work performed under the assistance of the German Technical Assistance (GTZ) and

3
Hydro Tasmania investigated the site under a SPREP funded project

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Ministry of Energy joint programme: “Improvement of rural electricity supplies in the Solomon
Islands”, 1985 – 1996. The later program is one of the few initiatives that resulted in investment
and the construction of the Buala mini hydro scheme that feeds the SIEA grid on Santa Isabel.
The consultant has also reviewed more than 2,000 pages of documentation on the Lungga
hydropower scheme provided by the ADB as well as recent studies performed by Hydro
Tasmania on Malaita (Rualae River) and Kira Kira (Huro River) 4. The quality and depth of
studies varies and it appears that there is no common understanding where the boundaries
between pre-feasibility and feasibility studies lie.
In general some common findings of most studies emerge: While Solomon Islands have
favourable rainfall conditions above 3,000 mm of rain per year in most higher catchments and a
topography favourable for medium to high head hydro schemes, there are some factors that
militate against the development of these renewable energy sources: Firstly, there are
geological or geotechnical constraints. Most rivers flow through porous limestone formations that
render the construction of reservoirs difficult and sometimes impossible. Sinkholes are common
and volcanic formations overlaying limestone form ideal conditions for the building of caves and
caverns not conducive to cost effective development of hydropower. Then there is a mismatch
of resource and demand. While hydro resources have been identified on practically all of the
larger islands, many sites are either too remote to supply an existing demand (at reasonable
cost) or are simply inaccessible due to difficult terrain and lack of a road network. A third
obstacle has been described repeatedly in relevant reports: Intentions to develop hydro power
often meet considerable resistance or unrealistic compensation claims from traditional land
owners who have not only stopped project development but in the case of the SIEA operated
Malu scheme on Malaita have even stopped the operation of an installed power plant.

2.3 Financial Analysis


A financial analysis was then developed on the basis of available SIEA data (billing data, station
logs, and relevant financial statements). Due to data inconsistencies and gaps, assumptions and
corrections were made in order to develop a plausible financial scenario for the projects. Future
hydropower production and supply cost, the most critical parameter determining financial
viability of hydropower has been analysed against the background of world market commodity
price developments adjusted for local fuel supply cost at the five locations in question. The
outcome of the financial analysis shows the impact of these projects on SIEA’s financial
performance in the outstations. Profit and Looss calculations indicate if the projects can improve
the financial performance of the systems. In addition the Financial Internal Rate of Return
(FIRR) were calculated for the projects based on avoided cost for diesel fuel. This allows to rank
project according to their merit order. Assuming that financial resources to be allocated to the
development of mini hydropower in SI will be limited, such a ranking will allow GSI and its
development partners to prioritize projects in order to ensure optimum allocative efficiency.

2.4 Stakeholder Analysis: Unserved Potential Customers


For both Lata and Auki sample surveys of unserved customers in low-income clusters were
carried out. The objective of these surveys was to assess current energy use and expenditure
for kerosene, and determine unserved households’ willingness to connect and ability to pay for
electricity. Annex 10 displays the result of these surveys. The results suggest i) an
overwhelming support for the provision of access to electricity, ii) relatively high average
expenditures for kerosene of up to SB$ 240 per household per month, iii) an expressed
willingness and ability to pay for electricity and iv) a willingness to actively support electrification
through labour, materials and permissions for easements.

4
The material provided by ADB on the Lungga project is mainly administrative in nature

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Current monthly energy expenditures are mostly for lighting kerosene. Some households also
use dry cell batteries and occasionally, families own small petrol generators. The lower energy
expenditure in the Lata cluster is probably due to lower income levels compared to Auki, where
most families have a stable cash income from fishing activities. The details of these surveys are
attached as Annex 8.

2.5 Counterparts, Capacity Building and Training


GSI contact points were the Permanent Secretaries for Mines, Energy and Rural Electrification
Mr. Luma Darcy and Mr. Benjamin Newyear as well as Mr. John Korinihona, Director of Energy.
The SIEA nominated the Chief Engineer, Mr. Dadily Posala, and the Generation Manager and
Deputy General Manager, Mr. Martin Sam, as the contact points for the project. The consultant
also maintained regular contact with Mr. Norman Nicholls, General Manager SIEA. Mr. Edward
Lapongi, Mr. Sam Indu, Mr. Drerek Sonitogha, Jay officers in charge for the SIEA outstations
worked with the consultants’ team on field surveys and assessments in their respective stations.
In line with the agreement between ADB, GHD, and GSI, the consultants were provided with an
office and logistical support by SIEA since April 2010.
The consultant provided on the job training for GSI staff in GPS surveying techniques, and
discharge measurements using the conductivity method. In addition, the team’s hydro engineer
provided training in installation and maintenance of state of the art level gauging using pressure
differential method and rain gauging by automatic rain gauging stations.

2.6 Data Availability and Data Quality


Lack of reliable and up-to date data and information remain a serious challenge in SI. In May
2011, the 2009 census data have not yet been made available. The lack of up-dated
demographic data is a serious constraint when analysing growth trends and developing load and
energy demand forecasts. In general, data availability and quality has been very poor at all
levels. Hydrological data is sketchy and unreliable as the collection process is often not
documented and data is often not plausible. While there is reliable hydrological data including
run off modelling, for the Lungga River, there is no such data for the rivers analysed in this
study. It was therefore decided to include both rainfall recording and automatic water level
recording for the priority sites.
Essential SIEA statistics have been analysed for the outer island stations but both generation
data and financial records show serious inconsistencies. Records of essential generation
parameters such as total engine hours, service histories, and fuel consumption are either not
available and if available often not credible; comparisons of generation data and units sold for a
particular system shows discrepancies that cannot be explained. Efforts to resolve these
anomalies were helped as SIEA’s billing system has been upgraded recently and is now able to
produce analytical reports.
GHD attempted to analyse original power station log sheets in order to establish daily load
curves and load development trends. Unfortunately practically all the log sheets are incomplete,
typically missing up to 10 hours of data entries in a 24-hour period (loads, voltage, Amps,
frequency, kWh etc). The consultant has raised these issues with SIEA senior management and
it is expected that over the lifetime of this project, data availability and quality will further improve
and allow the consultant to work with more accurate and reliable data.

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3. Mini Hydropower in Solomon Islands

In the following section 3, the general conditions for the development of hydropower in SI are
discussed in order to avoid repetition in the sections dealing with the five individual projects in
Part II of this report.

3.1 Definitions
There is an ongoing debate what a definition of mini hydropower should be. Mostly, the
boundaries are defined using installed capacities drawing the line between mini and micro
hydropower somewhere at 100 kW. For the purpose of this report a system is considered a mini
hydropower unit if it operates in the framework of an established or planned formal SIEA supply
system where SIEA standards apply and power consumption is metered either conventionally or
through pre-paid meters. The range of installed capacities would range between 100 and
5,000 kW.
Some clarification is also required with regard to the depth and content of feasibility and pre-
feasibility studies for mini hydropower. We consider an analysis at prefeasibility level as a
decision making and prioritisation tool involving no detailed hydrological analysis (due to a lack
of data) or geotechnical investigations, that would a) determine if a project shows a high
probability of being technically doable and b) rank a variety of projects according to their
financial and economical merits. A feasibility study in contrast would investigate a mini hydro
project in greater depth and may include geotechnical investigations, design work anddetailed
costing for major components. Assumptions in the pre-feasiblity analysis would be confirmed
during the \feasibility studies. A feasibility study typically includes a design of sufficient detail to
allow the international tendering of EPC contracts.

3.2 Hydrology and Hydro Resources


Numerous studies and investigations on hydropower in the Solomon Islands carried out since
the 60s have concluded that the country is well endowed with hydropower resources with a total
resource that exceeds current electricity demand in the country. Consistent and evenly
distributed rainfall in the range of 3,000 mm per annum or more in most of SI’s catchments and
a topography that is characterised by mountainous terrain lead creates hundreds of river with
steep enough gradients to allow harnessing hydropower on most inhabited islands of the group.

Figure 3.1: Lata Rainfall 25 Years

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Figure 3.1 above shows an analysis of rainfall data for Lata, Temotu province. While there is a
significant spread between the highest and the lowest rainfall in the 25 year period analysed the
mean values show rainfall of 300 mm or more for each month. This is an even rainfall
distribution that suggests that high plant factors can be achieved. High rainfall creates another
favourable factor for hydropower: most catchments are covered in dense vegetation either in the
form of natural rainforests or as fast growing secondary bush in areas where logging or slash
and burn agriculture has been practised. The vegetation acts like a buffer, avoiding fast run offs.
It also reduces erosion of surfaces, which creates high river sediment loads that are unwanted in
hydropower development. The prevailing topography allows most potential sites to be developed
as medium or high-pressure schemes, which results in lower specific investment cost than low
head schemes.

Flow Duration Curves


The basis of hydropower planning is the construction of a flow duration curve for a selected site.
The flow duration curves depend mostly on the annual rainfall distribution, the land use (natural
undisturbed forests have high infiltration rates, reducing surface runoff and increasing
groundwater flow) and the availability of groundwater reservoir capacity. Every site will have its
own distinct flow duration curve depending on these factors and the smaller the catchment, the
more prominent fluctuations will be. With regard to hydrological modelling, data for the rivers
investigated here are either fragmentary or simply not available. The best data available are
based on a long term analysis of the flows of the Lungga River (in Guadalcanal) were
hydrological measurements and data analysis has been performed over several years in
preparation of a hydro project.
By scaling for catchment size and adjusting for available rainfall data, the Lungga hydrology can
however be used as a proxy for the sites analysed 5. This is a common practice at pre-feasibility
level and is used for this report. As described below, a data collection program has been
initiated under this RETA which will allow the construction of more accurate flow duration curves
using discharge and rainfall data collected on the sites in question. This will allow comparison
with the proxy curve for each catchment. Figure 3.2 depicts flow duration curves for the Lungga
river for the three sites where long-term discharge data is available.

Figure 3.2: Flow Duration Curves Lungga River

0.2

Lungga Gorge
0.18
Lungga Bridge

0.16 Lungga Komarindi

0.14

0.12
Flow (m 3/s/km2)

0.1

0.08

0.06

0.04

0.02

0
0 10 20 30 40 50 60 70 80 90 100

% of Time Exceeded

5
This approach was also taken in Phase 1 of the Tina Feasibility Analysis.

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Source: Hydrological Report Tina River (HTC 2010)

3.3 Collection of Hydrological Data


For the rivers to be investigated at feasibility level, the use of proxy data from a different
catchment does not yield an accuracy required for a bankable project. While rainfall data are
generally available covering most catchments, discharge and run off data are scanty at best and
the quality of existing data is poor. It has therefore been decided to create a database of reliable
hydrological data as part of this project. Seven rainfall loggers and seven automatic water level
recording units have been procured and installed at various sites in cooperation with staff of the
water resource division of MMERE 6. While the data generated by these units will only become
useful after a recording period of at least a full hydrological year, the prospects of mini
hydropower in SI are attractive enough to justify the efforts and cost associated with a
measuring program.

Picture 3.1: Data Recording Equipment

Rainfall Logger Fiu Installation Levelogger Villagers assisting gauge installation

When selecting the equipment and approach towards collection of hydrological data, emphasis
was put on using cost-effective, simple and robust methods and equipment likely to survive
harsh conditions. At the same time it was necessary to operate the data stations automatically
with site visiting and data downloading intervals of six to nine months. The solution selected
consists of ARG100 automatic rain gauges (featuring dipping measuring generating an electric
impulse with two magnets passing each other when tipping), automatic water level recorders
that uses differential pressure method by recording water column and atmospheric pressure
independently using sol called barologgers.
Both rainfall and barologgers are controlled via communications cables and special software.
Discharge measurements are performed using the conductivity (salt dilusion) method.
Conductivity change in the rivers is measured using a temperature compensated and self-
calibrating Hanna HI-8733 conductivity meter. The rational for selecting the methods and
equipment described above are provided in Annex 1, which also describes operation of the
equipment in detail.
During installation of measuring equipment the project team successfully sought participation of
local residents. The purpose of the installations was explained together with the impacts hydro
development could have for the local areas in question (access to roads and power,
employment during construction etc).

6
MMERE’s water division has agreed to operate these stations and has budgeted for regular visits

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The data collected under this program will significantly improve hydrological knowledge in the
Solomon Islands, especially for smaller catchments. It will also allow to establish a relation with
the Lungga data and the Tina river data currently collected.

3.4 Ongoing Data Collection


The data collected by this equipment needs to be downloaded onto a field laptop. Whilst the
data logger can store up to 12 month of data, it is recommended that the data is downloaded
quarterly during the first 12 months to ensure equipment set up is functioning and that a high
quality data set is available for future investigations and analysis. A small field laptop has been
procured and the National Hydropower Specialist will undertake two rounds (6 months) of data
download as part of his project work. The Water Department of the Ministry of Mines, Energy
and Rural Electrification has agreed to take on the data collection and download after this time.
It is important to ensure this ongoing data download occurs and the initial investment in the
equipment is full utilised, with a quality data set being available for any future feasibility work.
Limitations to hydropower development in SI
There is however a number of factors present in SI that limit the feasibility of hydropower
development and/or lead to high and sometimes prohibitively high investment cost. The first
factor is the small size of most of the catchments in question. With upper catchment areas
typically around a few square kilometres, sometimes less, the flows in SI’s rivers show
significant daily and/or weekly fluctuations despite the buffer effect of vegetation. I.e. design of
components such as weirs, dams and spillways have to be designed to accommodate flows that
are much higher than mean flows would suggest. Flooding can be extreme during tropical
cyclones that occur on a regular basis. A river having a mean flow of 20 m3/s can show
discharges of 5,000 m3/s, i.e. a thousand times more than the mean flow during heavy rains
associated with the cyclone season.
These high flows put pebbles, rocks and even larger boulders into suspension and deposit them
downstream in riverbeds. Larger rivers therefore show alluvial deposits of pebbles that are
several meters and sometimes up to 30 meters thick. Obviously, these formations are not stable
and can render civil engineering costs for dams and other structures that need to be build in
riverbeds prohibitive.
A second limiting factor is SI’s geology. Most rivers flow through porous limestone formations
that render the construction of reservoirs difficult and sometimes impossible. Sinkholes are
common (see Picture 3.2) and volcanic formations overlaying limestone form ideal conditions for
the building of caves and caverns not conducive to cost effective development of hydropower.
While porous limestone is often the reason for significant water losses in reservoirs, the
presence of such formations often interrupted by fault lines also makes tunnelling difficult or
increases associated cost because of the need to line tunnels. Unfavourable geotechnical
conditions brought an end to the Lungga gorge hydro project after more than 10 years of
investigations at cost of approx 10 million US$. The soft limestone formations also favour the
creation of deep gorges characterized by steep and sometimes vertical walls. This feature
militates against the construction of canals at optimum contour levels and may necessitate the
construction of bridges or the use of tunnels and pipelines to bring the water to a fore bay.

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Picture 3.2: Features of SI Rivers

Limestone and sinkhole Narrow canyon and fault lines Thick alluvium

Often there is also a mismatch of resource and demand. While hydro resources have been
identified on practically all of the larger islands, many sites are either too remote to supply an
existing demand (at reasonable cost) or are simply inaccessible due to difficult terrain and lack
of a road network. It should be noted in this context, that even the main island of Guadalcanal
has no circumferential road and roads from the coast to the interiors are either nonexistent or in
extremely poor conditions. This lack of infrastructure including the lack of a transmission system
for power increases project costs significantly.
In the past intentions to develop hydro power have often met considerable resistance or
unrealistic compensation claims from traditional land owners who have not only stopped project
development but in the case of the SIEA operated Malu scheme on Malaita have even stopped
the operation of an installed power plant.
Although, some or all of these constraints are present at most sites, an appropriate technical
design together with innovative project development and ownership arrangements can mitigate
the presence of obstacles. Avoiding dams, reservoirs and tunnels will help to overcome some of
the technical constraints.

3.5 Project Design


The projects considered in this study are therefore small run-of-river hydropower projects (less
than 5 MW) with minimum technical complexity, as well as minimum social and environmental
impact. It should be noted that there is insufficient information on both hydrology and – perhaps
more importantly on topography and geotechnical conditions to optimize the design for the
individual plants, In line with the objective of the overall project (Improving Access to Renewable
Energy) a selection criteria for the projects chosen for the pre-feasibility analysis was
maximizing renewable energy penetration in the respective systems. I.e. if a site has the
potential to completely meet energy demand, the power plant is sized to meet demand
throughout the 20 year planning horizon. Given the nature of run-off river with no storage, this
sizing leads to relatively high values for installed capacity. This is necessary to ensure that the
hydro plants can actually follow the load curves of the systems they supply. Detailed surveys to
undertaken during feasibility study work will allow optimization of the investments for lowest
generation cost or highest FIRR.

The social and environmental impacts found typically on conventional reservoir based
hydropower projects are avoided. Instead submerged intake sills are proposed, which will allow
fish movement past the intake during a large part of the year when the discharge exceeds the
installed capacity. Instead of tunnels lined concrete canals are used to transport water from the
intake to the top of the penstock.

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These canals follow contour lines on the slopes above the river and end in a forebay. Slope
stability and quality assurance during construction are critical when building such canals, which
can be a weakness in the system. During plant operation there regular maintenance must be
ensured to clear the canals of landslides or flood debris blocking the flow in the canal. The
headrace canal including intake, sand trap and forebay delivers water from the river to the top of
the penstock starting with the trash rack in the fore bay and ending with the manifold in the
power station. The powerhouse building contains the electro-mechanical equipment typically
consisting of valves, turbines, controls, governors, generators, transformers and circuit
breakers. A tailrace canal discharges the water back into the river immediately downstream of
the powerhouse. In addition the projects require access roads to the power station and to the
top of the penstock and forebay tank.

Access Roads
The access roads would have to be constructed first. It is finished as a permanent road with
either laterite surfacing, if good quality laterite is locally available, or if less erosion stable gravel
materials have to be used, a double bituminous surface treatment (DBST) surfacing may be the
most efficient solution on the sloping stretches. The access road is made primarily to the
powerhouse, with a branch leading up to the top of the penstock. The branch roads would be
designed with a longitudinal slope of 14% or less and with systematic cross drainage, every 100
- 200 m to reduce erosion and the canal section. The roads are assumed to be single lane roads
with meeting bays made at maximum 500 m intervals. For the main road to the powerhouse, the
road is assumed to have a 6.0 m crest with 3.6 m of pavement and curves that allow access by
large trailers supplying the heavy units. The branch road to the forebay is assumed to have a
5.5 m width crest with 3.0 m pavement. Some of the sites under consideration in this report do
have partial access roads that can be improved upon to make them suitable for the
requirements of the hydropower plants.

Intake Structures
The intakes would be constructed by excavating or blasting a diversion intake canal on the bank
of the river, ideally on the outside of a bend, where the river does not carry much sediment and
debris. Only light works are constructed across the river such as placing large boulders,
anchored together, in the deep mid section of the river to keep a low barrier in place and define
the minimum supply water level. Figure 3.3 displays such an arrangement. The recommended
technical solution differs from the more traditional concept of a large concrete intake weir across
the river, with the advantage to add some head to the scheme. Due to the considerable depth of
unstable alluvium at the intake sites the construction of large weirs is however, not
recommendable. Such structures also causes settling sediments upstream of the intake and
creates a barrier for the movement of migratory fish up the river.

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Figure 3.3: Typical Intake Structure

Sand Trap and Flow Regulator


It is recommended to locate the sand traps where the intake canal level is above the flood level
of the respective river. Prior to entering the sand trap, the flow is separated in two. The amount
required for the power plant plus say 5% enters the sand trap, while any excess passes by the
sand trap on the riverside and leaves over a long side spillway. The purpose of the bypass is to
divert excess; sediment rich flows during heavy rains (cyclones) from overwhelming the capacity
of the sand trap. A flow regulator is located at the outlet to the sand trap. A coarse trash rack,
keeping large branches and logs out of the headrace canal may typically be placed at the inlet
to the sand trap, making the overflow regulator at the outlet easier to access and maintain. An
outlet for washing out the sediments is located at the deepest point of the sand trap. This design
only allows the design flow into the sand trap. Figure 3.4 below displays the recommended
design for sand traps.

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Figure 3.4: Recommended Sand Trap Design

Headrace Canal
The canal would be constructed with an initial roughness around n = 0.011, using steel
formwork. The canal is assumed to be cement concrete without reinforcement, requiring that it
will be kept moist by always keeping water in the canal. The cross section is rectangular with the
width equal to twice the design water depth H and with a 0.015 m freeboard. As roughness will
increase over the lifetime, the new and clean canal should have a capacity that is about 35%
higher than its design capacity.

Figure 3.5: Headrace Canal Cross Section

The canal is cast by first laying out a bottom layer of stiff concrete that is immediately vibrated
and is ready to accommodate formwork for the walls and casting of walls. This technique would
allow the total canal cross section to cure together. Following the removal of the formwork after
24 hours and completing final finishing on the concrete surface, water is let into the section to a
depth of 1/3 of H to keep the concrete wet, so no shrinkage occurs during the curing period. For
the first 2 weeks a 2 m wide strip of geo-textile is put over each wall pulling water up from the
canal and keeping the wall wet to avoid shrinkage in the unreinforced concrete.

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Forebay Tank
The forebay tank is located at the end of the canal and connects it to the penstock. It is similar to
the sand trap at the top of the canal except for the spillway. A small excess flow, at least during
heavy rains has to be managed by the spillway as well as the full flow of the canal during
sudden shutdown of the power station. This flow has to be safely carried back to the river
without endangering the penstock or the power station below. To achieve this, the spillway is
typically located 50-200 m before the forebay. Further down the canal towards the forebay, the
canal wall height is increased to manage the surge wave without overtopping during a sudden
power plant shut down. With this type of hydropower design the main operation risk is related to
production stop due to landslides on the steep slope above the cut made for the canal after
saturation of the soil during heavy rains. This problem is addressed by constructing cut-off
drains further up the slope, which intercept surface flow on the natural stable slope and carries it
down to the nearest cross flow structure passing under the canal. In this way the risk of
saturation and build up of hydrostatic water pressure in longitudinal cracks in the soil on the
slope, resulting in landslides, are significantly reduced.

After the construction of the canal, the road access along the alignment for vehicles is no longer
available. Instead a special vehicle is made using the canal walls as rails. It is then used for
inspection along the canal, for transporting equipment and materials for repairs and for
conveying sediments, to be removed after accumulating between the inner canal wall and the
uphill slope, obstructing the flow of water there towards the piped cross drains located every 100
m or so. A large fine trash rack is located in the forebay before the entrance to the penstock with
opening width as per the specification of the turbine manufacturer to protect the turbines. The
trash rack has an automatic trash rack cleaner starting as soon as the head loss over the trash
rack exceeds a given value to prevent clogging.

Penstock
The penstock would typically be constructed from steel pipes welded into long sections (as long
as possible given any transport constraints), sandblasted and then painted with epoxy paint
three times on both inside and outside at the workshop before delivery. Due to limited capacity
of the local engineering industry in SI, the penstock pipes would have to be pre-fabricated and
shipped in. To reduce transport cost, the penstock pipes could be produced in several diameters
(similar to the power poles used by SIEA) with the larger diameter thin-walled pipes placed over
the medium size pipes inside and finally the heavy smaller diameter pipes used at the bottom of
the penstock placed inside again.

This design also results in an optimum pipe diameter, as the most economical pipe diameter
decreases with increasing pressure and wall thickness. Where the slope of the penstock is
covered by a significant layer of soil, the penstock is placed in a trench and backfilled, which is
less costly than placing the pipe on concrete blocks or steel pole foundations every 10-15 m,
which is necessary on exposed rock slopes. Whether buried or on poles, the pipe is fixed on a
thrust block wherever there is a change in vertical or horizontal direction. The downstream part
pipe then is able to move axially through a joint made for this below each thrust block. The
penstock ends in a manifold or bifurcation if there are more than one turbine and where the
valves for the turbines are mounted. The penstock can be installed in parallel with the canal
construction.

Power House
The powerhouse would be small structures as the heads of the schemes are medium to high
resulting in compact turbines and generators. Where the powerhouse is located directly on the
bank of the river, it is affected by the extreme flood water levels of the river. It might be
necessary to locate powerhouses further up the slope at the foot of the penstock slope to avoid
flood water levels in the river impacting on the powerhouse. In such a scenario both impulse

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turbines (Pelton or Turgo which have to stay just above the tail water) or reaction turbines
(Francis) with long tube below can manage significant tail water variations.

In case of reaction turbines, the tailrace canal ends deep under the powerhouse and the lower
edge of the draft tubes would be located just below the minimum water level of the tailrace
canal. Preferably, the powerhouses would be located so the rock surface is about the floor level
of the turbine hall or above. On top of the narrow tailrace trenches under the turbines, the
turbine hall floor is cast with shallow trenches in which the pipes from the penstock manifolds or
bifurcations enter under the floor level to the turbines. Where possible, a platform at the floor
level is made outside the building in continuation of the turbine hall, where vehicles can deliver
or pick up equipment within reach of an overhead crane foreseen in the powerhouse. Circuit
breakers, controls, batteries, etc. are typically placed in a room parallel to the turbine hall a level
above the penstock manifold/bifurcation and the cut off valves together with control room and
office space for the operators. In order to shorten construction schedules, the powerhouse can
be constructed in parallel to the canal and penstock.

Electromechanical Equipment
The actual type and configuration of turbines would be left to the supplier of electromechanical
equipment that would be procured through competitive tenders requesting proposals for turnkey
contracts. Suppliers would be requested to develop an efficient package based on a given flow
duration curve. In most cases 1 or 2 or turbines are considered appropriate with the smallest
able to manage at the minimum flow at a satisfactory efficiency. The equipment is small enough
that it can be transported fully factory assembled and typically offloaded and placed directly on
the floor by crane.

The hydro schemes typically supply small grids (except for the Mataniko project on
Guadalcanal) and have to work in conjunction with diesel sets. This requires a control of the
hydro plants output by:

(i) Water level sensors in the sand trap by the intake (determining whether there is more
water available for the headrace canal, in which case the flow regulator in the outlet to the
canal can be adjusted to a higher flow within the capacity range of the plant)
(ii) Water level sensors on both sides of the trash rack in the forebay (controlling the trash
rack cleaner and adjusting the turbine control by opening or closing the guide vanes
nozzles on impulse turbines to maintain a constant maximum operation water level in the
fore bay)

The main power transformers and the station transformer will typically be located outdoors to
reduce fire risks from explosions to damage the power station. The connected breakers are
located inside the building. A simple SCADA system may be included to remote control the
hydro plant from the main SIEA powerhouse. The turnkey contracting, manufacturing and
delivery of the electro/mechanical equipment woud probably be the time critical activity, as the
other activities do not necessarily require long lead times, unless long access roads and canal
alignments are the required.

Transmission Lines
Transmission lines of medium voltage (11 or 33 kV) are also needed to evacuate the power
generated and feed it to an existing distribution system. In some cases 11 kV aerial bundle
conductors (ABC) may be needed as power evacuation has to cross dense rainforests
characterized by fast growing vegetation. The 11 kV line evacuating the power from the power
station would typically be a double circuit Aluminium Conductor Steel Reinforced (ACSR)
conductor. However, where the length exceeds 15-20 km (as in a project considered for New

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Georgia) it may be necessary to increase the voltage to 33 kV, as the losses at 11 kV become
prohibitive and it will become impossible to maintain common voltage standards with less than
20% voltage fluctuations. Constructing new lines might be made more economic by increasing
the span length from the usual SIEA practice, where the strength of ACSR conductors is
typically not fully utilized. Wind loads appears low in Solomons, so span lengths like 150-200 m
for single circuit and 100 m for double circuit should be more economic than the present
tradition of spans below 100 meters. This would involve tensioning the conductors to the
maximum to reduce the sag and putting stay wires everywhere the line changes direction. The
size of standard cross arms may also have to be increased. The feasibility and cost
effectiveness of this approach would need to be examined on a case by case basis during the
feasibility study for a specific site.

Earthquake Design of Small Hydro Projects


The main consideration when designing structures to manage earthquake loads is to determine
the load or ground accelerations to be accommodated in the design. The safety margins
employed also depend on the assumed consequences of an earthquake-induced failure of the
structure. The question here is whether a catastrophic event would only impact on the structure
itself or also jeopardize the safety of the population of a settlement. In the latter case
conservative design requires considering events with a return period of 1,000 to 10,000 years or
expressed as 10% probability in 100 or 1,000 years. However, the infrastructure involved in
typical small run-of-river hydropower projects without dams or any other infrastructure causing
significant risks to the public, belongs to the former category, where design return periods of 500
years (10 % in 50 yrs, the assumed lifetime of the infrastructure) are common. In the Seismic
hazard map of SI (refer Figure 3.6) depicting Peak Ground Acceleration in m/s2 with a 10%
chance of exceedance in 50 years. Guadalcanal clearly shows the highest risks with most of the
projects falling into the 1.6 -2.4 m/s2 categorie. The relevance of this for site specific hydropower
designs should be considered if this site proceeds to a feasibility study.

Figure 3.6: Peak Ground Acceleration

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4. Implementation and Financing Modalities

4.1 The Choices


Two implementation modalities have been realised for hydropower projects: A) conventional
public sector projects often with MLA loans provided to governments and on-lend to power
utilities and B) project finance through private sector. A is a well-established modality but would
not necessarily be aligned with GSI and SIEA’s interest to attract private sector finance and
reduce the burden of managing new projects. For very small schemes outside the SIEA supply
areas, there is also the community ownership model that has seen some success in particularly
in Malaita province. However, for the purpose of this study these types of projects are not
considered, as they were typically grant funded and did not have to overcome the issues
involved in financing larger projects.
For regular power projects, public sector finance is well understood in SI and there is no need to
elaborate on the modality. Typically, larger projects would be financed by multilateral lending
agencies with GSI being the lender and guarantor. For the projects considered in this study it
would be a financing option that could combine grant and loan finance and would probably result
in the lowest financing cost. It would allow private sector participation through EPC and
management contracts. Managing the risk associated with hydropower development would
mostly be the responsibility of the public sector. For at least one of the projects investigated
there is another option: The forest company in Ringi, a joint venture between GSI and a private
Taiwanese investor could be financed by the company itself, either with financing support from
commercial banks or as balance sheet financing by the private shareholder.
SIEA senior management and GSI have expressed a strong interest in exploring alternative
financing of hydro projects through BOT/IPP modalities. The involvement of the private sector in
the development, ownership and operation of power projects represents a major change from
past practice in the Solomon Islands. An appropriate development regime is needed to
reconcile potentially divergent interests of the Government, private developers, power
purchasers and other interested parties. Neither the Government nor SIEA can expect private
investors to risk their money in hydro projects unless profitability and risk offered by such
investments match alternative opportunities in SI. The promotion of private financing of power
generation projects in SI will require SIEA and the government to take a significant role in the
facilitation of such projects.
The issues associated with private sector participation in hydropower development are
discussed below.

4.2 Independent Power Producer


An Independent Power Producer owns one or more facilities that generate electricity that is
either sold to a national utility (single buyer model) or in a market or pool where several sellers
and buyers clear the market for power on an hourly basis (merchant power producer). A
privately financed IPP that includes a transfer of assets after a certain period of time to the utility
or the government is referred to as a BOT or BOOT project (Build Own Operate Transfer). In the
absence of a power market only the single buyer model, which requires a long term Power
Purchase Agreement (PPA) between producer and off-taker, is suitable for SI. In fact SIEA has
already signed two PPAs with small-scale producers in Honiara that operate diesel power
plants. There is, however, no precedent of a hydro IPP in SI.
Even at an international scale hydro IPPs are quite rare compared to IPPs based on thermal
generation. The risk profile of hydropower puts it at a considerable disadvantage in competing
for scarce project development finance through an IPP modality. Risks must be managed if a
project is to be financed and even in the presence of ECA coverage a large portion of debt from
civil engineering work is typically unsupported. Hydropower projects therefore normally require

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risk guarantees to cover this unsupported debt. In order for private hydropower projects to
become bankable in Solomon Islands it will be necessary to develop a clear understanding of
the specific risks, and equally important, develop cost effective ways to allocate and manage
these risks. In SI high risk of non-payment and risks related to controversy with landowner add
further to an already complex risk profile. The problems typically encountered in the IPP project
cycle include incompatible views on tariffs 7, long delays, overlapping responsibilities of
government departments, foreign exchange risk, unavailability of government guarantees,
inability to take security of assets, weak legal framework, etc. Despite these barriers, some
countries in the Asia Pacific region, namely Lao PDR, Nepal and the Philippines, have build
relevant experience with IPP/BOT hydropower with a number of projects either completed or
under construction. While the impetus behind private hydropower in each of these countries has
been quite different there are some commonalities with the Solomon Islands that would allow
learning from experiences and a variety of valuable lessons.

4.3 Enabling Environment


The typical risk profile and the highly site-specific nature, of hydropower schemes pose a
number of unique problems that require special consideration in creating an enabling
environment for private sector investment. Any sizable IPP investment will have to face a
number of constraints in the legal, institutional and commercial fields. Although the present
commercial and regulatory environment in SI is not attractive to private sector participation in
hydropower, experience in other countries clearly demonstrates that a favourable environment
can be created.
At present there is uncertainty with regard to applications, approval and licensing process with
responsibilities divided amongst central and provincial government authorities with respect to
investment licences, environmental approvals, water and land use rights, construction permits,
import permits, foreign exchange transactions and other approvals required to implement a IPP
project. GSI is aware of constraints to private sector investment and intends to streamline its
bureaucratic processes with the intention of expediting and simplifying its investment application
and approval regime for both foreign and local investors.

Despite these intentions, private investors have maintained a very cautious approach to power
sector investments in SI 8. To attract private investors for power projects the GSI will have to
maintain macroeconomic stability, further streamline its legal and regulatory framework and
adopt project implementation models in line with international best practice standards. Perhaps
most importantly, an innovative framework must be established that allows landowners to
participate in project development rather than becoming an obstacle to project development. It is
expected that the development of the Tina hydro project, which has been set up as an IPP
project from the very beginning will make a major contribution to the development of an enabling
framework for hydropower IPP in Solomon Islands. However, for the small size of projects under
consideration in this report, the use of a Standard Power Purchase Agreement (SPPA) seems to
be an effective means to create such a framework. It should be noted that a single agreement
would in most cases not be sufficient to cover all issues of hydro IPP. Typically, a number of
other legal instruments need to be used as well:

• Legal and regulatory framework. The framework is designed to overcome concerns of


foreign investors in connection with issues such as contract enforceability, foreign
exchange, sovereign risks and payment risks. Annex 2 provides a description of relevant
laws and regulations.

7
An unsolicited hydropower IPP proposal tabled by SMEC in 1999 encountered these problems and went nowhere
8
In recent years several attempts have been made by the World Bank to engage the private sector in SI’s power industry, but so far
without success

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• Implementation (or concession) agreement. Arrangements between a project sponsor and


government are defined in the implementation agreement, which addresses matters not
covered within the legal and regulatory framework. The more attuned the framework is to
IPP development models, and the more ‘standard’ the concession conditions of the
project, the less there is to say in an implementation agreement.

• Grid code (or connection agreement). The grid code sets out technical standards,
responsibilities and other matters relating to the interconnection and dispatch of the facility
within the power system. In SI, system standards are defined by SIEA. There is at present
no written grid code in SI. However, it would not be difficult to adopt an existing grid code
(such the Electricity Council of the United Kingdom “Recommendations for Connection of
Private Generating Plant to the Electricity Boards System – Engineering Recommendation
G59 of June 1985).

• Shareholders agreement. It is common for larger projects to be sponsored by a


consortium of investors and this entails a shareholders’ agreement which sets out the
arrangements for control and operation of the consortium. Shareholders’ agreements are
not generally needed for small projects, which tend to be developed by a single sponsor.
However, in case of traditional landowners participating in projects, such an agreement
would become necessary and could become a major instrument to avoid land owner
resistance.

• Land lease agreement. Whether the project is small or large, legal title to the use of the
project site (land and water) must be obtained. Two factors simplify land issues for smaller
projects. Firstly, the land requirements are more modest and rarely involve sensitive social
and environmental impacts. Secondly, if the co-sponsor is local, laws are generally less
restrictive in the rights of the party to own and use land.

• Engineering, Procurement and Construction. EPC contract(s) must be formed with


consultants, contractors and equipment suppliers for the design and construction of a
project. For larger projects these contracts involve international firms and international
competitive bidding and can be difficult to administer.

• Loan agreements. For larger projects financed on a non-recourse or partial recourse


basis, complicated syndicated loan arrangements can become necessary, with inter-
creditor agreements between multiple lenders backed by export credit agency and/or
multilateral guarantees. Such complexities are largely avoided with small power projects
that tend to involve balance sheet financing utilising smaller and locally denominated
loans.

• Operation and maintenance contracts. If the sponsor is to contract out the operation and
maintenance of the project, it will need to enter into an O&M contract with a suitable
operator. Conversely, the need for an O&M contract is avoided if the sponsor intends to
operate the facility itself.

4.4 Risk Management in Hydro IPPs


In comparison with thermal generation private sector investments hydro IPPs require complex
risk management. It is assumed here that risk management follows the accepted risk allocation
principle that the party who can manage risk at the lowest cost and in the most effective way
should wear a particular risk. The main risks of a hydro IPP project that require a clear allocation
and management are depicted in Table 4.1 and Table 4.2 below. Construction and operation
phases are distinguished as they involve different sets of risks. Annex 3 provides a more
comprehensive risk allocation and management matrix that also includes the consequences of
certain risk events for the main stakeholders of an IPP project.

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Table 4.1: Risks for a Hydro IPP during Construction

TYPE OF RISK EVENT RISK MANAGEMENT OPTION


• Regulatory Changes • Change-in-law and Extension of Time clauses in
Sovereign/ concession agreement, PPA, EPC contract
• Government guarantee
Political Risk • Political risk insurance or MLA partial risk guarantee
(PRG)
• Landowner Controversy • Participative approaches
(Also applicable for • Landowner compensation or landowner shareholding
Operation Phase ) • Expropriation, Nationalization • Government guarantee
or Cancellation of Concession • Political risk insurance or MLA partial risk guarantees

• Default, termination and disposal of assets clauses in


Project Agreements
• Inadequate Contract • Transparent, independent dispute resolution
Enforcement procedures
• Sound legal, regulatory & institutional framework
• Economic Problems, currency • Foreign exchange adjustment formulas in EPC and
realignments) PPA contracts
• Hedging of EPC costs with financial instruments

Completion Risk • Non-Political Force Majeure • Force Majeure clauses in concession, off-take and
(e.g. major flood, earthquake, O&M agreements
fire)
• Insure against insurable non-political Force Majeure
events
• Unforeseen Conditions • Thorough site investigations and project feasibility
studies
• Transfer risk to EPC contractors through fixed price &
fixed date contracts with liquidated damages
• Transfer risk to off-taker through off-take price
adjustment and extension of time clauses in PPA
• Contractual remedies: Fixed price/date EPC contract
and liquidated damages in project contracts
• Cost and Time Overrun on • Contingency finance measures:
EPC Contract not related to - emergency equity
unforeseen conditions - stand-by finance
• Contractual remedies: Fixed price/date EPC contract
• -Liquidated damages in project contracts
• Environmental and Social • Good quality EIA, Action Plans and Management
Impacts Plans
• Environmental obligations and constraints specified in
Concession Agreements

Once completed, hydropower IPP projects face a variety of operating risks. These are displayed
in Table 4.2 below.

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Table 4.2: Risks for a Hydro IPP during Operation

TYPE OF
EVENT RISK MANAGEMENT OPTION
RISK
Hydrological • Under-estimation of long term • Quality hydrological analysis using reliable data and
Risk mean monthly and annual independent self-checking
flows • Adjustment to concession terms to compensate for long
term hydrological variances
• Minimum payment to guarantee debt service
• Variations in flow about the • Optimize design
mean • Minimum payment to guarantee debt service
• Adjustment to concession terms to compensate for annual
hydrological variances
• Declining catchment yield • Contractual safeguards on catchment management
• Co-operation with landowners
Operating • Force Majeure (major flood, • Force Majeure clauses in concession, and off-take
Risk earthquake, fire, etc.) agreements.
• Insure against insurable non-political Force Majeure events
• Interruptions due to operator • Employ an experienced and reputable operator
default • Include design safeguards to reduce plant and
transmission line outages
• Liquidated damages remedies
• Lenders step-in–rights in chronic cases
• Tariff structure to secure debt service revenues (e.g. “take-
or-pay” or capacity-type charge)
Market • Reduced demand • Minimum payment mechanism (Take-or-Pay, capacity-type
Risk charge)
• Conflict over dispatch • A grid code to control system operation and dispatch
Commercial • Assurance of adequate debt • Structure project and financing plan to achieve acceptable
Risk service coverage Debt Service Coverage Ratio
• Maintenance of debt service cash reserve
• Insolvency of Project Co. • Default, termination and disposal of assets clauses in
Project Agreements
• Lenders’ Step-in Rights
• Collateral Arrangements
• Inability of Off-Taker to make • Government guarantee of Off-Taker obligations
payment • MLA partial risk guarantee (PRG) to secure debt service
payments
Foreign • Availability of foreign • Sovereign guarantee of currency convertibility and foreign
Exchange exchange for foreign debt exchange availability
Rate Risk service • .MLA partial risk guarantee (PRG) to secure debt service
payments
• Availability of foreign • Sovereign guarantee of currency convertibility and foreign
exchange for repatriation of exchange availability
profits • Analysis of economic indicators including ability to
generate foreign exchange to match payment obligations
• Devaluation of the local • Match PPA payment currencies to financing package
currency • Hedging of debt service portion
• Maximize local contribution in construction work
Environmental • Environmental impact on • Design project as run off river with environmental flow
and Social river and surrounding • EIA, Environmental Monitoring Plan and Environmental
Risks environment Management Plan to development agency standards
• Re-regulation of power station releases.
• Variable level intake structures for improved water quality
• Social impacts • Landowner participation and ownership
• Economic development initiatives in vicinity of project

Reliability of available hydrological data is of major concern to project developers, investors and
lenders. This includes the insufficient duration of time series, incorrect readings and extends to
the inadequate location of data recording stations. In general, the more reliable the data the

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better the easier it is to assess and take hydrological risk. If data is scarce or unreliable, no
investor will bear hydrological risk and this risk will in turn have to be transferred to the power
purchaser or the government.

4.5 Procurement and Implementation of IPP Projects


In practical terms, besides tariff, risk allocation remains the most prominent commercial issue in
IPP hydropower projects. An effective management of these risks described above has
significant impacts on the procurement process and associated contractual arrangements. In
case one of projects described here is to be implemented as an IPP it is recommended to
procure an initial project using a one-stage bidding process. I.e. a tariff is determined in a single
round of bidding. All Pre-investment activities would be carried out to MLA standards in the
public sector. The government’s consultants will undertake full site investigations, technical
studies, and preliminary designs. It is assumed that the project would attract the support of
development agencies to provide grants for feasibility studies and bid preparation activities.
Solomon Islands currently does not have any local private investors who have the financial and
technical expertise necessary to develop a hydropower project to international standards. This
is mainly because the private sector is still in its very early stages of development and most
infrastructure projects, have to date been developed and owned by the state or state owned
enterprises. This means that for hydropower projects, investment would have to be the
traditional public sector finance or private equity investment would have to come from
experienced and financially sound international developers. If a project is procured within the
public sector, there is a standard set of procurement rules that MLA agencies or the government
itself applies for the supply of machinery or EPC contracts. Procurement of an IPP project with
significant private sector involvement is significantly more complex and the paragraphs below
describe the processes and rules to consider.

Project Development
Technical design, environmental and social impact studies, environmental and social action
plans (including community mobilisation and landowner agreements) and watershed
management plans would have to be prepared by the public sector (typically using grants or
concessionary loans). With this shift of project investigation and formulation activities into the
public sector, the successful bidder and the project’s lenders would be protected to some
degree from associated risks by providing contractual relief through a minimum payment clause
that secures debt service in case of hydrological or demand short falls. In order to retain the
business character of the IPP it is recommend that the investor wear the risk of hydrological
shortfalls beyond the debt service period. The payment risk and foreign exchange risk beyond
debt service could be covered by guarantees provided by MLA and/or the government.
Back-to-back provisions can provide relief from unforeseen conditions during construction in the
concession agreement and the EPC contract allowing the investor to claim compensation for
cost overruns that occur due to latent conditions through downward adjustment of royalties and
taxes. Shifting the risk to the investor would force bidders to make substantial upward price
adjustments in order to cover for potential errors in project preparation work outside its control.
For investors, the benefits of the One-Stage Model over a directly negotiated transaction include
the elimination of protracted negotiations and the freedom to award the engineering,
construction and procurement work to anyone it pleases. In turn, the investor has to assume the
risk of cost and time overrun of EPC contract or shift this risk to the EPC contractor for all events
not classified as unforeseen conditions.
Depending on size and type of project it may be appropriate that the operating risk assumed by
the investor is partly transferred to a specialized O&M contractor. While the government has to
assume the off-taker payment risk in the commercial risk category the investors and lenders
have to assume what is left as commercial risk.

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Developers and Lenders


At first glance, investment in hydropower in SI may seem to offer higher risks and lower returns
in comparison to alternative investments. A PPA project would lock the investor into a long-term
contract with a monopoly buyer and involve assets that are essentially immovable. Private
investors would typically chose risky projects because they are familiar with the specific sector
and confident that they can use this knowledge to their advantage in assessing and managing
risk. In the absence of developers with specific private infrastructure or power sector know how
in SI we have to assume that in the eyes of an indifferent investor 9, hydropower projects will
have to compete with a wide range of other industrial projects such as manufacturing, real
estate, agriculture etc. The PPA contract on offer would then be appraised against other
ventures, many of which could have shorter pay back periods, involve less specific risks and
may be manageable with less demanding approval procedures.
A developer or investor (such as the SI pension fund) may be motivated by the desire to
diversify to invest in an IPP project. Such a project might enhance the risk profile of the overall
portfolio. A portfolio of investments, which has a high exposure to exchange rate fluctuations,
might reduce its overall financial risk by selecting a project with a high local content of both
capital outlay and revenue. Again, the investor will then compare various alternatives that show
a similar characteristic and compare, say, the IPP with an investment in real estate or the
fisheries sector. On balance, the relation between the return, which accrues from the
guaranteed revenue stream of the IPP, and the risks the project and or the investment portfolio
are exposed to must be attractive to the developer. Even if the PPA strikes a good balance and
allocates the various risks efficiently, the developer might still not have the confidence to deal
with the specific risks of a hydropower power project and instead select another investment.
Lenders on the other hand have a perspective that is different from the project
developer/investor. They have downside risks (they lose their money if the borrower becomes
insolvent or breaches its loan agreements) but do not participate in the upside risks (they do not
increase their gains if the project is especially profitable). Accordingly, they are normally
conservative in their approach to risk. Lenders have, or should have a broader view of capital
markets, often manage larger portfolios and typically have experience in assessing specific risks
of projects. They will identify the projects assets and take security over them. In order to further
mitigate their risk they will look at third parties such as suppliers and contractors and the
purchaser to provide additional layers of security. Lenders are aware that a project whose
performance depends on various parties fulfilling their obligations is only as strong as its
weakest link. If there is a weak party whose creditworthiness is in question, lenders will request
guarantees or risk transfers. In SI commercial banks (such as ANZ and Westpac) might be
willing to accept risk transfers and accommodate risks that remain uncovered 10. Commercial
lenders will, however, follow the same principle as developers in seeking the highest return for
the lowest possible risk and will try to insulate themselves from as much risk as possible.

One of the most important factors in the success of a private hydro project is the careful
selection of eligible developers in a competitive process. Developers of projects must
demonstrate to their lenders, in addition to their own financial capacity, that the project is
soundly conceived and that the expected financial performance of the plant under the offered
tariff is sufficient to reliably meet debt service obligations, operating and maintenance charges,
and provide a reasonable return on investment.

9
An investor who just wants to maximise return on his investment at the lowest risk possible
10
ANZ has been involved with the World Bank in an energy sector financing program which has in the meantime been assessed as
unsuccessful

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5. Financial Viability of Mini Hydropower in SI

For mini hydropower to be a financially viable alternative for SIEA its development and use has
to reduce SIEA’s overall cost. In section 5.1 below we demonstrate that SIEA is currently (and
presumably in the foreseeable future) in no position to afford – based on energy security or
environmental grounds – an energy source that is more expensive than its conventional
alternative. The financial competitiveness of mini hydropower (MHP) as a substitute for diesel
fuel in the SIEA outstations depends mainly on the capital cost, while diesel based power supply
depends mainly on the delivered cost of fuel. This introduces the need to predict a future price
development for petroleum products. As hydropower plants are typically not assets that cab be
moved (stranded assets once build), a conservative approach seems to be in order. In other
words, hydropower needs to show a robust financial and economic performance in order to
justify investments that are risky in nature.

5.1 Analysis of SIEA’s Financial Situation


A verified picture of SIEA’s current and recent past financial condition is not available. Critical
records, both financial and operational, are missing or are inconsistent with other available
records. SIEA’s financial statements for the years ending 31 December 2004, 2005, 2006, and
2007 were audited in 2009, but the Auditor General was unable to issue an opinion on any of
the statements, citing a lack of fundamental records needed for verification. These problems are
acknowledged by the SIEA Directors who, in their cover report for the Statements of 2005, for
example, “note that due to the unavailability of certain records, relevant estimates and
assumptions have been made in compiling these financial statements.”
The rate of revenue collection in the SIEA system nation-wide is reportedly between 80 and 90
percent of electricity invoices to consumers 11, but billing records are incomplete. Under
assistance from the World Bank 12, the SIEA is undertaking an ambitious effort to install
prepayment meters on all consumers (thus reducing and, in time, eliminating the poor collection
rate), in parallel with an overhaul of the billing, accounting, and data management systems.
These improvements are necessary to enable SIEA to comply with the provisions of the State
Owned Enterprises Act of 2007, and they are clearly urgent management priorities for the SIEA.
It may be expected that SIEA’s financial picture and prospects will gradually become clearer as
the improvements are implemented.
In April 2008, the GSI agreed to assume or forgive some SBD 196 million of SIEA’s long term
debt and to forgive approximately SBD 8.6 million in SIEA tax arrears, while the SIEA agreed to
write off about SBD 62.5 million 13 of arrears for government electricity consumption. In
aggregate, these steps represent earnest attempts to resolve SIEA’s current financial difficulties
and to enable the Authority to restructure itself and start with a new slate. However, the
Authority continues to face chronic arrears problems from some large customers, e.g., the
Solomon Islands Water Authority. 14 On this evidence, it would appear that neither the SIEA nor
the GSI are in a position to assume substantial new long-term debt for the foreseeable future.

11
Personal communication, SIEA Chief Engineer, April 2010
12
SISEP, Solomon Islands Sustainable Energy Project
13
SIEA’s 2007 Profit and Loss Statement shows a write-off of SIG arrears of SBD 62.45 million, but the Directors’ Report for that
year shows the write off as SBD 32.40 million. The reason for the discrepancy is not known.
14
SIEA, Corporate Plan 2010-2015

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The financial statements that are available from SIEA indicate that the Authority’s operations
have incurred heavy financial losses in four of the five years between 2003 and 2007. However,
in most of these years it is difficult to put a finger on the proximate causes of the losses, due to
the lack of reliable records. The large write-off of GSI arrears in 2008 (applied to the accounts of
2007) are partly responsible for the loss of SBD 37 million in 2007—the worst losses of the
period. The SIEA Corporate Plan 2010-2015 states that the regulated tariff is too low to allow full
cost recovery, but it would be difficult to verify this claim with the present data. It is possible, for
example, that a significant improvement in revenue collections (as would follow from universal
prepayment metering) would strengthen the profit and loss position dramatically.
SIEA’s financial statements are national in scope and do not show detail by outstation. However,
a recent tariff study 15 managed to develop such detail for the years 2004, 2005, and
(provisionally) 2006. Averages from these years have been applied to the national accounts
reported by SIEA for 2003 and 2007. By these means it has been possible to derive a
contiguous data set showing the financial operating performance of the SIEA in Honiara and in
each of the nine outstations (Lata, Buala, Gizo, Kirakira, Lata, Malu’u, Munda, Noro, and Tulagi)
for 2003-2007 inclusive.
Considering only sales revenues and direct O&M expenses in each centre (ignoring national
corporate overheads, finance costs and exchange rate losses, and bad-debt write-offs), it is
seen that, in general, only Honiara and to a lesser extent Lata, Gizo, Munda, and Noro show
consistent operating surpluses, which are used in part to cross-subsidise loss-making
operations in Buala, Kirakira, Lata, Malu’u, and Tulagi. Honiara overwhelmingly dominates the
SIEA national system, accounting for about 80% of total revenues and about 90% of total
generation. The chief operational financial results for Honiara and the outstations for 2003-2007
are summarised over the page in Table 5.1.

Tariffs
In the financial analysis of this report, no attempt has been made to calculate tariff adjustments
that may be possible or necessary in the future to keep SIEA solvent. The analysis is based,
rather, on keeping the base tariff constant in real terms throughout the 20-year planning period,
while allowing the “energy” or fuel price component of the tariff (set at SBD 0.63/kWh for all
consumers in all power centres in March 2010 16) to rise in concert with the assumed real
increase in international fuel prices (in this analysis, 3% per annum). In this connection, it is
noted that the fuel price component of the tariff does not fully recover SIEA’s fuel costs in any
centre. In Lata, for example, the rate of SBD 0.63/kWh recovers about 20% of fuel costs,
whereas in Auki the recovery rate is about 30%. Although data are not available for a full
analysis, it is estimated that the recovery of fuel costs system-wide (including Honiara) through
the fuel price component does not exceed 50%. An implication of keeping the base tariff
constant through time in combination with a fuel component that does not fully recover fuel
costs, despite allowing the fuel component to rise in line with international fuel prices, is that
financial losses in operations steadily rise as fuel prices rise. (However, as shown below, the
introduction of hydropower is capable of reducing financial losses as it displaces diesel fuel).

15
The Ridgway Study (PIEPSAP), 2007
16
It is understood that the fuel price component has been reduced to SBD 0.32/kWh, starting with April 2010 bills. However, as the
mechanism used by SIEA for adjusting the fuel component is not well understood, the rate of SBD 0.63/kWh has been retained in
this analysis, for 2010.

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In this context, GSI and SIEA may contemplate the revision of the current tariff. Hydropower
may allow a lower tariff in stations that have a viable hydropower sites. Once a plant has been
built, there is also a strong economic incentive to use its full capacity as short run marginal cost
for hydro generation are extremely low (assumed here to be 1 US cent per kWh for maintenance
and operation. Quite obviously, the economic benefits of selling hydro energy by far outweigh
these cost and one way to realise the benefits from incremental power use is to offer it at an
attractive price.

Table 5.1: Summary of Operational Financial Results for all Stations, ($SBD) 2003-2007
Operating Performance by Centre (Centre Sales Revenues vs Centre Generation, Distribution, and Administration Costs)

2003 Honiara Auki Malu'u Buala Noro Gizo Munda Tulagi Kirakira Lata Totals
Sales Revenues 52,571,870 2,409,001 87,147 479,165 6,337,936 2,926,504 972,256 265,130 576,159 454,074 67,079,243
Expenditures
Generation 30,177,208 1,160,751 74,097 250,980 2,863,371 1,757,917 17,208 475,591 421,831 394,094 37,593,049
Distribution 1,682,203 107,262 10,078 7,216 137,443 86,541 72,053 11,536 14,114 2,085 2,130,532
Administration 602,418 86,334 76,691 75,023 187,620 127,314 53,432 68,539 97,342 91,163 1,465,876
Total Expenditures 32,461,829 1,354,347 160,866 333,219 3,188,435 1,971,772 142,694 555,666 533,288 487,343 41,189,457
Surplus/(Loss) 20,110,042 1,054,655 (73,719) 145,946 3,149,502 954,732 829,562 (290,536) 42,871 (33,269) 25,889,785

2004 Honiara Auki Malu'u Buala Noro Gizo Munda Tulagi Kirakira Lata Totals
Sales Revenues 72,861,412 2,081,163 57,419 284,355 8,365,774 2,349,985 903,155 478,387 430,832 471,215 88,283,698
Expenditures
Generation 41,955,023 2,318,193 75,377 215,835 6,310,212 2,796,086 40,703 649,280 702,120 684,257 55,747,086
Distribution 2,547,417 194,600 10,166 14,526 241,622 152,095 62,408 10,000 28,849 8,645 3,270,329
Administration 573,248 80,778 77,640 73,784 214,296 101,049 52,797 59,160 104,562 78,145 1,415,456
Total Expenditures 45,075,688 2,593,571 163,183 304,145 6,766,130 3,049,229 155,907 718,440 835,530 771,046 60,432,871
Surplus/(Loss) 27,785,724 (512,408) (105,764) (19,790) 1,599,644 (699,244) 747,248 (240,053) (404,698) (299,831) 27,850,827

2005 Honiara Auki Malu'u Buala Noro Gizo Munda Tulagi Kirakira Lata Totals
Sales Revenues 85,638,886 3,198,804 79,834 391,055 6,075,052 3,306,926 912,648 732,467 598,304 365,214 101,299,190
Expenditures
Generation 64,707,699 2,335,138 229,363 482,630 5,389,899 4,352,133 30,772 1,453,974 1,018,486 866,802 80,866,895
Distribution 3,878,876 243,145 27,357 15,888 352,584 195,884 193,283 30,630 30,097 2,609 4,970,353
Administration 989,991 151,278 150,119 117,102 302,025 238,441 83,267 142,828 157,997 168,904 2,501,951
Total Expenditures 69,576,566 2,729,561 406,839 615,620 6,044,507 4,786,458 307,321 1,627,432 1,206,580 1,038,314 88,339,199
Surplus/(Loss) 16,062,320 469,243 (327,006) (224,566) 30,545 (1,479,532) 605,327 (894,965) (608,275) (673,100) 12,959,991

2006 Honiara Auki Malu'u Buala Noro Gizo Munda Tulagi Kirakira Lata Totals
Sales Revenues 88,633,880 6,044,464 272,417 1,577,089 15,353,067 8,100,240 2,754,658 35,489 1,679,318 1,298,119 125,748,741
Expenditures
Generation 86,179,308 2,764,243 168,761 905,375 6,597,750 4,085,436 38,493 935,925 975,031 967,330 103,617,652
Distribution 4,323,523 247,690 26,880 15,700 284,101 205,045 204,752 33,088 31,248 2,073 5,374,101
Administration 562,724 72,620 42,888 73,876 145,799 109,807 52,501 39,889 80,967 74,671 1,255,741
Total Expenditures 91,065,555 3,084,553 238,530 994,951 7,027,650 4,400,289 295,746 1,008,902 1,087,246 1,044,073 110,247,494
Surplus/(Loss) (2,431,675) 2,959,912 33,887 582,138 8,325,416 3,699,952 2,458,912 (973,413) 592,072 254,046 15,501,247

2007 Honiara Auki Malu'u Buala Noro Gizo Munda Tulagi Kirakira Lata Totals
Sales Revenues 166,723,373 7,639,767 276,374 1,519,596 20,099,763 9,280,945 3,083,356 840,816 1,827,197 1,440,023 212,731,210
Expenditures
Generation 103,049,237 3,963,738 253,026 857,046 9,777,851 6,002,943 58,763 1,624,050 1,440,471 1,345,754 128,372,878
Distribution 5,256,972 335,198 31,495 22,552 429,518 270,444 225,170 36,051 44,108 6,517 6,658,024
Administration 779,120 111,657 99,186 97,029 242,653 164,657 69,105 88,643 125,895 117,903 1,895,848
Total Expenditures 109,085,329 4,410,593 383,707 976,627 10,450,021 6,438,045 353,038 1,748,743 1,610,473 1,470,174 136,926,750
Surplus/(Loss) 57,638,044 3,229,173 (107,333) 542,969 9,649,742 2,842,900 2,730,318 (907,927) 216,724 (30,151) 75,804,460

What the available financial information for SIEA’s operation show is that the authority is still
financially too weak to subsidize the introduction of hydropower or other renewable energies. If
subsidies are being channelled to such an endeavour it has to be external to SIEA’s operation.
Hydropower projects can, however, improve SIEA’s energy security by sheltering the utility from
fuel price volatility. This distinguishes hydropower from the use of CNO as a fuel substitute that
has also been analysed in the framework of this RETA (see separate report).

5.2 Fuel Supply Cost at SIEA Outstations


For hydropower to be a financially superior solution for SIEA, it needs to be competitive with
other sources of power. At present all sites investigated are fuelled 100% by diesel power. A
pilot project in Auki will, however, soon start to test the use of diesel/CNO blends. I.e. supply
cost based on diesel or CNO generation is the main benchmark. However, diesel and CNO is
not the only competitor against which hydropower needs to measure up. In theory, hydro also
needs to be competitive when compared with solar, wind and other biomass technology. In the
separate analysis of CNO mentioned above, the consultant concluded that because of a close

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link between fuel price and vegetable oil price development on the world market, CNO does not
offer a strategic option for reducing cost to SIEA. At best in can be a financially neutral substitute
that enhances energy security and channels economic benefits to the rural producers of copra
and CNO. For the purpose of this analysis, supply cost for diesel and CNO (on an energy
equivalent basis) are considered identical for the locations under consideration.
The following Table 5.2 displays diesel supply cost to selected centres for June 2010. Actual
SIEA fuel prices for Taro are not presently available, as it is not an operating SIEA station. As it
is fairly remote from the Solomon Islands fuel importing centres of Honiara and Noro/Gizo, it has
for present purposes been assumed that the delivered fuel price in Taro will be similar to that for
Lata, which shares that characteristic. This assumption will be revised if warranted by new data.

Table 5.2: Delivered Diesel Fuiel Cost by Outstation (SBD$/litre, June 2010)

FOB Freight
Honiara Cost Total
Auki 6.83 $ 0.43 $ 7.25
Kirakira 6.83 $ 0.90 $ 7.73
Lata 6.83 $ 1.15 $ 7.98
Noro 6.83 $ - $ 6.83
Taro (Choiseul) 6.83 $ 1.15 $ 7.98

In order to make financial projections over 20 years, it is assumed that diesel fuel prices,
including the cost of transport of fuel to the outstations, will increase at 3 percent per annum in
real terms. This assumption does not purport to be a realistic fuel price forecast; petroleum
prices are extremely volatile. A ‘realistic’ fuel price forecast for 20 years or even a much shorter
period is not possible. Rather, the 3-percent-real assumption is made simply to place the
projections for each outstation on a consistent basis, to enable comparisons. In actual
experience during the next 20 years, it is fully expected that fuel price volatility will continue.

5.3 Supply Cost and Benefits of Hydropower


The supply cost from a hydropower station is driven by investment cost. In comparison to capital
cost, short run marginal costs of hydropower are almost negligible. For the five sites investigated
in this study, supply cost vary greatly but are clearly well below the cost of any competitor
including diesel, CNO solar or wind.
Hydropower is a reliable, low operating and maintenance cost means of supplying electricity 24
hours per day. As it requires no fuel input, energy from hydropower is much less costly than
equivalent diesel energy, and completely avoids the expense and insecurity of fuel logistics. It is
as effective in rural supply areas as it is in urban supply areas, provided that local topological
and hydrological conditions (rainfall, catchment area, runoff) are adequate. Its capital cost varies
significantly from site to site, depending upon local topological and geological conditions. In
contrast to the introduction of coconut oil (CNO) to displace diesel fuel for power generation in
rural areas, introducing small hydropower will not directly generate significant rural employment
or incomes (i.e., there will be no equivalent of local copra farmers to supply raw material for
fuel).
However, in the Solomon Islands, hydropower has considerable potential to provide affordable
electricity to rural areas where the physical conditions for it are appropriate, as they appear to be
in the above centres. In these centres and perhaps others, hydropower has good potential to
turn loss-making rural diesel centres into profitable operations or to create new power centres
that are profitable, either for SIEA or for an independent power producer (IPP). Thus
hydropower has a role in making reliable electricity accessible to more of the Solomon Islands’s
rural population. Assuming that the willingness to pay for electricity in rural areas (the

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assessment of which was beyond the scope of this TA) is at least equal to the national electricity
tariff, hydropower will benefit the rural population by raising the quality of life, widening the
opportunities for improved social services, and perhaps stimulating commercial development.

5.4 Carbon Finance


Clean Development Mechanism (CDM) allows emission reduction projects that assist
developing countries in achieving sustainable development and that generate ‘certified emission
reductions’ (CER) for use by the investing countries or companies. Mini hydro and biofuel
projects could theoretically qualify 17 for CDM and projects in Solomon Islands could therefore
generate an additional revenue stream from the trade of certified emission reductions. This
would not apply for projects that are financed using ODA funds. As the baseline is 100 % diesel,
calculating emission reductions from renewable energy contribution is straightforward. The
UNEP CDM guidebook suggests an emission co-efficient for small diesel grids of 0.8 kg
CO2/kWh generated by renewables. At an assumed average specific fuel consumption of
3.38 kWh per litre of diesel each litre of diesel replaced by hydro equals 2.7 kg of CO2.
Small hydro power generation is eligible for carbon credits under the Clean Development
Mechanism (CDM) of the Kyoto Protocol of the United Nations, and a number of projects have
been accepted as CER sources. Small renewable energy projects enjoy a simplified
demonstration of additionality. Small project activities are defined as less than 5MW. They must
employ renewable energy as their primary technology and are additional if any one of the
conditions below is satisfied:

A the geographic location of the project activity is in one of the Least Developed Countries or
the Small Island Countries (LDCs/SIDs) or in a special underdeveloped zone of the host
country identified by the Government before 28 May 2010;

B the project activity is an off grid activity supplying energy to households/communities (less
than 12 hours grid availability per 24 hours a day is also considered as 'off grid' for this
assessment);

C the project activity is designed for distributed energy generation, not connected to a
national grid, with both of the below conditions satisfied:

i. each of the independent subsystems/measures in the project activity is smaller than or


equal to 1500 kW electrical installed capacity; and

ii. end users of the subsystems or measures are households/communities/SMEs;

D the project activity employs specific renewable energy technologies/measures


recommended by the host country DNA and approved by the Board (though the total
installed capacity of the technology/measure must contribute less than or equal to 5% to
national annual electricity generation) 18

In addition to CER, there is also trading in so-called "verified emission reductions" (VERs) in
what is commonly referred to as the voluntary carbon market. VERs are not a standardized
commodity. While they may eventually become CERs there is a risk that this may not happen
and therefore buyers therefore tend to pay a discounted price for VERs, which takes the
inherent regulatory risks into account. Such opportunities may also be explored.

17
As a minimum SI government has to establish a Dedicated National Authority (DNA) for CDM. Such a unit is not yet in place but
the ADB supports the government in establishing such an institution.
18
http://www.cdmrulebook.org

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The hydropower projects assessed by this TA and discussed below are all financially viable and
would make good investments, both to improve the financial position of the project owner (in all
cases except Ringgi, the project owner would be SIEA) and to provide a sound electricity supply
to rural consumers in the Solomon Islands. The application of CER credits to these schemes
would not stimulate additional investment in them, and it is therefore unlikely that the schemes
would pass the additionality test for approval of CER credits. In addition, it is not even certain
that the benefits from CER would exceed the administrative cost incurred to obtain CER. CER
credits have therefore not been included in the analysis in this report.

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Part II

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6. Identification of Sites

6.1 Overview
The results of pre-feasibility level investigations for five individual sites are presented in
the following Sections. The shortlisted sites have been selected in close co-ordination
with the Solomon Island government and SIEA. SIEA senior management expressed a
preference for sites that could supply the Noro/Munda system, which is the largest
demand center after Honiara. In general, the criteria used for selecting the sites were:
• Existing or planned rural electricity supply network (Demand)
• Hydro site within a commercially viable range from the demand centre
• Cost to supply location with diesel

The following map shows the geographical location of the five sites described in the
following Part Two. The sites at Afio, Rualae (Auki) and Lungga (Honiara) are not
considered competitive options and have not been analyzed in detail. However, they are
briefly described. The Mase river site in New Georgia has been considered as a second
option to supply the Noro/Munda grid and appears to be viable.

Figure 6.1: Location of Sites Considered and Studied

Pre-feasibility
Pre-feasibility site Site
Taro
Site considered for
Prefeasibility analysis
Ringii

Noro

Auki

Rualae
Mataniko
Lata

Lungga

Afio

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The Mase river site received a gauging station as it could be a fall-back position in case the
Vila/Ringgi project cannot be built to size that would allow to supply the Noro/Munda demand
because of environmental concerns. (A larger development could infringe the protected area
around the crater of the Komlumbagara volcano. In all other respects, the Vila/Ringgi site is
superior. There is a network of good roads on the island, the forest company possesses all
heavy construction machinery that would be needed for the construction of a hydropower plant
thus reducing construction cost significantly and the transmission line to the demand centers
would be shorter and less expensive than for a project on the Mase river. As the scope of this
study only forsees five sites to be investigated in detail, the Mase river site is at this stage
considered a fall back option in case the Vila/Ringgi site cannot be developed to its full potential.

6.2 Consultations and Preliminary Site Selection


During initial meetings with the Permanent Secretary for Ministry of Mines, Energy and Rural
Electrification, GSI Energy Unit and SIEA, discussions included (i) the consultant’s ToR and
preliminary work schedule, (ii) local regulations and planning standards, (iii) details on existing
information and data bases (iv) existing experiences with pre-payment meter systems, (v)
financial status of the SIEA’s outstations, (vi) current fuel, operation costs, and tariffs, (vii)
current SIEA management structure, and (viii) existing operational procedures and reporting
templates.
In addition consultations were held with both MMER and SIEA senior staff on the selection of
sites to be investigated under the RETA. SIEA management clarified its objectives to reduce
supply cost in outer island stations with the aim to establish financial viability across its entire
system. SIEA also indicated its preference for projects that are suitable for development through
private sector sponsors and/or investors. MMER on the other hand clarified its policy to expand
supply areas in order to provide more access to electricity. Information on historic experiences
with hydropower was shared with the consultant including more recent lessons learned in the
framework of the Tina river hydropower development project on Guadalcanal. Initial
consultations yielded a shortlist of project sites to be investigated by the consultant.

6.3 Site Specific Investigations and Field Missions


On-site studies were conducted in Lata, Auki, Afio, Ringi, Honiara, Noro/Munda and Taro. They
included broadly based stakeholder consultations, surveys of power supply infrastructure,
assessment of existing hydropower resources through GPS surveys and discharge
measurements, demand surveys of both existing and potential new SIEA customers and specific
community consultations and individual interviews on relevant subjects such as pre-payment
metering systems, support for data collection (level and rainfall gauging stations), and possible
community participations in hydropower development and power system expansion projects.
The results of these surveys and consultations were used to develop a load forecast over a 20
year planning horizon for each station. In forecasting loads and energy consumption, the total
demand in the area regarded as serviceable through expansions of the system has been taken
into consideration. Based on a base-case load forecast, generation and distribution system
expansion was designed using standard planning criteria such as N-1 generation reliability. This
conventional expansion planning based on diesel is the baseline scenario against which the
introduction of hydropower needs to be measured. It was also deemed necessary, as SIEA
currently does not have a comprehensive expansion plan for their outstations. Subsequently
hydropower contribution to system power and energy demands was determined based on a
financial model driven by a variety of load forecast scenarios. No capapcity credit is given to run
off river hydro at this stage. I.e. the stations need to be backed up by diesel. This may change
during feasibility analysis when a comprehensive evaluation of hydrological data allows
determining whether or not the hydro plants can be credited to provide firm capacity. In this
regard, assumptions at pre-feasibility level can be considered conservative as potential savings

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in diesel capacity may occur when a thourough hydrological analysis has confirmed capacity
credit for the hydro schemes.
The following Table 6.1 summarizes the current electrification rates for the provinces under
consideration. The table is based on a number of assumptions: It uses the population
projections for 2012 published by the GSI statistical office. For every electricity account, be it
demestic or commercial, it is assumed that 6 people benefit (mean household size).

Table 6.1: Potential Impact of Hydro Projects on Electrification Rates of Provinces

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7. Auki Malaita

7.1 The Auki Power System


Malaita is one of the six main Islands, which make up the Solomon Islands. Malaita is
mountainous and is the country’s most populated island, hosting a population of 170,000
according to the 2007 Statistic Office record, or more than a third of the national population.
Malaita is about 164 km long and narrow at 37 km wide at its widest point. The largest town
is Auki, located on the northwest coast. Population growth is around 3.3% pa. Only
approximately 4% of the population of Malaita province currently has access to electricity. In
addition to the two SIEA service areas in Malaita, Auki and Malu'u, there are several
community type micro hydro projects on the island serving their immediate vicinity with
power. The Malu’u system is a diesel/micro hydro hybrid but the hydro plant is currently not
operating due to an unresolved land dispute.
Auki is the capital of the province and covers an area of approximately 2 km2. The immediate
town area has a population of approximately 5,300, with an additional 15,000 living in
outlying villages. Auki hosts national and provincial government offices, a hospital, and
several primary and secondary schools. It has a lively commercial sector consisting of
agriculture, fisheries, forestry and trading activities. There are several commercial banks and
a number of small hotels and guest houses. The town is served daily by a fast ferry from
Honiara and enjoys regular air service by Solomon Airlines. The town also provides services
to a large rural area on the North West coast of Malaita.
The bulk of Auki’s population is centred around the south western coastal inlet area with
small villages along the northern road towards Kilufu’u and the airport. There is also a
sparsely populated region approximately 700 m to the east of the main commercial area.

Generation
Auki’s electricity is generated at SIEA’s diesel power plant located on the outskirts of Auki,
approximately 500 m west of the town centre. The Auki Power Station was built in 1991 and
consists of a concrete block building with a painted sheet metal roof. The building consists of
the generator hall, electrical switch room and office / store. The floor of the power station
consists of a reinforced concrete slab. The station accommodates three generating sets. The
diesel generators currently installed at Auki Power Station are high speed (1,500 rpm)
Cummins units operating on base load duty. No.1 set is currently not serviceable. It had a
catastrophic failure in March 2010 with major damage to the piston and scoring of the
cylinder liners. These have been removed and parts are awaited to rebuild this set. However,
this set has already completed at least 43,132 hours (maybe 53,132 hrs) and was installed in
2001. The condition of this set would suggest that rebuilding may not be cost effective as it is
likely to require extensive maintenance from this point forward.

Table 7.1: Generation Assets Auki Power Plant, April 2011

No Model Nameplate Derated Available Total Installed Remarks


Rating kW kW kW Hours

1 Cummins NT855-G6 252 200 0 43,000 2001 Awaiting


Replacement

2 Cummins VTA28G5 512 500 500 8,500 2010 In service

3 Cummins NT855-G6 252 180 180 32,000 2005 In service

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With a current available capacity of 680 kW and a maximum demand of around 350 kW (April
2010) the largest unit is able to meet demand at approximately 65 % loading. However, there is
at present no stand-by capacity as the No 3 set can only produce 180 kW which is below even
the daytime demand. The No 3 set is going to be replaced in July 2011 within the framework of
this RETA and will be used to run biofuel trials. The new set will have a capacity of 360 kW and
will be able to supply the system load under most load conditions.

Picture 7.1: Auki Power Generation

Auki Power House, SIWA Tanks Auki Generators Auki Fuel Storage

The generators are controlled by a Cummins PowerCommand (PCCP 3100) control unit that
features a digital paralleling capability including load sharing, synchronizing and monitoring. An
automatic dispatching and switching unit is installed but is out of operation, i.e. the sets have to
be manually started and synchronized automatically after start up.

Figure 7.1: Auki Load Profile

Load Profile Auki April 2010


400
350
300

250
kW

200 18-Apr
19-Apr
150 20-Apr
21-Apr
100
22-Apr
50 23-Apr
24-Apr
0
1 3 5 7 9 11 13 15 17 19 21 23
Hours

Analysis of original power station log sheets suggests that at present, the Auki system has a
relatively flat load distribution typical for a smaller commercial centre with a daytime plateau and
decreasing demand after 10.00 p.m. Weekend daytime demand is approximately 100 kW lower
than weekday demand on Saturday; Sunday loads are even lower. Weekends show a
prominent evening peak, typical for small rural systems. Base load is in the order of 250 kW, a
value that is typical for the period from 10 p.m. until 7 a.m. Based on Auki station records a fuel
efficiency of 3.3 kWh send out per litre of fuel input has been calculated.

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The generators are connected to the system via two 500 kVA, 415V/11kV step up transformers
and a 415V switchboard. A single 11 kV bus and switchboard then supplies Auki’s distribution
system via two 11 kV overhead feeders (Nos 1 and 2). Station auxiliaries are fed at 415V/240V.

Distribution
The current area of SIEA electricity supply to the Auki town area is bounded by Kilu’ufi Hospital,
approximately 3.5 km to the west of the town centre, the Kwaibala river and pumping station
approximately 1km to the north, and the village of Ambu, some 500 m to the east of the town
centre. Power is distributed to consumers in Auki via two overhead 11 kV feeders, 5 11kV/415
substations, and overhead and underground 4-wire 415V/240V low voltage distribution circuits.
The 11kV overheads are typically installed on either tapered octagonal or 100mm steel poles,
some with pole lengths ranging from 12 – 14 metres. Cross arms are steel. Spans are typically
60 – 70 metres for straight runs, with 3% sag. Insulators are generally of the porcelain pin type.
Feeder 1 runs 2.5 km to the Kilu’ufi Hospital and has 3 transformers totalling 250 kVA. Feeder 2
has a length of only 1.1 km and supplies the town centre via 2 transformers totalling 400 kVA.
Total present loading of the feeders is approximately 20 - 25 Amps. The uneven phase loading
of the feeders observed during field investigations indicate that there is a need for rebalancing
loads in order to avoid unnecessary losses.
The 415V / 240V Low Voltage system consists of a mixture of overhead (open wire) distribution
lines with some short runs of underground cables. In some areas Aerial Bundle Conductors
(ABC) are installed at (eg supply to Dukwasi and Molou villages). SIEA’s policy is to
progressively install ABC for the overhead 415V system to reduce tree clearing work and to
improve reliability of the distribution system.
Service connections are generally made via overhead service line to the premise’s distribution
and metering board. Service connections from the distribution lines are free if they are less than
20 meters in length, above 20 meters SIEA charge a capital contribution to the new customer.
Most of Auki’s 700 SIEA customers are still metered by conventional single phase or three
single phase (Ferrari type) kWh meters. However, SIEA has started to install cash power
prepayment meters in Auki. As of April 2010 approximately 90 customers use the new system
and demand for additional prepayment meters seems to be high. Average demand of
prepayment customers in March 2010 was 44 kWh.

Financial Status SIEA Auki


Historically, the Auki centre has been one of the three or four “growing” SIEA outstations, with
electricity consumption dominated by the commercial sector. The billing records for March 2010
indicate that there are 778 connections in Auki, of which 496 are domestic and 282 commercial.
Commercial consumption dominates Auki’s power demand with more than 80 percent of
consumption. There is a number of domestic areas that could be connected to the load centre
by means of modest extensions (in phases) of the 11 kV and LV networks, the first two of which
are included in the proposed project in Auki. No substantial number of new commercial
connections are expected. New domestic loads expected in Auki over the planning period are
summarised in Table 7.2.

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Table 7.2: New Domestic Loads Expected in Auki following System Extension
Consumption
New Connec- Power Per First
Domestic tions Demand Day Year First
Connections (No) (kW) (kWh) (kWh) Year Online
Phase I 250 0.21 1.66 151,767 2012
Phase II 20 0.42 3.33 24,283 2012
Phase III 500 0.21 1.66 303,534 2016
Note: for new domestic connections, the power demand and daily kWh consumption are per household. Phase I Western Fishing
Village, Phase II new housing estate, Phase III Eastern expansion

The rate of revenue collection (collections as a percentage of total invoices) in Auki is not
presently known but is likely to be better than that of Lata, because of the preponderance of the
commercial sector. With the exception of 2004, Auki returned an (estimated) operating surplus
to SIEA each year between 2003 and 2007.
Because Auki already has a 11 kV distribution system (for which appropriate extensions are
proposed), distribution network efficiency will not show the same dramatic improvements that
characterise Lata. However, in concert with SIEA’s national effort to install prepayment meters in
Honiara and in all outstations, revenue collections are bound to improve in Auki in the future (but
may already be better than in most other outstations).

7.2 Auki Load Forecast


Unfortunately, no consistent and plausible data series on demand and electricity generation is
available for Auki. The monthly statistics spreadsheet provided by SIEA does not display any
plausible trend for either maximum demand or monthly generation and sales as displayed in the
graph below. There is also a long term systematic error in either generation or units sold data (or
in both data sets) as over a ten year period, the figures for units sold exceed units generated by
more than 10% -- i.e., a projection of historic demand development for load forecasting would
lack a trustworthy baseline. The load forecast below is therefore based on standard
assumptions with respect to general load growth of 4 %. It also takes into consideration the
connection of new consumers through grid extension by the project itself and a later one by
SIEA as displayed in Table 7.2 above.

Figure 7.2: Auki Load Forecast

Auki Power System Load Forecast


6,000,000

5,000,000

4,000,000

Sales to Commercial
kWh

3,000,000 Sales to Domestic


Station and Line Losses

2,000,000

1,000,000

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The Auki system load forecast, estimation of generation requirements, projected hydro output
and residual diesel or CNO fuel requirements, and a schedule of new generation capacity
installations required to meet load demand over the 20-year planning period are summarised in
Table 7.3 overleaf. The forecast distinguishes domestic and commercial load. Station use and
line losses are also computed separately.

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Table 7.3: Auki System Load Forecast, Generation Requirements, Fuel Requirements and Generator Scheduling
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 5.44%
Electricity Sales (kWh)
Existing Domestic (2010) 359,414 373,790 388,742 404,292 420,463 437,282 454,773 472,964 491,882 511,558 532,020 553,301 575,433 598,450 622,388 647,284 673,175 700,102 728,106 757,230 787,520
New Domestic - - 607,068 631,351 656,605 682,869 710,184 738,591 768,135 798,860 830,814 864,047 898,609 934,553 971,935 1,010,813 1,051,245 1,093,295 1,137,027 1,182,508 1,229,808
Existing Commercial (2010) 1,418,282 1,475,013 1,534,014 1,595,374 1,659,189 1,725,557 1,794,579 1,866,362 1,941,016 2,018,657 2,099,403 2,183,380 2,270,715 2,361,543 2,456,005 2,554,245 2,656,415 2,762,672 2,873,179 2,988,106 3,107,630
New Commercial - - - - - - - - - - - - - - - - - - - - -
Total Sales 1,777,695 1,848,803 2,529,823 2,631,016 2,736,257 2,845,707 2,959,536 3,077,917 3,201,034 3,329,075 3,462,238 3,600,727 3,744,757 3,894,547 4,050,329 4,212,342 4,380,836 4,556,069 4,738,312 4,927,844 5,124,958

Sales to Domestic 359,414 373,790 995,810 1,035,642 1,077,068 1,120,151 1,164,957 1,211,555 1,260,017 1,310,418 1,362,835 1,417,348 1,474,042 1,533,004 1,594,324 1,658,097 1,724,421 1,793,397 1,865,133 1,939,739 2,017,328
Sales to Commercial 1,418,282 1,475,013 1,534,014 1,595,374 1,659,189 1,725,557 1,794,579 1,866,362 1,941,016 2,018,657 2,099,403 2,183,380 2,270,715 2,361,543 2,456,005 2,554,245 2,656,415 2,762,672 2,873,179 2,988,106 3,107,630
Station and Line Losses 154,582 160,765 219,985 228,784 237,935 247,453 257,351 267,645 278,351 289,485 301,064 313,107 325,631 338,656 352,202 366,291 380,942 396,180 412,027 428,508 445,649

Load Factor 0.60 0.61 0.61 0.62 0.62 0.63 0.63 0.64 0.64 0.65 0.65 0.66 0.66 0.67 0.67 0.68 0.68 0.69 0.69 0.70 0.70

AAGR Generation = 5.44%


Generation Requirement (kWh) 1,932,278 2,009,569 2,749,808 2,859,800 2,974,192 3,093,160 3,216,886 3,345,562 3,479,384 3,618,560 3,763,302 3,913,834 4,070,388 4,233,203 4,402,531 4,578,632 4,761,778 4,952,249 5,150,339 5,356,352 5,570,606
Station and Line Losses (kWh) 154,582 160,765 219,985 228,784 237,935 247,453 257,351 267,645 278,351 289,485 301,064 313,107 325,631 338,656 352,202 366,291 380,942 396,180 412,027 428,508 445,649
Peak Demand (kW) 367.63 379.18 514.60 530.83 547.61 564.96 582.90 601.44 620.61 640.43 660.92 682.11 704.02 726.68 750.11 774.33 799.39 825.29 852.08 879.79 908.45
Required Capacity with Reserve (kW) 477.92 492.93 668.98 690.08 711.90 734.45 757.76 781.87 806.79 832.56 859.20 886.75 915.23 944.68 975.14 1,006.63 1,039.20 1,072.88 1,107.71 1,143.73 1,180.98
Fuel Required, All-Diesel Scenario (litres) 579,683 602,871 824,942 857,940 892,258 927,948 965,066 1,003,669 1,043,815 1,085,568 1,128,991 1,174,150 1,221,116 1,269,961 1,320,759 1,373,590 1,428,533 1,485,675 1,545,102 1,606,906 1,671,182

9 Hydro Scenario Generation Calculation


Generation Mix with hydro (kWh/year)
Hydro - - - - 2,974,192 3,093,160 3,216,886 3,345,562 3,479,384 3,618,560 3,763,302 3,913,834 4,070,388 4,233,203 4,402,531 4,578,632 4,761,778 4,952,249 5,150,339 5,356,352 5,570,606
Diesel 1,932,278 2,009,569 2,749,808 2,859,800 - - - - - - - - - - - - - - - - -
Fuel Required, Hydro Scenario (litres) 579,683 602,871 824,942 857,940 - - - - - - - - - - - - - - - - -
Fuel Saved by Hydro (litres) - - - - 892,258 927,948 965,066 1,003,669 1,043,815 1,085,568 1,128,991 1,174,150 1,221,116 1,269,961 1,320,759 1,373,590 1,428,533 1,485,675 1,545,102 1,606,906 1,671,182

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
9 Generator Scheduling
Existing Unit 1 200
Unit 1 Biofuel 500 500 500 500 500 500 500 500 500 500
Existing Unit 2 500 500 500 500 500 500 500 500 500 500
Existing Unit 3 180 180 180 180 180
Unit 2 Biofuel 500 500 500 500 500 500 500 500 500 500 500
Unit 3 Biofuel 500 500 500 500 500 500 500 500 500 500
Unit 4 Biofuel 500 500 500 500 500 500 500 500 500 500
Unit 5 Biofuel 500 500 500 500 500
Unit 6 Biofuel 500
Unit 7 Biofuel
Unit 8 Biofuel
Unit 9 Biofuel
Total Installed Capacity (kW) 880 1180 1180 1180 1180 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
Firm Capacity Available 380 680 680 680 680 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Memo: Units Added
Small Units (300 kW) - - - - - - - - - - - - - - - - - - - - -
Large Units (500 kW) - 1 - - - 1 - - - - 1 1 - - - - 1 - - - 1

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7.3 System Expansion Planning Auki

Generation
Currently, there is only one generator set in the Auki power station that can meet demand
(Cummins VTA28G5). Number 1 set (Cummins NT855-G6) is not serviceable after a
catastrophic piston failure and is under repair. The set should be replaced as soon as
possible as it is already 10 years old and has done more than 43,000 hours. The nature of
the recent failure indicates that the unit will probably continue to cause problems when used
for base load supply. In order to provide a minimum of redundancy, the Auki powerhouse
needs three reliable generator sets. Figure 7.3 illustrates the generation requirement
implied by the load forecast provided above. This expansion plan is based exclusively on
high speed diesel generators. The relative position of the proposed hydro scheme is also
displayed. It should be noted that at this stage, no capacity credit has been given to hydro.
I.e. in the event that the hydro plant is being built, the system is assumed to backed up by a
set of diesel generator capable of meeting peak demand in line with the N-1 planning
criteria.

Figure 7.3: Auki Capacity Requirements

Auki Capacity Requirements


1,600

1,400
Hydro
1,200

1,000

Peak Demand (kW)


kW

800
Firm Capacity Available

600 Total Installed Capacity (kW)

400

200

-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Grid Extension
The World Bank SKM report ‘Solomon Islands Proposed Power Sector Projects - Outer
Islands Generation and Rural Electrification Components’ of 2007 identified 3 potential
areas to which the Auki power system could be extended:
• Western fishing Village.
• Eastern extension area.
• Kilufu’u extension area.

All three areas have been surveyed by GHD during field investigation and the Western
Fishing village area has been identified as priority candidate for an extension. Electrification
of this low-income clusters would have to be included into the development of the hydro
scheme. The area closest to the existing system is currently been connected as part of this
project. It has the highest density of potential customers and being a village of fisherman
shows significant potential for productive electricity use (fish freezing, ice production). The

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area has also experienced substantial growth in recent years with now approximately 250
unserved households. However, the other two extension areas offer similar growth potential
at extension cost of approximately US$ 1,100 per household connection. Energy demand
surveys performed by GHD revealed that there is keen interest in getting access to the
electricity network and current expenditures for kerosene indicate that an average family
already spends SBD 180 – 220 per month on kerosene, equivalent to 55 kWh. This is more
than the average pre-payment customer in Auki use (45 kWh/month).

7.4 Hydro Options for Malaita Province and Auki

Afio
For Malaita Province, three different sites have been considered. MMERE named Afio
Island as a potential new project using the Pulalaha stream as a source to electrify Afio
station which is the main administration centre of South Malaita, Malaita Province. This
project was initially assessed by the Solomon Islands Village Electrification Council (SIVEC)
in August 2003 and re-assessed by GHD in 2011. The supply area that could be covered by
supplied by a hydro station on the Pulalaha consists of 17 residential houses, a health post,
government offices, a Telecom tower, a rest house and a defunct fisheries facility that may
be rehabilitated. Table 7.4 depicts an assessment of potential loads. As the Afio center has
currently no power supply the initial demand of the centre would be around 200 kWh per
day (53,000 kWh per annum).

Table 7.4: Potential Loads in Afio

Quan Potential
Consumer Types tity Load (kW) Comments

Domestic houses are mainly houses that accommodate


Residential Houses 17 10.5 government workers within the Afio station.

The Provincial Government office at Afio will require the use of


Provincial Government equipment such as computers, Air-conditions etc.
Administration office 1 4

This is an I8 bed health centre. Currently powered by 480 Watt


Health Centre 1 5 Solar Panel purposely to provide lighting.

Power for the Telekom towers is only required for the charging of
Our Telekom Tower 1 7 battery banks.

Equipment in this centre is not operational and the facility is being


used as a residence now. This facility use to have ice making
Fisheries Centre 1 5 equipment, freezers and office facilities.

Rest House is powered by 140 watts Solar Panel and 200 AH


Rest House 2 3.0 battery.

Total 36 Total daily energy at 25 % load factor: 210 kWh

The hydro potential of the Pualalaha river has been estimated at 0.1 m3/sec and a gross
head of 29 meter resulting in am installed capacity or approx 15 kW. With some demand
management the hydro scheme could probably supply Afio without support from a diesel
system. However, to harness the small potential a major civil engineering effort would be
required. The Pulalaha stream runs through a very steep limestone gorge as shown in
Picture 7.2. This morphology would pose be major challenges in the construction of an

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intake canal, sand trap and forebay. A substantial amount of excavation or even blasting of
the stream banks would be required. With specific cost estimated to be above US$ 16,000
per kW installed the project is not considered competitive with conventional diesel or even
PV based power supply.

Picture 7.2: Pulalaha Limestone Gorge at Afio

Considering the low demand of Afio, the high specific cost for the scheme and the high
hydrological uncertainty of a spring based river, it was decided not to investigate the Afio
project in more detail.

Ruala’e
The Auki area has several rivers with mini hydro potential. MMERE initially shortlisted the
Ruala’e scheme to be investigated under this TA. However two hydropower development
studies have already been carried for this site. In 1996 SIEA carried out a Pre-feasibility
study for the Ruala’e site and Hydro Tasmania updated the study with the 2010 feasibility
study. I.e. the project was dropped from the list. The following table summarizes the result
of this study performed by Hydro Tasmania:

Table 7.5: Characteristics Ruala’e Site Auki


Rualae Mini Hydropower Scheme, Auki System
Key Data Details
Location SIEA Auki System, Provincial Capital, Malaita Province
Auki township, Kiluufi hospital, planned coastal villages along south road to
Main Supply Area
Talakali.
Name of the River Rualae creek, Kwara’ae, 13 km south of Auki
Catchment Area Spring
Gross Head 200.0 m
Net head 175.0 m
Minimum Streamflow Approx. 10 litres/sec (100% exceedance)
Design Flow 130 litres/sec
Penstock diameter 250 mm
Maximum Plant Output 179 kW
Transmission Line 11 kV, 13 km long to Auki town

Project Capital Cost SBD $ 4.063 Million (500,000 US$)

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Against the background give above it was decided in consultation with SIEA and MMERE to
focus efforts on Malaita on the Fiu scheme which has the potential to meet the entire
demand of Auki. This project is analysed below.

7.5 General Description Fiu


The Fiu River is passing behind Auki town on its lower part and the potential projects
considered are up in the mountains 8-10 km from Auki. 7-8 other potential projects in the
MW range on Malaita have been identified, but Fiu is the closest to the demand centre of
Auki and easily accessible by road.

Picture 7.3: Fiu River

The project has been studied in 1996 by SIEA with support from German TA. The resulting
proposal included a tunnel from an intake higher up in the gorge on Fiu’s probably in an
attempt to maximize the head of the scheme and to overcome challenges in canal
construction along the sometimes very steep slopes of the Fiu gorge. As tunnelling is
normally cost prohibitive for a small hydro project, the project proposal did not go beyond
the study. The proposal was based on a larger catchment with inclusion of a major tributary
adding about 33% catchment area. However, GPS surveys indicate revealed a deep gorge
at the proposed intake, the canal alignment would be on extremely steep cross slope,
posing serious construction problems.
An alternative with an intake at the site of the AWLR station and a canal on the north river
bank does not appear to be competitive with the alternative to establish a project on the
steep tributary river joining the Fiu main stream at the previously proposed intake. This
solution would have a head of between 250 and 320 m, the last in case the powerhouse
would be located at the bottom of the gorge.

Figure 7.4: Location of Fiu

Hydro Station

SIEA Power Station

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The analysis is based on the topography shown on Google Earth and the 1:50,000 maps for
intake and canal alignments and the GPS survey around the automatic station, providing a
gross head of 314 m with an intake at 400 a.m.s.l. with a catchment size of about 14.6 km2.
One or more additional intakes along the canal could add about 5 km2 catchment on the
plateau to the north. The critical issue here is the risk of sinkholes diverting the water away
from the stream. This has to be verified through survey work in the feasibility analysis.

7.6 Hydrology
For the Fiu catchment discharge per km2 has been calculated based on the hydrology of the
Lungga Gorge. Figure 7.5 displays the flow duration curve assumed for the Fiu River. This
might be a conservative assumption as the Fiu is better exposed from South over West to
North West and may receive higher rainfall than Lungga. Data from the AWLR and rain
gauge stations will provide more accurate data for a full-scale feasibility analysis. The steep
slopes do not offer any opportunity to regulate the flow along the river near the intake.
There may be possibilities on the extreme upper end of the river valley above El. 600 m and
on the plateau north of the intake canal at about El. 630 m. Providing a certain regulation
over the day for peak production may allow significant investment at a later stage, once the
capacity is fully utilized. However, sinkholes may prevent establishment of small reservoirs.

Figure 7.5: Flow Duration Upper Fiu River

3.0
2.5
2.0
m3/s

1.5
1.0
0.5
0.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of time exceeding

7.7 System Layout


The suggested layout of the Fiu scheme is based on an intake at El. 400 meter and a gross
head of 260.5 meter. Figure 7.6 displays the profile of the river and the suggested layout of
the scheme. A higher head may be feasible by moving the intake up river say to 520 meter.

Figure 7.6: Fiu Branch Profile

500
Fiu Branch Long Profile
400
Fiu Branch Profile
300
m.a.s.l.

Canal
200
Penstock
100 Canyon
0
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

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This would reduce the effective catchment area. The final design will depend on a careful
analysis of the impact of sinkholes on the discharge at the various possible intake sites. A
higher canal level results in much less steep cross slope allowing easy canal construction.
The downside would be a longer winding canal alignment. The advantage of a higher head,
at a given power demand, is that a smaller portion of the flow would be used. This not only
leaves a higher ‘environmental’ flow in the river but also increases the plant factor of the
installation. However, with the projected demand in Auki a gradual development of the Fiu
may be the most economical solution. Such a development would increase the number of
intakes along the canal in response to demand increases. Additional discharge
measurement on the tributary in question would facilitate optimization of the scheme.
The scheme lay out selected for this analysis is shown in Figure 7.7. It would have a
relatively long canal of 3000 meter and a penstock of 755 meter. The powerhouse would be
located at 86 meter elevation. Power extraction would require a 11 kV power line of 9.6 km
to the SIEA diesel power station where it would connect to the 11 kV busbar supplying
Auki’s two feeders. The installed capacity would be 1,160 kW producing a maximum of
9.8 GWh per year. At full capacity use the plant would only use 50% (0.5 m3/s) of the mean
flow and thus leave a substantial environmental flow in the river. In this configuration either
a Pelton or a Turgo turbine could be employed. A single jet Turgo wheel which is similar to
the Pelton turbine is considered the optimal choice for the given head and flow variability
(0.2 – 0.5 m3/s). In a Turgo configuration the jet strikes the plane of the runner at an angle
of approx 20°. The water enters the runner on one side and exits on the other, which avoids
interference of the discharge with the incoming jet at higher flow rates. The Turgo wheel is a
robust design that is suitable for remote locations and for projects with high flow variability.

Figure 7.7: Fiu Hydro Scheme Layout

The hydropower plant would allow supplying Auki’s power requirements completely, i.e.
there would be no need to implement the generator sequencing shown in Table 7.3 above.

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7.8 Variations
The scheme described above could be designed to produce significantly more peak power
and energy. This would only be necessary if power demand in the greater Auki area
increased either through the implementation of a significant rural electrification program or
the establishment of an industrial power consumer in Auki. The following Table 7.6 depicts
a number of variations that could be implemented at the Fiu site.

Table 7.6: Design Variations for Fiu Hydro Site

Qdesign Qdesign Plant avail- Water GWh/yr


m3/s /Qavg Pdesign kW ability Utilization Power-house Net GWh/yr

0.5 49.90% 1,160 96.74% 45.82% 9.835 9.814

0.8 79.84% 1,950 82.63% 64.49% 14.123 14.060

1.1 109.79% 2,720 70.97% 77.10% 16.918 16.812

1.4 139.73% 3,370 63.88% 85.47% 18.868 18.849

1.7 169.67% 4,260 53.84% 90.79% 20.102 19.903

2 199.61% 5,110 46.78% 94.49% 20.951 20.704

An analysis of the engineering economics of these variations shows the lowest levelized
cost for capacities of approx 2 000 kW for under the assumption that all power potentially
generated is used. This is due to the deterioration of the plant factor with increased installed
capacity. For the purpose of this analysis it is assumed that the plant will be able to meet
both peak and energy demand (900 kW/5.6 GWh) at the end of the planning horizon. In
order to achieve this maximization of renewable energy in the Auki system, a plant size
above the projected peak load of 900 kW has been selected (1 160 kW). Due to the lack of
storage in the run-off river design and uncertainties in the hydrology, an optimized sizing of
the plant targeting lowest levelized cost or highest FIRR is not possible at present. A
smaller plant size could become an option, when a full hydrological analysis has been
prepared.

Figure 7.8: Levelized Cost versus Installed Capacity

0.14 Levelized USD/kWh


USD/kWh

Incremental USD/kWh
0.09

0.04
1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
kW Installed

As the design moves to higher installed capacities optimal turbine configurations, penstock
and canal characteristics would change as displayed in Table 7.7 below. Beyond an
installed capacity of 2 000 kW, levelized electricity production cost tend to increase due
more expensive designs.

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Table 7.7: Design Parameters of Variations

Turbine

Qdesign Main Canal Canal Height Penstock loss Penstock


m3/s Slope m/km m % Diameter m
Horizontal 1-jet Turgo 0.5 1.72 0.54 4.07% 0.49
Horizontal 2-Jet Pelton 0.8 1.51 0.66 3.92% 0.61
Horizontal 2-Jet Pelton 1.1 1.39 0.75 3.49% 0.70
Horizontal 1-jet Turgo 1.4 1.30 0.83 3.22% 0.78
Horizontal 2-jet Pelton 1.7 1.23 0.91 3.03% 0.85
Vertical. 3-jet Pelton 2 1.18 0.97 2.89% 0.92

7.9 Cost Estimates


The analysis of levelized cost displayed above suggests that the lowest cost can be
achieved building a relatively small scheme that shows a high plant factor. The projected
demand in the Auki area also supports the development of a small scheme in the MW
range. The following cost estimates are based on an installed capacity of 1,160 kW. The
scheme would initially be oversized for the projected demand but would allow SIEA to
supply Auki from hydropower for years to come. A full feasibility analysis would have to
confirm the optimal size of the plant. As displayed in Table 7.8 below, total cost amount to
US$ 4.2 million or US$ 3,600 per kW. This includes the connection of 1,000 new consumers
at US$ 1,100 per connection including prepaid meters. Without the new connections
specific investment cost for the plant alone would be US$ 2,650 per kW installed.

Table 7.8: Investment Cost Fiu River Hydropower Scheme

Item US$ SB$


Feasibility Study 100,000 800,000
Development 121,000 968,000
Engineering 180,000 1,440,000
Hydro turbine 629,000 5,032,000
Road construction 288,000 2,304,000
Transmission line 295,000 2,360,000
Substation 20,000 160,000
Penstock 317,000 2,536,000
Canal 285,000 2,280,000
Other Civ Eng 843,000 6,744,000
Rural Electrification 1,100,000 8,800,000
Total Investment 4,178,000 33,424,000
say $4.2 million

The Cost Estimates presented here have been prepared for the purpose of prioritizing sites
for further investigation and should not be used for any other purpose. They are subject to
the limitations described in Section 1.4. Further detailed investigations, including
geotechnical and hydrological investigations, would be required to firm up the cost
estimates for budget setting purposes.

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7.10 Financial Analysis


In comparison with the all-diesel scenario for Auki, the hydropower scenario results in
greatly reduced costs and much higher profitability under the current tariff as illustrated in
the following three Figures. The detailed financial projections for Auki are shown in the
Annex.

Figure 7.9: Auki Hydro Scenario

Revenues vs Operating Expenses,


Auki Hydro Scenario
$30.000
$25.000
SBD millions

$20.000
$15.000
Revenues
$10.000
Expenses
$5.000
$-

Figure 7.10: Auki All-Diesel Scenario

Revenues vs Operating Expenses,


Auki All-Diesel Scenario
$35.000
$30.000
$25.000
SBD millions

$20.000
$15.000 Revenues
$10.000 Expenses
$5.000
$-

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Figure 7.11: Profit/(Loss) after Tax and Finance Charges, Auki

Profit/(Loss) After Tax and Finance Charges, Auki


$25.00

$20.00

$15.00

With Hydro
$10.00
All Diesel

$5.00

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
$(5.00)

FIRR Analysis
The FIRR analysis which is based on avoided cost for diesel fuel also shows promising
results. In a comparison of ‘with project’ (hydropower) and ‘without project’ (all-diesel)
scenarios, the financial internal rate of return (FIRR) of hydropower investment is evaluated
at 34.7%, greatly exceeding the WACC of 5.0%, with a financial net present value (FNPV,
discounted at a rate equal to the WACC) of SBD 142.6 million. The high financial
performance is due almost entirely to the avoidance of diesel fuel costs, which are 100%
displaced by the hydro scheme. The full FIRR/FNPV analysis table is presented in the
Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and
decreases in benefits (reduction in the rate of real growth in diesel fuel prices, reduction in
average annual hydro output, and reduced load forecast). The hydro option was found to be
highly robust to changes in any of these parameters, and to an adverse change in all of
them simultaneously, as shown in Table 7.9.

Table 7.9: Sensitivity Analysis, Auki


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 142.56 34.7%
Increases in Costs
1. Capital Cost (SBD m) 20% 133.77 29.2% 0.31 33.43 141.84 324.3%
2. Hydro O&M Cost (SBD/kWh) 20% 141.85 34.6% 0.03 0.08 3.28 3999.6%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 132.86 33.7% 0.34 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 142.55 34.7% 0.00 96.7% 9.4% -90.3%
5. Load Forecast -20% 126.43 33.0% 0.57 4.0% 0.0% -100.0%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 108.26 26.6%

FNPV = financial net present value, FIRR = financial internal rate of return

The Sensitivity Indicator (SI) is an index of sensitivity, useful for the comparison of the
sensitivity of one parameter with another (the higher the index, the higher the sensitivity; an
SI of 2.0, say, in the capital cost parameter indicates that a 10% increase in capital cost
results in a 20% decrease in the FNPV). The Switching Value (SV) of each parameter is a
calculation of the level of the parameter that would result in an FNPV of zero. As Table 7.9

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shows the Fiu project is robust over a wide range of assumptions and should therefore be
subjected to a full feasibility study.

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8. Lata, Temotu

8.1 The Lata Power System


Lata is the capital of Solomon Islands’ easternmost Temotu province. It is located on the
main island of Santa Cruz. There are numerous outlying islands including Reef Island, Duff
Islands, Tikopia, Utupua and Vanikoro. 2009 census data are not yet available but
according to a recent survey conducted by a Malaria project, Santa Cruz Island has a total
population of 9,500. Lata and the adjacent settlements accessible through the existing road
network have a population of 3,864 living in approximately 670 households as displayed in
Table 8.1.

Table 8.1: Population, Lata

Zone Location Population Households

1 West Lata 622 100

2 Lata Central 1,120 200

3 North Lata 238 50

4 Gracious Bay 1,884 320

Total 3,864 670

Infrastructure services in Lata include a central water supply with a pumping station located
at the Southern end of Gracious Bay, landline and cell phone communication, a rural
hospital, a police post, schools and basic government services. Internet services are
provided at the Telecom head office. A rural internet café operating a V-sat station on solar
power in the Gracious Bay area was funded by the European Union and provides
comparatively good bandwidth. Lata is serviced by Solomon Airlines with an average of two
flights a week; a RAMSI helicopter also calls regularly to supply the RAMSI office.
SIEA power supply is restricted to zone 1 (Central Lata) where only 120 customers are
connected to the grid. I.e. only 21% of the potential customers within the service area of the
SIEA power plant are connected to grid power. At the time of the visit, power quality within
the service area was poor with very significant voltage drops experienced at the end of the
low voltage feeders.
Santa Cruz’s commercial sector consists of timber milling, fisheries and agriculture as
primary activities. The forestry sector consists of low level milling using mobile units after
large scale clear felling operations by foreign timber companies left very few timber grade
trees in accessible areas. In the agricultural sector, the focus of the Ministry of Agriculture is
currently on food security. Retailing and construction are also significant activities. Tourism
has not been developed, and there are only a few small local guest houses with limited
facilities.

Generation
Lata’s power house is located in a residential area and consists of an open corrugated iron
shed where three high-speed diesel generators (1500 rpm) sit on a concrete slab. At the
time of field investigations in March, only unit No 3 (Cummins) was operational. The other
two units (Perkins) were dismantled awaiting alternators. In April 2010 the No 3 unit also
broke down leaving Lata without SIEA power supply. Dismantling the engine showed

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massive carbon deposits at pistons and cylinder head consistent with the continuous
operation of the unit below design loads.
SIEA has recently installed two new 140 kW Cummins units in Lata. One of generator sets
developed oil pressure problems during the first start up and investigations of the oil sump
revealed ground metal residue, probably from a failed bearing. SIEA currently negotiates a
solution with the supplier, but the unit is not going to be available for some time.

Table 8.2: Generation Assets - Lata Power Pant

No Model Nameplate Derated Available Total Installed Remarks


Rating kW kW kW Hours

1 Cummins GMS 175 140 120 120 1200 2011 Awaiting Repair

2 Cummins GMS 175 140 120 0 0 2011 Break down during


commissioning

3 Cummins 103DGE 132 100 0 20,600 2005 Unable to maintain


A Voltage

There is no synchronizing board at the powerhouse but there is a double bus bar with
switches to allow supply to each of the 3 feeders with any of the existing units. With a
present maximum demand of around 70 kW (May 2011), only the new Cummins set is able
to supply peak demand. Due to low power quality, present demand is, however, artificially
suppressed. The Telecoms station for instance operates their own 30 kVA standby
generator during periods of low power quality (voltage, frequency) as telecommunication
equipment cannot tolerate the voltage fluctuations experienced in the SIEA system. The
standby set automatically isolates the telecoms compound when a set voltage value is
reached and switches the 30 kVA unit on.

Load Profile
Lata load data show a typical rural load profile on weekends with daily base loads of 30 kW
and a peak of 45 kW for two to three hours in the evening. During the week, load conforms to
a commercial profile: Base load demand of 35 kW is confined to the early morning hours
after which a daytime plateau is reached between 55 and 65 kW. While old the old Cummins
132 kW should be able to supply peak load even after significant de-rating, the station
manager reports that it cannot maintain a stable voltage. On the other hand, the new 140 kW
unit is typically operating at less than half its rated capacity. This is not conducive to a long
engine life and incurs a heavy penalty in specific fuel consumption (SFC). In 2010 the SFC
averaged 2.7 kWh per liter and is well below best practice values for small diesel generator
sets (3.2 – 3.4 kWh/l).

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Figure 8.1: Load Profiles, Lata

Distribution
The existing distribution network in Lata consists of three overhead line feeders powered by
the LV (415V AC) generating facility at the SIEA Power House, with feeders 1 and 2
providing power to the town centre’s various commercial, institutional and residential loads.
Feeder 3 mostly supplies commercial and institutional loads at the outskirts of Lata. Refer
Figure 8.2 below for the existing 415V AC LV distribution single line diagram:

Figure 8.2: Lata Existing 415 V AC LV Distribution Single Line Diagram

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Each of the three distribution feeders typically consists of distribution cross-arm poles
carrying four wires of aluminum conductor steel re-enforced (ACSR) bare conductors.
Depending on the type of connection (i.e. single phase or three phase), the service line is
provided as either a four core or two or three core aerial bundled conductors (ABC) of
different size (16 mm2, 25 mm2, or 50 mm2), supported by service line poles of different
capacities and connection arrangements. Without the exact records, it was observed that
the bare conductors used are either 41.6 mm2 ACSR (Apricot) or 49.5 mm2 ACSR (Apple)
bare conductors. SIEA’s current practice uses 77.3 mm2 ACSR (Banana) open conductors
for 415V AC backbone distribution network. For future expansions the use of the larger
95 mm2 ABC should now be considered.
The existing distribution network suffers from considerable line losses between the
generating source and the consumer terminals, due to the length of the distribution lines.
This in turn results in unacceptable voltage drops in the entire network. The switching of
any electrical equipment at different points within the network is also causing a significant
amount of voltage fluctuations that can have a detrimental effect on the operation of
electrical equipment connected to the network.
There are no records of how the distribution network was designed or if a load flow analysis
has been performed. Single phase voltage level measurements at different points within the
network found values of less than 200V AC, 20 % less than the standard in a healthy
distribution network. Technical distribution losses are estimated to be approximately 30%.
Billing data from 2010 show 129 active customers in the Lata system of which nine are
three phase (415V AC) type used by the institutional, industrial or commercial consumers
and the rest are single phase (240V AC) type used by several commercial and all
residential consumers. Meter readings are sent to SIEA headquarters where the billing
system generates invoices which are sent back to Lata. Consultations with SIEA customers
suggest that this system is believed to incur billing errors on a regular basis.

Financial Status SIEA Lata


Being the most remote and currently one of the smallest of SIEA’s outstations, Lata is
subject to high costs and has consistently made financial losses on operations, as shown in
Annex 8. Financial losses are also due in part to a chronically low rate of revenue
collections—it is understood that until recently collections were very poorly enforced and
this allowed most consumers in Lata to build up considerable arrears. (Lata billing data for
March 2010 indicates that total arrears held by 129 active consumers exceed SBD 260,000,
almost SBD 200,000 of which is held by commercial consumers.) It is a credit to current
SIEA management in Lata, however, that collection rates have of late been improving and
the overhang of arrears is gradually being drawn down. SIEA’s planned prepayment
metering program for all outstations is especially timely in Lata’s case and will reduce
losses much further in the short term.
As discussed elsewhere in this report, the current LV distribution system in Lata severely
restricts the spatial extent of electricity distribution, leaving the majority of the population in
the surrounding communities unserved (currently active domestic consumers, for example,
number only 74 in the March 2010 billing records, whereas it estimated that up to 550
households could be connected if the distribution system were upgraded to 11 kV as
recommended).

8.2 Lata Load Forecast


Lata is one of SIEA’s smallest systems, mainly because of the limited capacity of the
distribution system to serve that relatively highly populated area of Temotu Province. The
recommended upgrade of the Lata power system to an 11 kV distribution network and
increased generation capacity will permit a very substantial increase in connected load,

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potentially raising the number of domestic connections by more than a factor of 7 and
nearly tripling domestic consumption by 2012, while about doubling commercial load.
Table 8.3 below summarizes the major new loads expected in Lata once the power system
is upgraded. The following load forecast for the Lata system is based on the assumption
that power quality can be improved to a level that institutional customers such as telecoms
and fisheries department would not have to operate their own generators. It is also
assumed that a system expansion based on Option B described below is implemented.

Table 8.3: New Loads expected in Lata following System Upgarde

Consumption
Connec- Power Per First First
New Domestic and Commercial tions Demand Day Year Year
Loads (No) (kW) (kWh) (kWh) Online
Church of Melanesia 1 12.00 21 7,665 2012
Water Pump 1 18.50 100 36,500 2011
S I Broadcasting 1 12.00 96 35,040 2011
S I Telekom 1 30.00 82 30,000 2011
Fisheries 1 3.00 36 13,140 2011
CNO Mill (Maximum Consumption) 1 30.00 240 57,600 2014
New Domestic Connections 470 0.10 0.79 135,868 2011
Note: for new domestic connections, the power demand and daily kWh consumption are per household.

Existing loads are expected to grow at 4% per year. 19 The Lata system load forecast,
estimation of generation requirements, projected diesel fuel requirements and a schedule of
new generation capacity installations required to meet load demand over the 20-year
planning period are summarised in Table 8.4 overleaf.
It is noted that the proposed system upgrade in Lata will greatly improve the overall
efficiency of the system, which presently suffers from high line losses due to the heavily
overloaded LV distribution system and low thermal efficiency of the diesel generators.

Figure 8.3: Lata Power System Load Forecast

Lata Power System Load Forecast


1,200,000

1,000,000

800,000

Sales to Commercial
kWh

600,000
Sales to Domestic
Station and Line Losses
400,000

200,000

-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

19
Review of SIEA Base Tariff, Ridgway PIEPSAP 2007

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A proposed 107 kW hydropower scheme adjacent to Lata would provide 791 MWh of
electricity per year to Lata and environs, at an initial cost of US$ 2,169,000. The project is
assumed to be commissioned in 2014, with hydro output reaching its maximum in 2025.
When commissioned, the hydro scheme will not be quite sufficient to supply the entire load
in Lata, and increasing amounts of diesel generation to top up supply will be required
through the planning period. The proposed hydro scheme would displace initially 98% of the
need for diesel generation in Lata immediately after it is commissioned, declining to about
73% by 2030 as illustrated in Figure 8.4.

Figure 8.4: Generation Mix Lata with Hydro

Lata Generation Mix


1,200,000

1,000,000

800,000
kWh/year

600,000 Diesel
Hydro

400,000

200,000

-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

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Table 8.4: Lata System Load Forecast, Generation Requirements, Fuel Requirements, and Generator Scheduling
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 7.91%
Electricity Sales (kWh)
Existing Domestic (2010) 67,572 70,275 73,086 76,009 79,050 82,212 85,500 88,920 92,477 96,176 100,023 104,024 108,185 112,512 117,013 121,693 126,561 131,624 136,888 142,364 148,059
New Domestic - - 135,868 141,302 146,954 152,833 158,946 165,304 171,916 178,792 185,944 193,382 201,117 209,162 217,528 226,230 235,279 244,690 254,477 264,657 275,243
Existing Commercial (2010) 150,864 156,899 163,175 169,701 176,490 183,549 190,891 198,527 206,468 214,727 223,316 232,248 241,538 251,200 261,248 271,698 282,565 293,868 305,623 317,848 330,562
New Commercial - - 122,345 127,239 132,328 137,621 143,126 148,851 154,805 160,998 167,438 174,135 181,100 188,345 195,878 203,713 211,862 220,336 229,150 238,316 247,849
Total Sales 218,436 227,173 494,473 514,252 534,822 556,215 578,463 601,602 625,666 650,693 676,720 703,789 731,941 761,218 791,667 823,334 856,267 890,518 926,139 963,184 1,001,712

Sales to Domestic 67,572 70,275 208,953 217,312 226,004 235,044 244,446 254,224 264,393 274,969 285,967 297,406 309,302 321,674 334,541 347,923 361,840 376,313 391,366 407,021 423,301
Sales to Commercial 150,864 156,899 285,520 296,940 308,818 321,171 334,017 347,378 361,273 375,724 390,753 406,383 422,639 439,544 457,126 475,411 494,427 514,204 534,773 556,164 578,410
Station and Line Losses 100,449 104,467 42,998 44,718 46,506 48,367 50,301 52,313 54,406 56,582 58,845 61,199 63,647 66,193 68,841 71,594 74,458 77,436 80,534 83,755 87,105

Load Factor 0.70 0.69 0.67 0.66 0.64 0.63 0.61 0.60 0.58 0.57 0.55 0.54 0.52 0.51 0.49 0.48 0.46 0.45 0.43 0.42 0.40

AAGR Generation = 6.33%


Generation Requirement (kWh) 318,885 331,640 537,471 558,969 581,328 604,581 628,765 653,915 680,072 707,275 735,566 764,988 795,588 827,411 860,508 894,928 930,725 967,954 1,006,672 1,046,939 1,088,817
Station and Line Losses (kWh) 100,449 104,467 42,998 44,718 46,506 48,367 50,301 52,313 54,406 56,582 58,845 61,199 63,647 66,193 68,841 71,594 74,458 77,436 80,534 83,755 87,105
Peak Demand (kW) 52.00 55.27 91.57 97.42 103.69 110.43 117.67 125.46 133.85 142.90 152.67 163.23 174.65 187.04 200.47 215.08 230.97 248.31 267.25 287.98 310.74
Required Capacity with Reserve (kW) 67.60 71.85 119.05 126.64 134.80 143.55 152.97 163.10 174.01 185.77 198.47 212.20 227.05 243.15 260.61 279.60 300.26 322.80 347.42 374.38 403.96
Fuel Required, All-Diesel Scenario (litres) 127,554 132,656 177,365 184,460 191,838 199,512 207,492 215,792 224,424 233,401 242,737 252,446 262,544 273,046 283,968 295,326 307,139 319,425 332,202 345,490 359,310

9 Hydro Scenario Generation Calculation


Generation Mix with hydro (kWh/year)
Hydro - - - - 571,551 589,888 608,785 628,247 648,277 668,874 690,033 711,748 734,007 756,792 780,080 791,004 791,004 791,004 791,004 791,004 791,004
Diesel 318,885 331,640 537,471 558,969 9,777 14,694 19,980 25,668 31,794 38,401 45,532 53,240 61,581 70,619 80,428 103,924 139,721 176,950 215,668 255,935 297,813
Fuel Required, Hydro Scenario (litres) 127,554 132,656 177,365 184,460 3,226 4,849 6,593 8,470 10,492 12,672 15,026 17,569 20,322 23,304 26,541 34,295 46,108 58,393 71,170 84,459 98,278
Fuel Saved by Hydro (litres) - - - - 188,612 194,663 200,899 207,322 213,932 220,728 227,711 234,877 242,222 249,741 257,426 261,031 261,031 261,031 261,031 261,031 261,031

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (existing) 100 100 100 100 100 100 100 100 100 100 100
Unit 2 (new) 100 100 100 100 100 100 100 100 100 100
Unit 3 (new) 100 100 100 100 100 100 100 100 100 100
Unit 4 (new) 100 100 100 100 100 100 100 100 100 100
Unit 5 (new) 100 100 100 100 100 100 100 100 100 100
Unit 6 (new) 100 100 100 100 100 100 100 100 100 100
Unit 7 (new) 100 100 100 100 100 100 100
Total Installed Capacity (kW) 100 300 300 300 300 300 300 300 300 300 300 300 300 300 400 400 400 400 400 400 400
Firm Capacity Available 0 200 200 200 200 200 200 200 200 200 200 200 200 200 300 300 300 300 300 300 300
Memo: Units Added
Small Units (100 kW) - 2 - - - - - - - - - 3 - - 1 - - - - - -
Large Units (100 kW) - - - - - - - - - - - - - - - - - - - - -

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8.3 System Expansion Planning Lata


At present SIEA has no detailed long term expansion plans for their outer island stations. The
expansion planning performed below aims to develop such long-range plans based on the
analysis of unserved demand and associated load forecasts. While long range expansion
planning is a standard practice of power utilities, it should be noted that the forecasts underlying
such plans need to be regularly verified and revised if necessary. It is assumed that SIEA and
GSI will actively pursue existing opportunities to expand supply areas and develops biofuel
and/or mini hydro where the potential exists.
If diesel supply is continued, the Lata power system requires a complete refurbishing including
powerhouse, generators and most importantly distribution. The current low voltage distribution
system does not allow any further expansion; it already incurs technical losses above 30%. The
power quality is unacceptable due to voltage drops (down to 190 V at consumer level) and
significant voltage fluctuations. In the following it is assumed that funding can be mobilized to
install a 11 kV distribution system that covers the current supply area and includes supply to
Gracious Bay (water pumping station, schools, residential homes) and to West Lata.

Generation
In 2011 SIEA has installed two new 140 kW units at the Lata powerhouse. They replace the two
17 year old Perkins units and operate together with the existing 132 kW Cummins. At present
loads, each of the two new generators would be able to supply demand. If load cannot be
expanded through improvements in the distribution system the generators would not be
adequately loaded and hence would operate at relatively high specific fuel consumption. Under
a purely thermal scenario (either diesel or CNO) the next diesel set would have to be installed in
2016, typically another 140 kW unit in order to standardize. Figure 8.5 depicts the changes in
installed capacity, firm capacity (capacity minus largest generator set), and peak load implied by
the load forecast for Lata. It is assumed that high speed generators are retired after 10 years of
base load service and replaced in such a way that a) an acceptable loading (>60%) of the sets
is ensured and b) a high level of standardization is achieved (i.e. size variety of generator set is
minimized).

Figure 8.5: Lata Peak Load, Installed Capcity and Firm Capacity

Lata Capacity Requirements


700

600

Hydro
500

400
Peak Demand (kW)
kW

300 Firm Capacity Available


Total Installed Capacity (kW)

200

100

-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

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For the load forecast above to materialize, the distribution system had to be expanded in line
with the recommendations in the following section. The expansion of the supply area would also
bring a 11 kV close to the hydro site identified.

Grid Extension and Upgrade


The Lata distribution system needs to be upgraded to 11 kV in order to enable SIEA to reduce
distribution losses, provide an acceptable power quality to its customers, supply suppressed
demand and expand the system to unserved areas. There are two options for such an
expansion. Option A would involve upgrading of the existing distribution infrastructure to 11kV
without any further expansion. This option would reduce line losses considerably and would
allow supplying customers that currently generate their own power due to poor quality of SIEA
power. With higher loads in the system, better generator loading could be achieved extending
lifetime of engines and reducing specific fuel consumption to acceptable levels.
Option B would involve expanding SIEA’s service area considerably beyond its current
boundaries to the Gracious Bay and North Lata areas where up to 500 new connections could
be established. This upgrade would allow the use of CNO due to considerable increase in loads
and would also facilitate the development of the hydropower site identified close to the Southern
end point of the new line. Option B is preferable, as it would significantly enhance Lata’s
infrastructure, reduce overall cost for energy supply and provide opportunities for economic and
social development that are currently out of reach. The two options are not mutually exclusive
and a phased approach could be taken if funding constraints dictated such an approach.
However, the implementation of Option B is a precondition to the development of the hydro
scheme. Annex 4 presents the design of the two options.

Table 8.5: Distribution Cost Summary Option B

Table 8.5 summarizes costing for the Lata system expansion. Specific connection costs are
nearly US$ 2,000 per customer.

Financial Performance SIEA Lata


Being the most remote and currently one of the smallest of SIEA’s outstations, Lata is subject to
high costs and has consistently made financial losses on operations, and this will continue
under the current projections in the absence of a real tariff increase. In common with most other
outstations, financial losses are also due in part to a chronically poor rate of revenue collections.
(Lata billing data for March 2010 indicate that total arrears held by 129 active consumers
exceed SBD 260,000, almost SBD 200,000 of which is held by commercial consumers.) SIEA’s
planned prepayment metering program for all outstations which will improve revenue collections
and eliminate bad debts is especially timely in Lata’s case and will reduce losses much further
in the short term.

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8.4 Hydro Options for Lata


There are several rivers on the main island of Santa Cruz that have hydro potential. From a
pure supply perspective, among a high head site at Noka at the eastern end of the Island might
be the most attractive. Unfortunately, most of the rivers in the higher mountains of Eastern
Santa Cruz are just too far from the demand centre Lata to be viable options. In the absence of
any roads on the Eastern part of the island costs for transmission lines and infrastructure would
be extremely high. There is also no demand that could be served in the Eastern part of the
island.
The JICA Masterplan Study of 2001 identified a hydropower site on the Luembalele river which
drains into Gracious Bay close to the end point of the proposed 11 kV distribution line. Based on
previous work by GSI Geology Department and GTZ the JICA study provides a preliminary
design and cost estimates for the development of the site. The key data for the project are:

Catchment Area: 2.4 km2


Rainfall: 4270 mm/year
Head: 35 meters
Type: Run off river, reverse pump or cross flow turbine
Penstock: 203 m, 400mm diameter
Access road: 2.8 km
Discharge: 0.24 m3/sec (at 90 % probability)
Capacity: 50 kW
Energy: 432,000 kWh/year
Cost US$: 4,117,000 (Civil works 2,250,000; Transmission line 1,200,000)

Due to the very high specific cost estimate (82,000 US$/kW) the project was not considered
economically viable. GHD has surveyed the Luembalele river and has reviewed design and
costing for this scheme. The results are presented below.

8.5 General Description Luembalele


The general surface geology of the Luembalele River is characterized mainly by limestone
formations on the lower part of the river. In the upper part of the catchment solid boulders and
pebbles become the dominant geological characteristic of the river. In general landscape and
topography in the vicinity of Lata is not very suitable for hydropower development. There are no
distinct valley and ridges, rather flat terrain with the watercourses typically cut deep into the
limestone forming canyons. These conditions pose challenges in the design of inexpensive
intake structures. There are also no natural canal alignments along the rivers. Sink holes which
create sub-terrain flow and transfer water from one catchment to another via underground
tunnels have also been observed.

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Picture 8.1: Luembelele River, Santa Cruz

Figure 8.6: Location of Luembelele Hydro Site

Demand
Centre

Hydro Site

8.6 Hydrology
Rainfall is recorded at a met station in Lata at an elevation of 15 meter. At this location the
annual rainfall for the preriod 1970-2010 averages at about 4,350 mm. Adjustments have to be
made in order to allow for location and orientation of the catchment area for the project. The
catchment size is 6.28 km2 with an average elevation of 266 meter. The catchment is oriented
towards south (SW-S-SE). Using the change in rainfall pattern observed on the south coast of
Guadalcanal an increase of 6.14 mm/year/m elevation increase is assumed. This results in an
average annual rainfall of 5,891 mm/year. If evaporation losses are assumed to be in line with
those observed for Guadalcanal (2,184 mm/year) the net average annual runoff would be
3,707 mm/year or 429 litres. The average monthly rainfall figures are pretty stable over the year
with 30% higher the first 3 months than the rest of the year. In the absence of detailed data
showing long term variations it is not possible to establish flow duration curves for the
Luembalele. Instead the shape of the duration curve from Lungga Gorge is used, which is
considered a conservative assumption for this site. Figure 8.7 below displays the assumed flow
duration curve for the Luembelele project.

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Figure 8.7: Assumed Flow Duration Curve for Luembelele

1.400
1.200
1.000 Flow Duration Curve Assumed for Luembalele River Intake
0.800
M3/s

0.600
0.400
0.200
0.000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of time flow exceding

8.7 System Layout


At elevation160 meter a site has been identified were the form of the riverbed allows the
construction of an intake. The canal alignment from the intake, unfortunately, moves away from
the river quite rapidly creating a canal of 1,160 meters length. This in turn requires a
comparatively long penstock of 740 meter that would bring the water back to river and to the
powerhouse. Although there is a network of old logging roads leading to the site, these roads
need considerable improvement and some new construction in order to access intake, forebay
and power house site.

Figure 8.8: System Layout

The plant here is a typical large micro hydro installation and should be installed like that. It is to
be installed without traditional hydro/mechanical governor, but instead with a simple electronic
governor, which uses dump loads to adjust the voltage. This may typically be in the dispatch
center, where the back-up diesel installation may be available too. The spears in the nozzles on
the turbine may be controlled by the water level at the forebay, so that it does not suck in air

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with falling water flow. It is assumed provided with a synchronous generator. Table 8.6
summarizes the details.
Two types of turbines are available for these conditions, one is horizontal Turgo tubines with 1
jet up to 300 l/s and 2 jet above and the other is a cross flow turbine. The last has typically
about 10% less efficiency and with the large investment in penstock on this project, it is not
economic to use the cheaper cross flow turbine here. The Turgo is the most robust turbine type
on the market.

Table 8.6: General Information - Luembelele Hydro Plant

Intake coordinates 58 L 595,497 m E 8,810,684 m S

Powerhouse coordinates 58 L 594,377 m E 8,810,000 m S


2
Catchment area km 6.28

Penstock Length 740 m

Installed Capacity kW 107

Max Annual Energy kWh 791,000

Access Road construction 8000 m

Gross head 54 m

Canal Length 1160 m

11 kV Power Extraction 11.2 km

The hydro site in Lata could be developed up to an installed capacity of approx 300 kW if all
water is used. The GWh yield per installed kW would however drop significantly and no
environmental flow would remain in the river. In the following the 107 kW variant is analysed for
its financial performance.

Table 8.7: Variations

Plant Water GWh/yr


Qdesign/ Qdesign Pdesign avail- Utili- Power- Net
Turbine Qavg m3/s kW ability zation house GWh/yr

Hor. 1-jet Turgo 50% 0.215 68 97% 46% 0.573 0.573

Hor. 2-jet Turgo 75% 0.322 107 85% 62% 0.792 0.791

Hor. 2-jet Turgo 100% 0.429 147 75% 74% 0.963 0.962

Hor. 2-jet Turgo 125% 0.536 187 67% 82% 1.095 1.093

Hor. 2-jet Turgo 150% 0.644 227 60% 88% 1.190 1.188

Hor. 2-jet Turgo 200% 0.858 307 46% 95% 1.251 1.247

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Canal
Qdesign Slope Canal Penstock Penstock
m3/s m/km Hm loss % Diam m

0.246 2.16 0.38 15.50% 0.37

0.340 1.93 0.45 12.28% 0.45

0.413 1.79 0.50 10.48% 0.52

0.469 1.68 0.55 9.29% 0.58

0.510 1.60 0.60 8.45% 0.63

0.535 1.48 0.68 7.30% 0.73

8.8 Cost Estimates


The cost estimates provided below are for the 107 kW hydro component alone, i.e. they include
only an 11 kV extraction line up to the point of the drinking water supply station located at the
Southern end of the Gracious Bay area. In order to transport electricity generated from the
hydro plant to Lata’s demand center the 11 kV line described above needs to be constructed as
well at a cost of approximately 1.1 million US$.

Table 8.8: Cost Estimates 107 kW Hydro Scheme


Item US$ SB$
Feasibility Study 33,000 264,000
Development 39,000 312,000
Engineering 73,000 584,000
Hydro turbine 179,000 1,432,000
Road construction 55,000 440,000
Transmission line 104,000 832,000
Substation 10,000 80,000
Penstock 288,000 2,304,000
Canal 68,000 544,000
Other Civ Eng 261,000 2,088,000
Rural Electrification 1,059,000 8,472,000
Total Investment 2,169,000 17,352,000
say $ 2.2 Million

The Cost Estimates presented here have been prepared for the purpose of prioritizing sites for
further investigation and should not be used for any other purpose. They are subject to the
limitations described in Section 1.4. Further detailed investigations, including geotechnical and
hydrological investigations, would be required to firm up the cost estimates for budget setting
purposes.

8.9 Financial Analysis


In comparison with the all-diesel scenario for Lata, the hydropower scenario results in
significantly reduced costs and much higher profitability under the current tariff (transforming a
loss-making centre into a profitable one) as illustrated in the following three Figures. The
detailed financial projections for Lata are shown in the Annex.

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Figure 8.9: Revenue vs Expenses Lata Hydro

Revenues vs Operating Expenses, Lata


Hydro Scenario
$8.000
$7.000
$6.000
SBD millions

$5.000
$4.000
Revenues
$3.000
Expenses
$2.000
$1.000
$-

Figure 8.10: Revenue vs Expenses Lata All Diesel

Revenues vs Operating Expenses,


Lata All-Diesel Scenario
$8.000
$7.000
$6.000
SBD millions

$5.000
$4.000
Revenues
$3.000
Expenses
$2.000
$1.000
$-

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Figure 8.11: Lata Profit and Loss Diesel and Hydro

Profit/(Loss) After Tax and Finance Charges, Lata


$2.50

$2.00

$1.50

$1.00
SBD Million

With Hydro
$0.50
All Diesel

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
$(0.50)

$(1.00)

$(1.50)

FIRR Analysis
In a comparison of ‘with project’ (hydropower) and ‘without project’ (all-diesel) scenarios, the
financial internal rate of return (FIRR) of hydropower investment is evaluated at 13.2%,
exceeding the WACC of 5.0%, with a financial net present value (FNPV, discounted at a rate
equal to the WACC) of SBD 14.7 million. The full FIRR/FNPV analysis table is presented in the
Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and
decreases in benefits (reduction in the rate of real growth in diesel fuel prices, reduction in
average annual hydro output, and reduced load forecast). The hydro option was found to be
robust to changes in any of these parameters, and to an adverse change in all of them
simultaneously, as shown in Table 8.9. The financial viability of the proposed hydro scheme is
most sensitive to a reduction in the load forecast, followed by an increase in capital costs,
followed by a reduction in hydro output.

Table 8.9: Sensitivity Analysis


Test Basecase Switching
Variation Sensitivity Para- Switching Value
Test Case (+/- %) FNPV FIRR Indicator meter Value (+/-%)
Base (reference case) 14.69 13.2%
Increases in Costs
1. Capital Cost (SBD m) 20% 10.13 10.0% 1.55 17.35 28.53 64.4%
2. Hydro O&M Cost (SBD/kWh) 20% 14.57 13.1% 0.04 0.08 1.96 2346.9%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 12.72 12.3% 0.67 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 10.20 11.3% 1.53 84.4% 45.7% -45.9%
5. Load Forecast -20% 9.60 10.6% 1.73 4.0% 1.8% -55.7%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 1.83 6.0%
FNPV = financial net present value, FIRR = financial internal rate of return

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9. Ringgi, Noro and Munda, Western Province

In the western province a hydro site has been identified that has the capacity to supply both the
forest company located at Ringi and the SIEA system of Noro and Munda through an undersea
cable.

9.1 The Noro/Munda Power System


Noro is the industrial centre of the Western province. It is located on the North coast of the
island of New Georgia, approximately 50 km East of the provincial capital Gizo. The town
features a deep-water harbour with storage facilities on the wharf. Several tuna fishing vessels
operate out of Noro and the there is a tuna processing/canning factory. (Soltai) Noro harbour is
used for transhipment of timber from logging operations in the area. Munda is located at New
Gerogia’s South coast and is connected by a paved road of 16 km to Noro. Munda has a small
tourism industry and its airstrip is the gateway to New Georgia. Population estimates for Noro
and Munda are 4,500 and 3,000 respectively. Infrastructure services in Noro and Munda include
a central water supply, landline and cell phone communication, a rural hospital, a police post,
post office, schools and basic government services. Internet services are provided at the
Telecom head office. Munda air services are combined with Gizo with several flights a day. Both
towns have banking facilities.

Generation
Munda and Noro’s electricity supply is provided from the SIEA diesel power generator located
on the waterfront at Noro, approximately 1km west of the main port area and adjacent to the
Soltai complex, historically the major load centre of the power system. The SIEA powerhouse
was build in 1987 and is equipped with 3 medium speed WA Allen diesel generators, also
installed in 1987. Power is generated at 11 kV. There is also a 250 kW Detroit stand-by
generator in a small shed close to Munda airstrip, which is used to in case of a failure of the
11 kV transmission line between Noro and Munda.
Current records are inconclusive with respect to engine hours on the three W.A. Allen sets but it
is likely that the sets all have total hours in excess of 60,000 as shown in Table 9.2. The only
set in operation is No 2. Set No 1 awaits an overhaul kit for the cylinder heads. Set No 3 has not
been operated since 2001 and has been stripped for spare parts. Its wiring is has been heavily
corroded and the set is clearly beyond repair.
Due to considerable wear the sets only supply a fraction of their nameplate rating. No. 2 can
supply a maximum of 400 kW (nameplate 1200 kW). Replacement of the sets would have been
due in 2002 and it is unlikely that overhauling these units will result in a reliable and efficient
supply.

Figure 9.1: Load Profiles Noro on Two Consecutive Weekdays

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Due to these severe supply constraints SIEA has to cut off the main feeder No 1 (2,000 kVA) to
the cannery factory from 10 p.m. to 7 a.m. This is necessary to reduce the load to a level the
single generator in operation can provide. The dominance of the fish cannery as a customer
and the need to respond to demand increases of the Soltai factory with load shedding creates a
somewhat erratic load shape that shows no pattern at all.
The August 2010 fuel efficiency calculated on the basis of Noro station records was 3.42 kWh/l
and surprisingly high. The poor state of repair of the Noro generators, the low loads and the
significant de-rating of the operational No 2 set would suggest a lower efficiency. Again,
recording errors and data inconsistency were evident at the station and the results are not
considered suitable for planning or decision making purposes.
The Noro generators are directly connected to a single 11kV switchboard which supplies the
Noro/Munda distribution system via three 11kV overhead feeders (Feeders No. 1, 2 and 3) and
one 11kV underground feeder (Feeder No.4).

Distribution
The current SIEA electricity supply to the Noro town covers the area; running along the harbour
foreshore and up to the fuel terminal, 1.5 km to the west of the main port area, the Baru
residential area, approximately 1.5 km to the east of the port area. Power supply also extends
approximately 1 km inland to residential and commercial consumers along the main road.
Power is distributed to consumers in Noro via a combination of overhead 11kV feeders, and
several 11kV/415 substations, and overhead and underground 4-wire 415V/240V (LV) circuits.
In Noro almost all existing residential and commercial loads are connected to the SIEA grid. In
Munda the supply area includes the foreshore up the hospital, approximately 2.5 km to the west
of the town centre a residential area, approximately 700 m to the east of the town centre, and
extends approximately a few hundred metres north of the airstrip. The supply also extends
slightly to Munda via a 17 km 11kV underground cable. Half way between Noro and Munda a
SIWA pumping station is supplied by SIEA.
The billing records for August 2010 indicate that there are 396 and 358 connections in Noro and
Munda respectively (total 754), of which 298 and 253 respectively are domestic (total 551) and
98 and 105 respectively are commercial, industrial, and government (total 203). Presently about
three-quarters of total electricity consumption in the two centres combined is
industrial/commercial, and only about 25 percent is domestic. Peak demand is presently about
400 kW, but would be much greater if all loads could connect to the public supply (not possible
now because generating capacity in the SIEA is severely constrained).

Ringgi Power System


Ringgi on Kolombangara Island in Western Province is the site of a forestry plantation operated
by the Kolombangara Forest Products Ltd (KFPL), a joint venture of the Solomon Islands
Government and the Tropical Timber Fund. KFPL presently provide for their own power needs
by a diesel power plant, which supplies electricity to both KFPL commercial operations and to
the community of KFPL workers and their families who live in the area. Power development on
the island has been undertaken by KFPL which operates a small diesel powered grid. The
current electrical power demand for Ringgi is supplied from a Caterpillar 320 model of 240 kW
rating. In addition a 200 kW Cummins machine is available but mostly used as a backup unit.

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9.2 Load Forecast

Noro and Munda


Noro-Munda is the second largest SIEA power centre after Honiara. Noro is an international
port with deep water, and is strategically placed as a centre for industrial development. Noro
receives direct fuel shipments from overseas and thus Noro (and Munda, connected via power
and road to Noro) faces no domestic fuel transport costs. With industrial growth, it is expected
that the population and number of households connected to the power system will increase
greatly. The SIEA power supply in Noro is, however, in a derelict condition.
A large fish processing factory (Soltai) is rapidly increasing production following a lengthy
downturn earlier in this decade, and reports that they will have a maximum demand of
approximately 1 MW once their expansion plans are fulfilled. There is presently no way that
such a load could be accommodated by the public supply.
The provincial government with support from the Ministry of Commerce is pursuing a new
industrial development for which 44 lots have been allocated North of the fuel depot. In order to
supply all designated lots of this new development an extension of the SIEA system by
approximately 700 meters would be required. Only one lot of this new industrial estate is
currently under development (a sheet metal factory) and has been connected to the SIEA
system. According to a preliminary development plan, the new industrial area is supposed to
attract a variety of industries including metal and woodworking, mechanical repair shops,
construction companies, food processing and similar businesses.
It is difficult to predict time lines for development at this stage but the fact that one factory is
already being developed supports a scenario whereby the area will eventually see some
investments. At this stage generic assumptions for loads and energy of new developments are
being made: Each site would on average start with an annual peak power demand of 15 kW
and a power factor of 20% resulting in an annual energy demand of 26,280 kWh per year in the
first year of operation. It is further assumed that each year from 2011 onwards 5 sites come on
stream until 2020.
At present a Chinese investor is developing a Hotel along the main road in Noro. This
development is assumed to have the same characteristic as other industrial developments. In
addition there are 12 police houses under development in Noro. The load growth of the new
industrial estates is assumed to be 4% p.a. once established.
By far the largest demand increase will emerge from the operation and expansion of the Soltai
fish processing plant. The factory that employs nearly 800 workers currently processes 60
tonnes of tuna per day and requires 600 kW of load that cannot be supplied by SIEA. According
to Soltai’s business plan, the processing target is 150 tonnes per day equivalent of a power
need of 1,000 kW at a power factor of 60%. This development alone could increase demand in
the Noro system by 5.2 GWh per year.
SICE has expressed interest in establishing a CNO mill in Noro. The size of the mill would be
determined by the sustainable copra production potential in the Noro catchment area which is
estimated at 600 tonnes of dry copra per month. The operation of a new CNO mill with a
capacity of 300 kL per months has been assumed. Such a mill would require 396 MWh per year
and would have a power factor of 36%. Growth in power demand after establishing the mill is
assumed to be 2%.

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Table 9.1: Industrial Demand Growth Noro by end of 2011


Consumption
Power Per First
New Domestic and Commercial Connec-tions Demand Day Year First
Loads (No) (kW) (kWh) (kWh) Year Online
New Industrial Zone Enterprises 10 30.00 240 576,000 2012
New Soltai Load 1 850.00 13,600 4,964,000 2012
New Hotels 1 10.00 240 87,600 2012
- - - 2011
Trade Stores 5 3.00 72 86,400 2011
CNO Mill (Maximum Consumption) 1 60.00 480 115,200 2012
New Domestic Connections 200 0.65 5.15 375,804 2012

As shown in Table 9.3, the largest potential load stems from Soltai’s planned expansion of
operations (from processing presently 60 tonnes of fish per day to 150 tonnes per day).
Existing loads are expected to grow at 4% per year. The new Soltai load is assumed to remain
at the indicated level of about 5 GWh per year after the expansion plans are realised.

Ringgi
Currently, the KFPL’s workshop and administration centre is the main load centre for the power
system during workdays from 7 am – 4pm. Loads during this period are around 80 – 90 kW.
After working hours, the load is reduced to the consumption of approximately 50 households
that are connected to the low voltage grid. Annually, the generation of KFPL is in the order of
350,000 kWh. However, KFPL management has indicated that the company plans to establish
a sawmill at Ringgi in order to add value to their output, which currently consists of unprocessed
logs. This development would substantially increase total load to an estimated 700 kW in 2013.
Apart from the actual sawmill, the size of the entire operation would have to be increased, more
workers would be have to be hired and accommodated and Ringgi would probably see some
commercial developments outside KFPL. At an assumed load factor of 0.65 annual generation
requirements would than be around 4.3 GWh in 2013.

As the hydro site idendified in Ringgi has the potential to supply both the assumed KFPL load
and the load of the SIEA system of Noro and Munda, two variants have been distinguished for
the further analysis. Variant A assumes that Ringgi remains an isolated system and only the
load on the island has to be met. Variant B assumes an interconnection between the SIEA
system Noro/Munda and Ringgi. Variant B therefore combines the load forecasts for the two
demand centres. Figure 9.2 below depicts the forecast for the two variants. The tables overleaf
show the details of the forecasts.

Figure 9.2: Load Forecasts Variant A and B


Ringgi Generation Mix
9,000,000
Ringgi Power System Load Forecast (Variant B)
30,000,000
8,000,000

25,000,000
7,000,000

6,000,000
20,000,000

5,000,000
kWh/year

Sales to Commercial
kWh

Diesel 15,000,000
4,000,000 Hydro Sales to Domestic
Station and Line Losses
3,000,000 10,000,000

2,000,000
5,000,000

1,000,000

-
-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

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Table 9.2: Ringgi System Load Forecast (Varian A), Generation Requirements, Fuel Requirements and Backup Generator Scheduling
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 4.02%
Electricity Sales (kWh)
Existing Domestic (2011) 1,415,578 1,474,560 1,536,000 1,600,000 1,664,000 1,730,560 1,799,782 1,871,774 1,946,645 2,024,510 2,105,491 2,189,710 2,277,299 2,368,391 2,463,126 2,561,652 2,664,118 2,770,682 2,881,510 2,996,770 3,116,641
New Domestic - - - - - - - - - - - - - - - - - - - - -
KFPL Consumption (2011) 2,123,366 2,211,840 2,304,000 2,400,000 2,496,000 2,595,840 2,699,674 2,807,661 2,919,967 3,036,766 3,158,236 3,284,566 3,415,948 3,552,586 3,694,690 3,842,477 3,996,176 4,156,023 4,322,264 4,495,155 4,674,961
New Commercial - - - - - - - - - - - - - - - - - - - - -
Total Sales 3,538,944 3,686,400 3,840,000 4,000,000 4,160,000 4,326,400 4,499,456 4,679,434 4,866,612 5,061,276 5,263,727 5,474,276 5,693,247 5,920,977 6,157,816 6,404,129 6,660,294 6,926,706 7,203,774 7,491,925 7,791,602

Sales to Domestic 1,415,578 1,474,560 1,536,000 1,600,000 1,664,000 1,730,560 1,799,782 1,871,774 1,946,645 2,024,510 2,105,491 2,189,710 2,277,299 2,368,391 2,463,126 2,561,652 2,664,118 2,770,682 2,881,510 2,996,770 3,116,641
Sales to KFPL 2,123,366 2,211,840 2,304,000 2,400,000 2,496,000 2,595,840 2,699,674 2,807,661 2,919,967 3,036,766 3,158,236 3,284,566 3,415,948 3,552,586 3,694,690 3,842,477 3,996,176 4,156,023 4,322,264 4,495,155 4,674,961
Station and Line Losses 307,734 320,557 333,913 347,826 361,739 376,209 391,257 406,907 423,184 440,111 457,715 476,024 495,065 514,868 535,462 556,881 579,156 602,322 626,415 651,472 677,531

Load Factor 0.61 0.63 0.64 0.65 0.67 0.68 0.69 0.71 0.72 0.73 0.75 0.76 0.78 0.79 0.81 0.82 0.84 0.86 0.87 0.89 0.91

AAGR Generation = 4.02%


Generation Requirement (kWh) 3,846,678 4,006,957 4,173,913 4,347,826 4,521,739 4,702,609 4,890,713 5,086,342 5,289,795 5,501,387 5,721,443 5,950,300 6,188,312 6,435,845 6,693,279 6,961,010 7,239,450 7,529,028 7,830,189 8,143,397 8,469,133
Station and Line Losses (kWh) 307,734 320,557 333,913 347,826 361,739 376,209 391,257 406,907 423,184 440,111 457,715 476,024 495,065 514,868 535,462 556,881 579,156 602,322 626,415 651,472 677,531
Peak Demand (kW) 658.83 672.28 686.00 700.00 714.00 728.28 742.85 757.70 772.86 788.31 804.08 820.16 836.56 853.30 870.36 887.77 905.52 923.64 942.11 960.95 980.17
Required Capacity with Reserve (kW) 930.96 949.96 969.35 989.13 1,008.91 1,029.09 1,049.67 1,070.67 1,092.08 1,113.92 1,136.20 1,158.92 1,182.10 1,205.74 1,229.86 1,254.46 1,279.55 1,305.14 1,331.24 1,357.86 1,385.02
Fuel Required, All-Diesel Scenario (litres) 1,099,051 1,144,845 1,192,547 1,242,236 1,291,925 1,343,602 1,397,347 1,453,240 1,511,370 1,571,825 1,634,698 1,700,086 1,768,089 1,838,813 1,912,365 1,988,860 2,068,414 2,151,151 2,237,197 2,326,685 2,419,752

9 Hydro Scenario Generation Calculation


Generation Mix with hydro (kWh/year)
Hydro - - - 4,347,826 4,521,739 4,702,609 4,890,713 5,086,342 5,289,795 5,501,387 5,721,443 5,950,300 6,188,312 6,435,845 6,693,279 6,961,010 7,239,450 7,529,028 7,830,189 8,143,397 8,469,133
Diesel 3,846,678 4,006,957 4,173,913 - - - - - - - - - - - - - - - - - -
Fuel Required, Hydro Scenario (litres) 1,099,051 1,144,845 1,192,547 - - - - - - - - - - - - - - - - - -
Fuel Saved by Hydro (litres) - - - 1,242,236 1,291,925 1,343,602 1,397,347 1,453,240 1,511,370 1,571,825 1,634,698 1,700,086 1,768,089 1,838,813 1,912,365 1,988,860 2,068,414 2,151,151 2,237,197 2,326,685 2,419,752

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (existing) 500 500 500 500 500 500 500 500 500 500 500
Unit 2 (new) 500 500 500 500 500 500 500 500 500 500 500
Unit 3 (new) 500 500 500 500 500 500 500 500 500 500 500
Unit 4 (new) 500 500 500 500 500 500 500 500 500 500
Unit 5 (new) 500 500 500 500 500 500 500 500 500
Unit 6 (new) 500 500 500 500 500 500 500 500 500
Unit 7 (new)
Total Installed Capacity (kW) 500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
Firm Capacity Available 0 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Memo: Units Added
Small Units (500 kW) - 2 - - - - - - - - - 1 2 - - - - - - - -
Large Units (500 kW) - - - - - - - - - - - - - - - - - - - - -

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Table 9.3: Ringgi Noro Munda System Load Forecast (Variant B), Generation Requirements, Fueld Requirements and Backup Generator Scheduling
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 4.02%
Electricity Sales (kWh)
Existing Domestic (2011) 4,600,627 4,792,320 4,992,000 5,200,000 5,408,000 5,624,320 5,849,293 6,083,265 6,326,595 6,579,659 6,842,845 7,116,559 7,401,221 7,697,270 8,005,161 8,325,368 8,658,382 9,004,718 9,364,906 9,739,502 10,129,083
New Domestic - - - - - - - - - - - - - - - - - - - - -
Existing Commercial (2011) 6,900,941 7,188,480 7,488,000 7,800,000 8,112,000 8,436,480 8,773,939 9,124,897 9,489,893 9,869,488 10,264,268 10,674,839 11,101,832 11,545,905 12,007,742 12,488,051 12,987,573 13,507,076 14,047,359 14,609,254 15,193,624
New Commercial - - - - - - - - - - - - - - - - - - - - -
Total Sales 11,501,568 11,980,800 12,480,000 13,000,000 13,520,000 14,060,800 14,623,232 15,208,161 15,816,488 16,449,147 17,107,113 17,791,398 18,503,054 19,243,176 20,012,903 20,813,419 21,645,956 22,511,794 23,412,266 24,348,756 25,322,706

Sales to Domestic 4,600,627 4,792,320 4,992,000 5,200,000 5,408,000 5,624,320 5,849,293 6,083,265 6,326,595 6,579,659 6,842,845 7,116,559 7,401,221 7,697,270 8,005,161 8,325,368 8,658,382 9,004,718 9,364,906 9,739,502 10,129,083
Sales to Commercial 6,900,941 7,188,480 7,488,000 7,800,000 8,112,000 8,436,480 8,773,939 9,124,897 9,489,893 9,869,488 10,264,268 10,674,839 11,101,832 11,545,905 12,007,742 12,488,051 12,987,573 13,507,076 14,047,359 14,609,254 15,193,624
Station and Line Losses 1,000,136 1,041,809 1,085,217 1,130,435 1,175,652 1,222,678 1,271,585 1,322,449 1,375,347 1,430,361 1,487,575 1,547,078 1,608,961 1,673,320 1,740,252 1,809,863 1,882,257 1,957,547 2,035,849 2,117,283 2,201,974

Load Factor 0.48 0.49 0.50 0.51 0.52 0.53 0.54 0.55 0.56 0.57 0.59 0.60 0.61 0.62 0.63 0.65 0.66 0.67 0.68 0.70 0.71

AAGR Generation = 4.02%


Generation Requirement (kWh) 12,501,704 13,022,609 13,565,217 14,130,435 14,695,652 15,283,478 15,894,817 16,530,610 17,191,834 17,879,508 18,594,688 19,338,476 20,112,015 20,916,495 21,753,155 22,623,281 23,528,213 24,469,341 25,448,115 26,466,039 27,524,681
Station and Line Losses (kWh) 1,000,136 1,041,809 1,085,217 1,130,435 1,175,652 1,222,678 1,271,585 1,322,449 1,375,347 1,430,361 1,487,575 1,547,078 1,608,961 1,673,320 1,740,252 1,809,863 1,882,257 1,957,547 2,035,849 2,117,283 2,201,974
Peak Demand (kW) 2,729.46 2,785.16 2,842.00 2,900.00 2,958.00 3,017.16 3,077.50 3,139.05 3,201.83 3,265.87 3,331.19 3,397.81 3,465.77 3,535.08 3,605.79 3,677.90 3,751.46 3,826.49 3,903.02 3,981.08 4,060.70
Required Capacity with Reserve (kW) 3,856.84 3,935.55 4,015.87 4,097.83 4,179.78 4,263.38 4,348.65 4,435.62 4,524.33 4,614.82 4,707.11 4,801.26 4,897.28 4,995.23 5,095.13 5,197.03 5,300.97 5,406.99 5,515.13 5,625.44 5,737.95
Fuel Required, All-Diesel Scenario (litres) 3,571,916 3,720,745 3,875,776 4,037,267 4,198,758 4,366,708 4,541,376 4,723,031 4,911,953 5,108,431 5,312,768 5,525,279 5,746,290 5,976,142 6,215,187 6,463,795 6,722,346 6,991,240 7,270,890 7,561,726 7,864,195

9 Hydro Scenario Generation Calculation


Generation Mix with hydro (kWh/year)
Hydro - - - - 14,695,652 15,274,419 15,841,708 16,432,569 17,047,963 17,688,890 18,356,388 19,051,540 19,775,471 20,529,352 21,314,399 22,131,881 22,983,115 23,869,472 24,792,379 25,753,320 26,321,610
Diesel 12,501,704 13,022,609 13,565,217 14,130,435 - 9,059 53,110 98,041 143,872 190,618 238,300 286,935 336,543 387,144 438,756 491,400 545,098 599,869 655,736 712,720 1,203,071
Fuel Required, Hydro Scenario (litres) 3,571,916 3,720,745 3,875,776 4,037,267 - 2,588 15,174 28,012 41,106 54,462 68,086 81,982 96,155 110,612 125,359 140,400 155,742 171,391 187,353 203,634 343,735
Fuel Saved by Hydro (litres) - - - - 4,198,758 4,364,120 4,526,202 4,695,020 4,870,847 5,053,968 5,244,682 5,443,297 5,650,135 5,865,529 6,089,828 6,323,395 6,566,604 6,819,849 7,083,537 7,358,091 7,520,460

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (existing) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Unit 2 (new) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Unit 3 (new) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Unit 4 (new) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Unit 5 (new) 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Unit 6 (new) 2000 2000 2000 2000 2000 2000 2000 2000 2000
Unit 7 (new) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Total Installed Capacity (kW) 1000 4000 4000 4000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000
Firm Capacity Available 0 3000 3000 3000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000
Memo: Units Added
Small Units (1000 kW) - 3 - - - - - - - - - 1 - - - - - - - - -
Large Units (2000 kW) - - - - 1 - - - - - - - 1 - - - - - - - -

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9.3 Noro/Munda System Expansion Planning

Generation
In September 2010, available capacity at the SIEA powerhouse was 400 kW. Only one of three
1,200 kW generators was operational derated to a third of its nominal capacity. As a
consequence, only a fraction of the demand in the system can currently be met by SIEA. As
load approaches 400 kW, the operator disconnects the Soltai cannery feeder and the fish
factory starts up one of its three 1,000 kW Mitsubishi sets. All SIEA generators are long overdue
for replacement and it is expected that power supply to the Noro/Munda area will further
deteriorate if the powerhouse is not refurbished with new generation equipment soon. Lack of
reliable power has also become a major obstacle for the implementation of the industrial
development plans pursued by the provincial government. 20
From the consultant’s perspective, three thermal options exist to secure future power supply in
the Noro/Munda system:
1. Upgrade of SIEA generation to meet full future demand
2. Upgrade of SIEA generation to meet future demand exclusive of Soltai cannery
3. Abandon SIEA generation and purchase and distribute power from external generator

The objective of option one would be to establish the Noro/Munda system as a profit centre for
SIEA through a comprehensive rehabilitation of the generation. Ideally, this option would include
the re-location of the SIEA powerhouse to higher ground in order to protect the facility against
damage by seawater in case of storms or a tsunami 21 Seawater penetration has already caused
damage to the wiring of the powerhouse even without an extreme event.
Soltai management has indicated that it would be willing to swap a higher ground plot for the
current SIEA location. Based on the load forecast provided in Section 9.4, the powerhouse
would be equipped with three sets of 1,500 – 1,800 kW generators in order to provide N-1
redundancy. In order to enhance security of supply further, a special agreement should be
established with Soltai which would include a reverse supply from the 3 MW Soltai power
station as a back up for SIEA. Such an arrangement would guarantee N-1 redundancy desirable
for a system with substantial commercial/industrial load. The generator size for the new
powerhouse could be reduced to three synchronized 1,500 rpm 1,000 kW units. Under such an
arrangement two generators would have to operate simultaneously, with one unit on stand by.
In case of scheduled outages of one engine Soltai’s capacity would be brought in as a reserve.
Our costing provided below is based on this least cost arrangement.
Option 2 would involve the rehabilitation and development of SIEA’s generation to a level that
guarantees reliable power supply for all existing and future demand exclusive of Soltai. Soltai
has already considered this option. In a comparative cost analysis, Soltai management
discovered that self-generation results in electricity supply cost approximately 25 % lower than
SIEA supply. This is surprising as Soltai is charged the uniform national industrial tariff. In
addition, Soltai does not enjoy tax-free diesel supply (which SIEA does). However, an
examination of Soltai’s claims by the consultant suggests that the company can indeed
generate electricity below SIEA supply cost if and when the factory’s loads are above 400 kW at
current duty paid supply cost of SB$ 8.38 per litre. Thus, Soltai only buys power from SIEA in
low load situations. The reasons for the cost advantage in high load situations are the following:
• A well managed and maintained power house allows Soltai to achieve high fuel efficiencies
of 3.82 kWh per litre of fuel

20
The Special Provincial Development Officer expressed serious concerns about this issue during consultations with GHD.
21
Such climate proofing is strongly recommended by the consultant

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• Load and generator size are a good match for high load situations (600 kW load for sets
with 1000 kW nameplate rating)
• There are no transmission and distribution losses
• Staff cost are minimal as the operation employs only 3 staff

A complete isolation of Soltai may conflict with the Electricity Act that gives SIEA an excusive
right to supply, however, the act may be difficult to enforce as long as SIEA cannot demonstrate
that it is able to meet the demand of this industrial client. Soltai is a major employer in the
Western province and generates significant foreign exchange for the Solomon Islands. Option 2
would still require SIEA to replace its ageing generators and it would still recommendable to
climate proof generation through a relocation of the powerhouse. Option 2 would require the
installation of three 1,500 rpm generator sets in the 500 kW class, with subsequent
replacements with larger sets in 10 years in line with load growth expected from expansion of
the supply area and industrial growth outside Soltai.
Option 3 is a fall back position in case SIEA is unable to finance capital investment in Noro.
Soltai has indicated that the company would be willing to enter an IPP arrangement with SIEA.
Under such an arrangement SIEA would obtain bulk supply from Soltai and be reduced to the
role of a distributor of electricity. A long term PPA would be required as Soltai would eventually
have to invest in larger generators in order to meet the demand of the system with an
acceptable level of redundancy.

Distribution
In Munda the existing SIEA 11kV distribution system currently terminates north of the main
commercial area and from this point the 415V ABC distribution supplies domestic consumers up
to 1,000 meter West from the 11kV end point. Power system studies performed by SKM
indicate that the length of the existing 415V system already causes significant voltage drops at
the extremities of the line. I.e. there is little room to expand low voltage reticulation further.
West of Munda’s main commercial area the 415 supply system ends within 300 meters and
leaves an estimated 40 households further West without supply. This area is also a strong
candidate for extending the existing network.

Design of Expansion
In Munda there are 2 residential low income clusters, which are currently not supplied by SIEA:
A small housing cluster to along the shore West of the current supply area (South of the air
strip) and a larger cluster to the East of the current supply area. While the western extension
could be implemented by extending the existing 415 V supply, the eastern cluster could be
connected by extending the 11 kV system in order to avoid unacceptable voltage drops and line
losses. In addition, Goldie Island approx 7 km from the SIEA supply area is a potential
candidate to be included in the SIEA supply. Currently, approx half of the 80 households on the
island are supplied by small private generators. Connecting the island would involve two water
crossings one of which is too wide for an overhead line and required an undersea cable. While
this may be a long-term option for SIEA, connecting Goldie is currently not considered in the
load forecast due to the high cost involved in the installation of an undersea cable.
SKM has proposed to extend the existing 11kV system in a ring configuration approximately
2 km east of the main commercial area. This would encompass 4 additional 11kV 415V
transformer substations. The proposed system will also remove any existing voltage drop
issues.
Noro will require a substantial investment to supply power to the new industrial area under
development. This will require an extension of SIEA 11 kV grid including several new
transformer stations. This expansion should proceed with priority, as the lack of power to the

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new industrial site is a major obstacle to the development of new commercial activities intended
by the provincial government.

9.4 Hydro Options for Western Province


Two different hydro sites have been considered for the Noro/Munda/Ringgi area: the Vila river
on Kolombangara island and the Mase river on New Georgia. Figure 9.3 depicts these
locations. Both projects could be developed either with or without an interconnection by
undersea cable. At both sites automatic gauging stations have been installed in order to
develop a comprehensive picture of the hydro potential in the Western Province.

Figure 9.3: Mase and Vila Hydro Sites

Vila

Mase

Both projects have the potential to supply a significant share of the power demand in the area.
They are however quite distinct in other characteristics. Mase would be a green field project to
be constructed in a remote area without any infrastructure. Landowner issues had to addressed
and resolved prior to development. In contrast, the Vila project on Kolombangara would not
have to address landowner issues as the land belongs to the forest company.
In addition, the company already operates all heavy construction equipment that would be
necessary for the construction of a mini hydro plant (bulldozers, backhoes, diggers, graders,
cranes, flat bed trucks etc). SIEA management on the other hand has expressed a preference
for IPP implementation modalities for mini hydro projects feeding the grids of their outstations.
For these reasons the Vila project is given priority over the Mase project and will be analysed in
detail below. Table 9.4 compares the main characteristics of the two projects.

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Table 9.4: Options for Ringgi, Munda and Noro


Hydro Options Noro/Munda/Ringgi
River Mase Vila
New Georgia, 33 km north-east
Location Ringgi, Kolombangara Island
of Noro
Catchment Area 23 km2
Gross Head 160 m 200.0 m
Design Flow 2.06 m3/sec 130 litres/sec
Penstock diameter 1000 mm 250 mm
Maximum Plant Output 3.4 MW/16.5 GWh per year 12 MW
33 kV, 40 km 1.1 km 33 kV undersea cable
Transmission Line
and 21 km transmission line
Project Capital Cost 9,200,000 US$

9.5 General Description Vila


The Vila River on Kolombangara Island runs on the slope of the dominant volcano towards the
South East. It is accessible by roads, established and maintained to a high standard by the
Kolombangara Forest Products Limited (KFPL). It seems Vila River seems possible to develop
the Vila River as a cascade of hydropower plants starting from 400m above sea level and down
to about 79m in 3 steps. A significant part of the catchment is the crater of the volcano, which is
assumed to be drained through a natural tunnel starting at around El. 670m at the bottom of the
crater and emerging as the Vila River at about El. 590 m. It seems feasible to plug the tunnel
entrance by installing a remotely controlled valve to release water in response to the actual
power demand of the system. It is assumed here that 30-40% of the total runoff originates from
the crater. With a 1,100m sea cable it is possible to cross over to Arundel Island and from there
to Noro with a 21 km 33kV feeder. Vila River seems the nearest point from which to provide
hydropower for the significant load centers of Noro and Munda which are already
interconnected by a 11 kV transmission line.
The orientation of the catchment to the South East allows catching the rains coming from SE
during the winter resulting in a low variation of rainfall as depicted in Figure 9.4.

Figure 9.4: Rainfall Pattern Ringgi

800
Ringgi monthly rainfall variation over the year
mm rainfall per month

600

400

200

0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Jan-Dec

Minimum Average Maximum Standard Deviation

There are numerous technical options for the hydro development on the Vila, i.e. projects can
be tuned to any power requirement in the area. Figure 9.5 displays the various options. A small

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development between 700 kW and 1,000 kW is possible with a project just upstream from
Ringgi (Vila Low 128 m-79 m). 1,000 kW - 3,000 kW could be harnessed further up the river
with Vila Middle 221 m-136 m. The potential of Vila Upper (400 m-221 m) is 2,500 kW - 6,000
kW which can be augmented to 3,000 kW - 7,500 kW by using an additional catchment to the
west using a siphon across the river. I.e. the Vila has the potential of supplying not only the
future demands of the entire Kolombangara Island but also the load centres of Noro and Munda
towns. A sequential development could eventually create up to 12MW installed capacity. The
Vila Upper needs further fieldwork to confirm the stability of the side slopes for building the
canal. In addition the options for regulating the crater catchment and the transfer of catchment
by siphon across the river needs to be carefully studied.

Figure 9.5: Possible Developments on Vila River

450
Vila River Kolombangara Island
Scope of Hydropower Development
400

350

300

250
Altitude in m

200

150

100

50

0
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000

Horizontal distance in m as measured along the river course

Vila River West ridge East ridge


Vila Lower Canal Vila Lower Penstock Vila Middle Penstock
Vila Middle Canal Vila Upper steep canal Vila Upper steep Penstock

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Table 9.5 below shows the coordinates for both the various intakes and the individual power
houses.

Table 9.5: Location of Intakes and Powerhouses

Project Intake UTM El m Powerhouse UTM El.

Vila Upper 57 L 292100 m E 9113655 m S 400 57 L 292014 m E 9111298 m S 221

Vila 57 L 290875 m E 9112844 m S 405


Transfer

Vila Middle 57 L 292014 m E 9111298 m S 221 57 L 294255 m E 9118365 m S 136

Vila Lower 57 L 294446 m E 9117872 m S 128 57 L 294679 m E 9115628 m S 79

9.6 Hydrology
KFPL has operated a rain gauge at Ringgi from 1993-2010. The monthly values are depicted in
Figure 9.6 below.

Figure 9.6: Monthly Rainfall for Ringgi Station

800
700 Ringgi, Kolombangara Island, Monthly Rainfall 1993-2010
600
500
mm/month

400
300
200
100
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Year
y = 2.4994x - 4729

Ringgi monthly rainfall 30 months moving average Linear (Ringgi monthly rainfall)

Analysis reveals a trend through the period with an increase of 2.5 mm per year in monthly
rainfall, changing from about 250 to 300 mm/month over 20 years. On the other hand there is
no parallel increase in the absolute standard deviation of the monthly values in each year over
the period, which indicates that the trend towards higher rainfall is real. Figure 9.7 shows the
monthly rainfall values as a duration curve with the average pan evaporation of Honiara
included.
Rainfall increases with altitude. For Guadalcanal this relationship has been quantified and the
same model is applied for the Kolombangara catchments. Adjustments have been made using
Ringgi rainfall data: At 35 m the average annual rainfall 2011 is estimated 3,600 mm while the
the value for Guadalcanal is 1,963, resulting in a 1,637 mm higher rainfall at Kolombangara
than on Guadalcanal. The resulting hydrology for the individual catchments is depicted in
Table 9.6.

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Figure 9.7: Rainfall Duration Curve Ringgi

800

600
mm/month

Monthly rainfall duration curve Ringgi


400

200

0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Year

Monthly rainfall duration curve Average pan evaporation Honiara

Table 9.6: Catchment Run Off Vila River

Average
Annual Runoff = Average Average
Sub Area Elevation Rainfall Shade rain – Runoff Accumulated
Catchment km2 m mm Factor Evaporation m3/s m3/s
Crater area 14.02 1,080 7,498 70% 3,065 1.362 1.362
Upper outside
crater 6.50 935 7,231 100% 5,047 1.040 2.403
Upper
Transfer 3.61 676 6,535 100% 4,351 0.498 2.901
Middle 4.50 424 5,587 100% 3,403 0.486 3.386
Lower 5.53 283 4,940 100% 2,756 0.483 3.870

Figure 9.8 below displays the flow duration curves based on the hydrological model of the
Lungga Gorge. This may be a conservative estimate, as the Vila catchments do not experience
the low winter rainfall that characterizes Lungga. On the other hand, the catchment area is only
10% of Lungga, so the natural groundwater regulation of Lungga may be far more developed
than this small and very steep catchment.

Figure 9.8: Flow Duration Curves Vila Catchments

12
11
10 Flow duration Curve Vila Middle (221m.a.s.l.)
9
8
7 Upper
m3/s

6
5 Upper + Transfer
4
3 Middle
2
1 Lower
0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of time with flow exceeding

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9.7 System Layout


Given the variety of cascade options that can be developed on the Vila, a design that matches
the load forecasts provided earlier needs to be found. The possible power production of the
individual schemes is displayed in Table 9.7 are calculated using installed capacities and the
flow duration curves shown in Figure 9.8. Two designs have been selected for a detailed
analysis here: Variant A would be the smaller of the two configurations and would supply
Kolombangara Island only (KFPL commercial demand + communities). The second, ‘Variant B’,
would be a much larger scheme capable of supplying Kolombangara Island plus Noro/Munda
by undersea cable.

Table 9.7: Capacity and Energy of Vila Options

Under Variant A, a proposed 1,210 kW hydropower scheme would provide 10.4 GWh of
electricity per year to KFPL and the Ringgi community. The project is assumed to be
commissioned in 2013, with hydro output completely displacing the need for diesel generation
from that year forward. Variant B would supply all loads in Ringgi as well as the loads of the
Munda and Noro together with possible new electrification in the area.
Under Variant B, a proposed 4,320 kW hydropower scheme would provide 26.3 GWh of
electricity per annum year to KFPL and the Ringgi community as well as to Noro and Munda.
The project is assumed to be commissioned in 2014, with hydro output completely displacing
the need for diesel generation in that year but requiring a slight and gradually increasing amount
of diesel generation to top up supply to the combined loads in every year thereafter. Figure 9.9
displays the options and their respective catchment areas.

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Figure 9.9: Exploitable Catchments of Vila River

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9.8 Variations and Least Cost Option


The selection of the two projects not only aims to match supply and forecasted demand,
levelized production costs for the various configurations have also been considered (least cost
development) as displayed in Figure 9.9. As displayed in Figure 9.10, the lower Vila scheme
would be sufficient to match power demand of Variant A, but would result in levelized production
cost significantly higher than a ‘Vila Middle’ option in the same capacity class of 1,200 kW.
Specific investment cost for the ‘Vila Lower’ options are significantly higher because the scheme
would only be able to harness a head of approximately 40 meters while the middle option would
have a head of more than 80 meters using a 2 jet Turgo turbine.
Variant B is best matched with a high head option of the ‘Vila Upper and Transfer’ configuration
using vertical 3 jet Pelton wheels. These two variants will be analysed further with regard to
their financial performance.

Figure 9.10: Levelized Production Cost as a Function of Installed Capacity

0.1000

Levelized Production Cost

0.0800
USD/kWh

0.0600

0.0400
0 1,000 2,000 3,000 4,000 5,000 6,000
Installed Capacity kW

Vila Upper 400-221m Vila Upper + Transfer

Vila Middle 221-136m Vila Lower 128-79m

9.9 Cost Estimates


Table 9.8 displays the cost estimates for the two variants. The larger Variant B that supplies
both Ringgi and Noro/Munda is clearly a superior choice with specific investment cost below
3,000 US$ per kW inclusive of 33 kW transmission line to Noro and undersea cable. Total cost
for variant A is 4.4 million US$ resulting in specific investment cost of US$ 3,600 per installed
kW.

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Table 9.8: Cost Estimates


Variant A Variant B
US$ SB$ US$ SB$
Feasibility Study 134,000 1,072,000 331,000 2,648,000
Development 161,000 1,288,000 398,000 3,184,000
Engineering 236,000 1,888,000 488,000 3,904,000
Hydro Turbine 1,212,000 9,696,000 3,085,000 24,680,000
Road Const. 52,000 416,000 253,000 2,024,000
Transmission Line
Extraction 172,000 1,376,000 252,000 2,016,000
Transmission Noro 33
kV 0 0 588,000 4,704,000
Undersea Cable 33 kV 0 0 300,000 2,400,000
Substation 26,000 208,000 88,000 704,000
Penstock 349,000 2,792,000 1,036,000 8,288,000
Canal 708,000 5,664,000 1,224,000 9,792,000
Other Civil Eng 1,280,000 10,240,000 3,246,000 25,968,000
Total 4,330,000 34,640,000 11,289,000 90,312,000
say $4.4 Million $11.3 Million
US$/kW 3,579 2,656
say 3,600 2,700

The Cost Estimates presented here have been prepared for the purpose of prioritizing sites for
further investigation and should not be used for any other purpose. They are subject to the
limitations described in Section 1.4. Further detailed investigations, including geotechnical and
hydrological investigations, would be required to firm up the cost estimates for budget setting
purposes.

9.10 Financial Analysis


In the following the two Variants will be tested for their financial performance.

Variant A
Though the Ringgi hydro power plant would most probably be operated by an IPP, it is assumed
for present purposes (to preserve comparability with other hydro schemes assessed in this
report) that electricity is sold in Ringgi at the SIEA’s national tariff. In comparison with the all-
diesel scenario for Ringgi, the hydropower scenario results in significantly reduced costs and
much higher profitability under the current SIEA tariff as illustrated in the following three figures,
Figure 9.11, Figure 9.12 and Figure 9.13. The detailed financial projections for Ringgi (Variant
A) are shown in the Annex.

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Figure 9.11: Revenues vs Operating Expenses Variant A

Revenues vs Operating Expenses, Ringgi


Hydro Scenario
$60.000

$50.000

$40.000
SBD millions

$30.000
Revenues
$20.000 Expenses

$10.000

$-

Figure 9.12: Revenues vs Operating Expenses Variant A All-Diesel

Revenues vs Operating Expenses,


Ringgi All-Diesel Scenario
$60.000

$50.000

$40.000
SBD millions

$30.000
Revenues
$20.000 Expenses
$10.000

$-

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Figure 9.13: Profit/Loss Variant A


Profit/(Loss) After Tax and Finance Charges, Ringgi
$40.00

$35.00

$30.00

$25.00
SBD Million

$20.00
With Hydro
All Diesel
$15.00

$10.00

$5.00

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
FIRR Analysis Variant A
In a comparison of ‘with project’ (hydropower, Variant A) and ‘without project’ (all-diesel)
scenarios, the financial internal rate of return (FIRR) of hydropower investment is evaluated at
45.1%, greatly exceeding the WACC of 5.5%, with a financial net present value (FNPV,
discounted at a rate equal to the WACC) of SBD 200.8 million. The full FIRR/FNPV analysis
table is presented in the Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and
decreases in benefits (reduction in the rate of real growth in diesel fuel prices, reduction in
average annual hydro output, and reduced load forecast). The hydro option was found to be
robust to changes in any of these parameters, and to an adverse change in all of them
simultaneously, as shown in Table 9.9.

Table 9.9: Sensitivity Analysis, Ringgi (Variant A)


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 200.84 45.1%
Increases in Costs
1. Capital Cost (SBD m) 20% 191.89 38.1% 0.22 34.64 183.38 429.3%
2. Hydro O&M Cost (SBD/kWh) 20% 200.11 44.9% 0.02 280 14,557 5099.0%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 189.53 44.2% 0.28 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 200.83 45.1% 0.00 98.0% 11.2% -88.6%
5. Load Forecast -20% 185.78 44.2% 0.38 4.0% 0.0% -100.0%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 165.64 36.2%

FNPV = financial net present value, FIRR = financial internal rate of return

Variant B
Though Ringgi would be operated by an IPP, it is assumed for present purposes that electricity
is sold in Ringgi and in Noro/Munda from the proposed scheme at the SIEA’s national tariff. In
comparison with the all-diesel scenario for Ringgi, the hydropower scenario results in
significantly reduced costs and much higher profitability at the retail level under the current SIEA

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tariff as illustrated in the following three figures, Figure 9.14, Figure 9.15 and Figure 9.16. The
detailed financial projections for Ringgi (Variant B) are shown in the Annex.
IPP financial issues and scope to establish a transfer price between the IPP and SIEA that is
profitable for both parties is discussed in section 9.11 below.

Figure 9.14: Revenues vs Operating Expenses Variant B

Revenues vs Operating Expenses, Ringgi


Hydro Scenario (Variant B)
$180.000
$160.000
$140.000
$120.000
SBD millions

$100.000
$80.000 Operating Revenues
$60.000 Expenses
$40.000
$20.000
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

Figure 9.15: Revenues vs Operating Expenses Variant B All-Diesel

Revenues vs Operating Expenses,


Ringgi All-Diesel Scenario (B)
$180.000
$160.000
$140.000
$120.000
SBD millions

$100.000
$80.000 Operating Revenues
$60.000 Expenses
$40.000
$20.000
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

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Figure 9.16: Profit/Loss Variant B

Profit/(Loss) After Tax and Finance Charges, Ringgi (B)


$120.00

$100.00

$80.00
SBD Million

$60.00
With Hydro
All Diesel

$40.00

$20.00

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
FIRR Analysis Variant B
In a comparison of ‘with project’ (hydropower, Variant B) and ‘without project’ (all-diesel)
scenarios, the financial internal rate of return (FIRR) of hydropower investment is evaluated at
46.9%, greatly exceeding the WACC of 5.5%, with a financial net present value (FNPV,
discounted at a rate equal to the WACC) of SBD 614.1 million. The full FIRR/FNPV analysis
table is presented in the Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and
decreases in benefits (reduction in the rate of real growth in diesel fuel prices, reduction in
average annual hydro output, and reduced load forecast). The hydro option was found to be
robust to changes in any of these parameters, and to an adverse change in all of them
simultaneously, as shown in Table 9.10.

Table 9.10: Sensitivity Analysis, Ringgi (Variant B)


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 614.05 46.9%
Increases in Costs
1. Capital Cost (SBD m) 20% 591.23 40.5% 0.19 90.30 583.14 545.8%
2. Hydro O&M Cost (SBD/kWh) 20% 611.69 46.8% 0.02 280 14,278 4999.2%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 579.36 45.9% 0.28 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 573.79 45.8% 0.33 70.7% 8.7% -87.6%
5. Load Forecast -20% 568.96 46.0% 0.37 4.0% 0.0% -100.0%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 492.09 37.6%

FNPV = financial net present value, FIRR = financial internal rate of return

9.11 IPP Financial Analysis: Bulk Energy Transfer Price


The above analysis of the proposed hydro scheme at Ringgi, Variant B, recognises that KFPL is
likely to invest in and operate the scheme as an IPP, but essentially considers the operations as
if the IPP were essentially in the same position as SIEA (a producer and retailer of energy). This
is useful to show the financial performance of the proposed scheme under the same parameters
that apply to the other hydro schemes assessed under this TA.

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Given the special circumstances of the Ringgi scheme it is however necessary to ask: is there a
bulk energy transfer price that would allow the IPP to earn an adequate return on investment,
and also allow SIEA to purchase bulk energy and operate customer service and retail functions
in the affected service areas, at a profit? At the present prefeasibility level of analysis, it is
desirable to answer this question in an indicative way, leaving a more detailed determination of
actual transfer prices between the IPP and SIEA to a future feasibility analysis.
To provide an indicative level response to this question, an analysis was undertaken of a
transfer price from the IPP that would allow the IPP to make an ‘adequate’ financial return on
investment on the basis of bulk sales to SIEA, and assuming that all retail sales of electricity in
the affected service areas are under the responsibility of SIEA and are priced at the national
tariff. For this purpose, it is assumed that an ‘adequate’ commercial return to the IPP is 15%. A
discounted cash flow analysis was conducted to determine the average revenue from bulk
energy sales that would be required to produce an FIRR of 15%, as shown in Table 9.11.

Table 9.11: Calculation of a Bulk Energy Price (SBD/kWh) that Achieves FIRR=15%
Revenue per kWh of Bulk Sales (SBD) $ 1.87
Hydro ('With Project') Revenue from Bulk Sales
Diesel Diesel & Diesel & Total
Fuel Hydro O&M Hydro Depr 'With Project' Energy Sold Revenue Net Financial
Year Capital Cost Costs Costs Costs Costs (MWh) (SBD m) Benefit
2012 45.15 28.58 15.60 0.88 90.21 12,480 23.32 $ (66.89)
2013 45.15 30.66 16.25 2.14 94.20 13,000 24.29 $ (69.91)
2014 - - 1.19 3.98 5.17 13,520 25.26 $ 20.09
2015 - 0.02 1.20 3.98 5.20 14,061 26.27 $ 21.07
2016 - 0.13 1.25 3.98 5.36 14,623 27.32 $ 21.96
2017 - 0.24 1.30 3.98 5.52 15,208 28.41 $ 22.89
2018 - 0.36 1.36 3.98 5.70 15,816 29.55 $ 23.85
2019 - 0.49 1.41 3.98 5.88 16,449 30.73 $ 24.85
2020 - 0.64 1.46 3.98 6.08 17,107 31.96 $ 25.88
2021 - 0.79 1.52 4.27 6.58 17,791 33.24 $ 26.66
2022 - 0.95 1.58 4.86 7.39 18,503 34.57 $ 27.18
2023 - 1.13 1.64 4.86 7.63 19,243 35.95 $ 28.33
2024 - 1.32 1.69 4.86 7.87 20,013 37.39 $ 29.52
2025 - 1.52 1.76 4.86 8.14 20,813 38.89 $ 30.75
2026 - 1.74 1.82 4.86 8.42 21,646 40.44 $ 32.03
2027 - 1.97 1.88 4.86 8.71 22,512 42.06 $ 33.35
2028 - 2.22 1.94 4.86 9.02 23,412 43.74 $ 34.72
2029 - 2.48 2.01 4.86 9.35 24,349 45.49 $ 36.14
2030 - 4.31 2.57 4.86 11.75 25,323 47.31 $ 35.56

FIRR = 15.0%
FNPVs 87.96 65.76 45.92 46.10 245.74 373.97 128.23

WACC = 5.47%

The bulk energy transfer price that achieves an FIRR of 15%, given the costs of the proposed
Ringgi scheme, Variant B, is calculated to be SBD 1.87/kWh, slightly greater than
US$0.23/kWh. The analysis indicates that the IPP, by undertaking the investment and charging
this price for the output, is financially better off by a net present value of SBD 128.2 million over
the planning period. With the financial viability of the IPP investment secured, it now needs to
be determined is if SIEA can operate profitably at the retail level if it purchases energy from the
IPP at this price?

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Table 9.12: SIEA Analysis, Hydro Energy Purchase from IPP (Ringgi, Variant B)
SBD million 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Total SIEA Revenues
from Retail Sales $ 69.210 $ 72.403 $ 75.638 $ 79.032 $ 82.594 $ 86.331 $ 90.255 $ 94.374 $ 98.700 $ 103.243
SIEA Bulk Purchase Cost $ 23.316 $ 24.288 $ 25.259 $ 26.270 $ 27.320 $ 28.413 $ 29.550 $ 30.732 $ 31.961 $ 33.239
SIEA Customer Service &
Administration Cost $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258
Net SIEA Revenues $ 45.64 $ 47.86 $ 50.12 $ 52.50 $ 55.02 $ 57.66 $ 60.45 $ 63.38 $ 66.48 $ 69.75
SBD per k Wh
Average Revenue per kWh from
Retail Sales $ 5.55 $ 5.57 $ 5.59 $ 5.62 $ 5.65 $ 5.68 $ 5.71 $ 5.74 $ 5.77 $ 5.80
Average Cost per kWh from Bulk
Purchase and Admin $ 1.89 $ 1.89 $ 1.89 $ 1.89 $ 1.89 $ 1.89 $ 1.88 $ 1.88 $ 1.88 $ 1.88
Net SIEA Revenue per kWh $ 3.66 $ 3.68 $ 3.71 $ 3.73 $ 3.76 $ 3.79 $ 3.82 $ 3.85 $ 3.89 $ 3.92

SBD million 2022 2023 2024 2025 2026 2027 2028 2029 2030
Total SIEA Revenues
from Retail Sales $ 108.016 $ 113.030 $ 118.300 $ 123.840 $ 129.663 $ 135.787 $ 142.228 $ 149.004 $ 156.134
SIEA Bulk Purchase Cost $ 34.569 $ 35.952 $ 37.390 $ 38.885 $ 40.441 $ 42.058 $ 43.741 $ 45.490 $ 47.310
SIEA Customer Service &
Administration Cost $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258 $ 0.258
Net SIEA Revenues $ 73.19 $ 76.82 $ 80.65 $ 84.70 $ 88.96 $ 93.47 $ 98.23 $ 103.26 $ 108.57
SBD per k Wh
Average Revenue per kWh from
Retail Sales $ 5.84 $ 5.87 $ 5.91 $ 5.95 $ 5.99 $ 6.03 $ 6.07 $ 6.12 $ 6.17
Average Cost per kWh from Bulk
Purchase and Admin $ 1.88 $ 1.88 $ 1.88 $ 1.88 $ 1.88 $ 1.88 $ 1.88 $ 1.88 $ 1.88
Net SIEA Revenue per kWh $ 3.96 $ 3.99 $ 4.03 $ 4.07 $ 4.11 $ 4.15 $ 4.20 $ 4.24 $ 4.29

In Table 9.12 above it is shown that SIEA’s retail and customer service operations in the
affected service areas are profitable over the planning period (differencing retail sales revenue
and the sum of bulk energy purchase and customer service/administration costs). The NPV of
the operating profit from these operations (calculation not shown) is approximately SBD 780
million over the planning period.
This analysis indicates that the Ringgi project is robust under a very wide range of assumptions
and its implementation would allow SIEA to create a profit centre in Noro/Munda. The hydro
scheme would also allow to completely abandoning the old power station in Noro as the Soltai
diesel sets (3 MW) could be used as stand-by units.

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10. Taro

10.1 The Taro Power Supply


Taro, the provincial capital of Choiseul, has no SIEA grid. It is situated on a small island approx
1 km from the main island of Choiseul (see Figure 10.1). Taro island hosts the government
station, a hospital and residences of government employees. The total population of Taro and
the surrounding areas of the main island is estimated at 2,000. There is limited commercial
activity in the area, apart from government wages the main cash income of the population
comes from copra production.
Power is currently supplied by a multitude of small generator sets that provide power to
institutions and commercial entities, normally for a limited period of time every day. Most
households within the Taro ward are currently without electricity supply. The provincial
government believes that the lack of grid power is currently a major obstacle to economic and
social development of the greater Taro area and has requested the national government and
SIEA to assess possibilities of a grid based supply along the lines of the existing SIEA
outstations.
SIEA has responded to these requests and will establish a low voltage mini grid that would
cover only the island of Taro, but not the settlements on the main island adjacent that are part of
the Taro ward. Such a system would, however, not be able to trigger commercial activity as the
island of Taro itself is too confined to allow any significant economic activity there.

Figure 10.1: Map Taro

The following table lists existing generation equipment in Taro and their mode of operation. In
total, approximately 500 kWh are produced by five individual institutional generators. The

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provincial hospital is the largest consumer. Together the five institutional users are likely to
produce a peak in the order of 45 – 50 kW. The table also shows an estimate for electricity
consumption under an assumed 24 hour supply regime.

Table 10.1: Installed Generation in Taro

Residential areas on the main island of Choiseul are currently not supplied with any form of
power. The only form of lighting available is by kerosene lamps. The following map shows the
location of Taro island and the surrounding settlements. In total the Taro ward (including the
main island settlements) are home to approximately 470 households of which one hundred live
on Taro island itself.

Figure 10.2: Settlements Around Taro

10.2 Load Forecast


It is assumed that 295 households could be connected initially, with the remaining 175
households connected in a later second phase by extending the supply area on the main island.
There are 5 potential government and commercial connections, as shown in Table 10.1. Most of
these already have some form of self-generation capacity. It is assumed that 2013 is the first
realistic start year for the new power system.
There are no billing records on which to base a demand profile and load forecast for Taro, but
the TA consultants have carried out a survey of the proposed service area and estimate that

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295 households can be connected to the system initially (2013) and an additional 175
households can be connected in 2014. A modest amount of commercial consumption from
government service agencies, telekom, a fish freezer, and a guesthouse is envisaged as part of
load growth after the public power supply is established. It is assumed that initially, energy
demand will be in the order of 500,000 kWh per annum.
In keeping with the other outstations, it is assumed that load in Taro will grow at 4% per year
after the initial connections are made. The Taro system load forecast, estimation of generation
requirements, load factors, projected diesel and hydro generation requirements, and a schedule
of new diesel generation capacity installations required to provide 100% backup for the system
over the 20-year planning period are summarised in Table 10.2. Figure 10.3 illustrates the
generation requirement implied by the load forecast. The hydro site identified on the main island
would be able to completely meet the forecasted load over a 20 years planning horizon as
shown in Figure 10.4.

Figure 10.3: Taro Load Forecast

Taro Power System Load Forecast


1,400,000

1,200,000

1,000,000

800,000
Sales to Commercial
kWh

600,000 Sales to Domestic


Station and Line Losses

400,000

200,000

-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Figure 10.4: Taro Generation Mix


Taro Generation Mix
1,400,000

1,200,000

1,000,000

800,000
kWh/year

Diesel
600,000 Hydro

400,000

200,000

-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

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Table 10.2: Load Forecast Taro

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 5.13%
Electricity Sales (kWh)
Initial Domestic (2013) 282,500 293,800 305,552 317,774 330,485 343,704 357,453 371,751 386,621 402,086 418,169 434,896 452,292 470,383 489,199 508,767 529,117 550,282
New Domestic (Phase II) - 95,813 99,645 103,631 107,776 112,087 116,571 121,233 126,083 131,126 136,371 141,826 147,499 153,399 159,535 165,916 172,553 179,455
Initial Commercial (2013) 172,309 179,202 186,370 193,824 201,577 209,640 218,026 226,747 235,817 245,250 255,060 265,262 275,873 286,907 298,384 310,319 322,732 335,641
New Commercial - - - - - - - - - - - - - - - - - -
Total Sales 454,809 568,814 591,567 615,229 639,838 665,432 692,049 719,731 748,521 778,461 809,600 841,984 875,663 910,690 947,117 985,002 1,024,402 1,065,378

Sales to Domestic 282,500 389,613 405,197 421,405 438,261 455,792 474,023 492,984 512,703 533,212 554,540 576,722 599,791 623,782 648,733 674,683 701,670 729,737
Sales to Commercial 172,309 179,202 186,370 193,824 201,577 209,640 218,026 226,747 235,817 245,250 255,060 265,262 275,873 286,907 298,384 310,319 322,732 335,641
Station and Line Losses 39,549 49,462 51,441 53,498 55,638 57,864 60,178 62,585 65,089 67,692 70,400 73,216 76,145 79,190 82,358 85,652 89,078 92,642

Load Factor - - - 0.60 0.60 0.61 0.62 0.64 0.65 0.66 0.67 0.69 0.70 0.71 0.73 0.74 0.76 0.77 0.79 0.80 0.82

AAGR Generation = 5.13%


Generation Requirement (kWh) 494,358 618,276 643,007 668,727 695,477 723,296 752,227 782,317 813,609 846,154 880,000 915,200 951,808 989,880 1,029,475 1,070,654 1,113,480 1,158,020
Station and Line Losses (kWh) 39,549 49,462 51,441 53,498 55,638 57,864 60,178 62,585 65,089 67,692 70,400 73,216 76,145 79,190 82,358 85,652 89,078 92,642
Peak Load on the Generators (kW) 94.06 117.63 119.99 122.38 124.83 127.33 129.88 132.47 135.12 137.83 140.58 143.39 146.26 149.19 152.17 155.21 158.32 161.48
Required Capacity with Reserve (kW) 122.27 152.92 155.98 159.10 162.28 165.53 168.84 172.22 175.66 179.17 182.76 186.41 190.14 193.94 197.82 201.78 205.81 209.93
Fuel Required, All-Diesel Scenario (litres) 141,245 176,650 183,716 191,065 198,708 206,656 214,922 223,519 232,460 241,758 251,429 261,486 271,945 282,823 294,136 305,901 318,137 330,863

9 Hydro Scenario Generation Calculation


Generation Mix with hydro (kWh/year)
Hydro - 618,276 643,007 668,727 695,477 723,296 752,227 782,317 813,609 846,154 880,000 915,200 951,808 989,880 1,029,475 1,070,654 1,113,480 1,158,020
Diesel 494,358 - - - - - - - - - - - - - - - - -
Fuel Required, Hydro Scenario (litres) 141,245 - - - - - - - - - - - - - - - - -
Fuel Saved by Hydro (litres) - 176,650 183,716 191,065 198,708 206,656 214,922 223,519 232,460 241,758 251,429 261,486 271,945 282,823 294,136 305,901 318,137 330,863

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (new) 100 100 100 100 100 100 100 100 100 100
Unit 2 (new) 100 100 100 100 100 100 100 100 100 100
Unit 3 (new) 100 100 100 100 100 100 100 100 100 100
Unit 4 (new) 100 100 100 100 100 100 100 100
Unit 5 (new) 100 100 100 100 100 100 100 100
Unit 6 (new) 100 100 100 100 100 100 100 100
Unit 7 (new)
Total Installed Capacity (kW) 0 0 0 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300
Firm Capacity Available 0 0 0 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200
Memo: Units Added
Small Units (100 kW) 3 - - - - - - - - - 3 - - - - - - -
Large Units (100 kW) - - - - - - - - - - - - - - - - - -

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10.3 Taro System Expansion Planning

Generation
At this stage, it is therefore only possible to indicate some key characteristics of a future power
system in Taro. Generation requirements based on the load forecast provided previously would
initially be met by 2 diesel sets of 150 kW each. Later as load grows replacement of the units
with larger 250 kW units may be warranted. The hydro site identified on the Sorawe river could
be developed in two different ways: As a separate grid supplying consumers on the main island
only or as an integrated system that would connect the government headquarters on the island
of Taro and the loads indentified on the main island.

Distribution
An isolated power supply system for Taro only would be small in comparison to other SIEA
outstations, and would not allow a system expansion that included the households of the Taro
ward located on the main island. The provincial capital of Taro is on an island which is
separated from the main island of Choiseul by a channel that is approx 2 km wide and 80
meters deep. A central power supply would require an 11 kV undersea cable that would connect
Taro with the main island. Supplier quotes obtained for such a cable indicate supply cost of US$
190,000 or US$ 95,000 per km. Installed cost would be in the vicinity of to US$ 280,000. This
investment is substantial but for the time being it has been assumed that diesel generation
would not be split into two stations, one supplying Taro and another station supplying the
settlements on the main island. The capital investment for the undersea cable does significantly
increase supply cost as long as the system is operated using thermal generation. This situation
changes in the presence of a mini hydro plant on the Sorawe river. The capacity requirements
depicted in Figure 10.5 are therefore a preliminary assessment based on the load forecast
provided in the previous section and illustrates the generation requirement implied by the load
forecast.

Figure 10.5: Taro Capcity Requirements (Entire Taro Ward)

Taro Capacity Requirements


500

450

400 Hydro
350

300

250 Peak Demand (kW)


kW

Firm Capacity Available


200
Total Installed Capacity (kW)

150

100

50

-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

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10.4 Hydro Options for Taro


The only river that has hydro potential is the Sorawe which discharges east of Taro island into
the sea. The river offers a number of options for hydro development. A low head scheme is
possible on the bank of the Sorawe using the head of a waterfall at the bottom of the river. This
however is limited in capacity and has a higher investment per kW because of the low head.
Other opportunities up to 700 kW installed capacity exist on the slope of the higher part of the
catchment with development of head between 280 m and 80 m above sea level, which allows
for a gradual development in 2 or 3 stages. Figure 10.6 shows the various options

Figure 10.6: Hydro Options Taro

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10.5 Hydrology
The rainfall at Taro shows little variation over the year with December and January slightly lower
than the other months, when the Taro station area may be in rain shade of the south-easterly
rains. The average monthly rainfall is 260 mm/months or 3,200 mm/yr. Assuming the same
rainfall gradient as on the northern coast of Guadalcanal and an altitude of 20 m for the Taro
rain gauge rainfall can be calculated for the two catchments in question: the larger catchment of
the whole river has an average elevation of 146 m the upper catchment shows an average
elevation 430 m. Thus annual rainfall figures of 3,845 mm and 5,227 mm respectively can be
assumed for the two catchments. Assuming an evaporation of 2,184 mm the resulting average
annual runoff of would be 1,662mm and 3,043 mm respectively.

Figure 10.7: Rainfall Taro

400 Taro Monthly Average Rainfall 1975-2009

350

300
Average Rainfall (mm)

250

200

150

100

50

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months for Year 1976-2009

The results of the hydrological analysis for four different hydro options are displayed in
Table 10.3 below. At the Sorawe, an automatic gauging stations has been installed as part of
this TA and the measurements will allow a more accurate assessment of the run off.

Table 10.3: Calculated Runoff for Sorawe Catchments


2 3
Catchment km Elevation Rainfall mm/yr Runoff mm/yr Avg. Runoff m /s

Waterfall at 21m 35.8 146 3846 1662 1.8866

Upper 1 3.7 430 5227 3043 0.3570

Upper(1+ 2) 7.4 430 5227 3043 0.7140

Upper (1+2+3) 10.0 430 5227 3043 0.9649

The potential power production at the two sites is estimated based on the shape of flow duration
curve of the Lungga, even though it may prove too conservative. On the other hand, runoff in
the upper catchments may be diminished by sinkholes given a geology that is characterised by

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the predominance of soft limestone formations. Future discharge measurements in conjunction


with the gauging of the Sorawe will eliminate the remaining uncertainties. Figure 10.8 and
Figure 10.9 show the assumed flow duration characteristics for the lower and upper hydro sites.

Figure 10.8: Flow Duration Curve for Lower Catchment

5 Assumed Flow duration curve for Surawe River,


4 Downstream Waterfall, Choiseul
m3/s

0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of Time Exceeding

Figure 10.9: Flow Duration Curve for Upper Catchment

1.2

1.0 Assumed Flow duration curve for Upper 1 Alterative


0.8 280m-80m, Sorawe River,Choiseul
m3/s

0.6

0.4

0.2

0.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of Time Exceeding

10.6 System Layout

Lower Alternative at the Waterfall


A detailed long profile has been established available from elevation 23.1 m to 0.0 m
(Figure 10.10). An intake weir of 0.4 meter would be located at elevation 23.1m where the main
course of the river turns south and has little slope. Some additional head may be possible by
establishing a higher intake weir, but this would not increase output of the lower option
significantly.
The low head suggests the use of a double runner Francis turbine. A cross-flow turbine could
also be used but the Francis turbine has a much higher efficiency and utilise the full head, while
the runner of the cross flow turbine has to be safely above the highest water level of the tidal
waters. This would result in a significant loss of head.

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Figure 10.10: Long Profile for Sorawe Lower

25

20
Surawe River Long Profile
15
m.a.s.l.

Downstream Waterfall
10

0
0 50 100 150 200 250 300 350 400 450 500
Distance measured along river to the sea level

Main River Penstock Canal

Figure 10.11: Layout Lower Scheme

It appears to be possible to carry a headrace canal on the slope above the river course to a
point just above the bottom of the waterfall, which would reduce the length of the penstock to
63 meters and thus reduce cost significantly compared to earlier proposals of establishing
penstock from the intake to the powerhouse at a length of 440 meters. An installed capacity of

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150 kW could be established using a 1,000 RPM Francis turbine with a throat diameter of
270 mm.
An access road would be constructed first to the powerhouse and further up to the fore bay.
Then a road would be constructed with a slope of 1 meter per km between the fore bay and the
intake. On this road the canal would be constructed moving from the intake back to the fore bay.
Power would be extracted via 6.5 km of 11kV line which would branch into a 2 km undersea
cable connecting Taro Island and a 21 km feeder along the road costal road to the communities
North of the Sorawe mouth.

Upper Alternative
The lower alternative shows high specific investment cost due to the low head that requires a
costly turbine installation. It would also have to use a large discharge, which required a large,
and costly canal cross-section as well as a larger powerhouse.
Further upstream however, another powerhouse location was identified at elevation 80 m above
which the river has a very steep slope up to an elevation of 300 m (see Figure 10.12). Apart
from the main river, up to 3 smaller streams could be collected at an intake level of 280 m,
resulting in a gross head of about 200 meters. As power demand of the Taro area is limited a
staged development seems appropriate. The first stage of this may be a canal of 1,200 m to the
north (depicted as canal 1 in Figure 10.12 below). From the fore bay a 310 mm penstock with a
length of 600 meters would transport the water to the powerhouse at elevation 80. A single jet
Turgo turbine would provide an installed capacity of 260 kW.

Figure 10.12: Long Profile Sorawe

350

Surawe River Long Profile


300 from Upper 1

250

200
m.a.s.l.

150

100

50

0
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Distance measured along river to the sea level

Main River Penstock Canal Lower penstock Lower canal

It is possible that the area will experience a demand growth that required more capacity in 10 or
15 years time. This demand could be met by adding a new canal (canal 2 on Figure 10.13) to
the south, along with a new penstock and turbine set. Collecting a 3rd stream to the south could

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develop up to 750 kW, a capacity requirement that is unlikely to develop in the Taro area in the
foreseeable future. The upper alternatives have longer access roads, both to reach the
powerhouse and from there to the fore bay. The extraction line is only 3.5km or 11% longer than
at the lower alternative (see Table 10.4).

Table 10.4: Characteristics of Sorawe Alternatives

Figure 10.13: Sorawe Upper Alternatives

10.7 Cost Estimates


The following estimates summarizes cost for the Sorawe option ‘Upper 1’, a scheme that has an
installed capacity of 260 kW and is able to supply up to 2.1 GWh per year to Taro island and the
surrounding communities on the main island. Specific cost are relatively high which is a
consequence of the need to use an undersea cable and relatively long feeders to supply
outlaying communities.

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Table 10.5: Cost Estimates Tarp Hydro


US$ SB$
Feasibility Study 39,000 312,000
Development 47,000 376,000
Engineering 87,000 696,000
Hydro Turbine 201,000 1,608,000
Road Construction 105,000 840,000
Transmission Line Extraction 295,000 2,360,000
Undersea Cable 33 kV 249,600 1,996,800
Rural Electrification 175,000 1,400,000
Substation 4,000 32,000
Penstock 167,000 1,336,000
Canal 45,000 360,000
Other Civil Eng 283,000 2,264,000
Total 1,697,600 13,580,800
say $1.7 Million
US$/kW 6,529
say 6,500

The Cost Estimates presented here have been prepared for the purpose of prioritizing sites for
further investigation and should not be used for any other purpose. They are subject to the
limitations described in Section 1.4. Further detailed investigations, including geotechnical and
hydrological investigations, would be required to firm up the cost estimates for budget setting
purposes.

10.8 Financial Analysis


The hydro project is assumed to be commissioned in 2014 with diesel facilities commissioned in
2013. When commissioned, the hydro scheme will entirely displace need for diesel generation
to meet projected loads throughout the planning period. The hydro scheme, as with the other
schemes assessed in this TA, is assumed to have 100% diesel backup capacity. In other words,
it is assumed, for present purposes, that Taro is to become an SIEA outstation that will receive
the full diesel and distribution facilities required to operate it as an outstation, and that hydro
development is being considered as a least-cost option to supply the centre.

Profit and Loss


In comparison with the all-diesel scenario for Taro, the hydropower scenario results in
significantly reduced costs and much higher profitability under the current tariff as illustrated in
the following three Figures. (If Taro were to be constructed and commissioned as an all-diesel
centre, it would generate financial losses for SIEA.) The detailed financial projections for Taro
are shown in the Annex.

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Figure 10.14: Revenues and Operating Expenses Hydro Taro

Revenues vs Operating Expenses, Taro


Hydro Scenario
$7.000
$6.000
$5.000
SBD millions

$4.000
$3.000 Revenues
Expenses
$2.000
$1.000
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

Figure 10.15: Revenues and Operating Expenses Diesel Taro

Revenues vs Operating Expenses,


Taro All-Diesel Scenario
$7.000
$6.000
$5.000
SBD millions

$4.000
$3.000 Revenues
$2.000 Expenses
$1.000
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

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Figure 10.16: Profit/Loss Hydro and Diesel Taro

Profit/(Loss) After Tax and Finance Charges, Taro


$4.50

$4.00

$3.50

$3.00

$2.50
SBD Million

With Hydro
$2.00
All Diesel

$1.50

$1.00

$0.50

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
$(0.50)

FIRR Analysis
In a comparison of ‘with project’ (hydropower) and ‘without project’ (all-diesel) scenarios, the
financial internal rate of return (FIRR) of hydropower investment is evaluated at 18.4%, greatly
exceeding the WACC of 5.0%, with a financial net present value (FNPV, discounted at a rate
equal to the WACC) of SBD 22.2 million. The full FIRR/FNPV analysis table is presented in the
Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and
decreases in benefits (reduction in the rate of real growth in diesel fuel prices, reduction in
average annual hydro output, and reduced load forecast). The hydro option was found to be
robust to changes in any of these parameters, and to an adverse change in all of them
simultaneously, as shown in Table 10.6. The financial viability of the hydro project is most
sensitive to a reduction in the projected rate of growth in consumption.

Table 10.6: Sensitivity Analysis, Taro


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 22.19 18.4%
Increases in Costs
1. Capital Cost (SBD m) 20% 18.61 14.9% 0.81 13.58 30.29 123.1%
2. Hydro O&M Cost (SBD/kW) 20% 22.02 18.3% 0.04 280.00 7,824.60 2694.5%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 20.07 17.6% 0.48 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 22.19 18.4% - 90.5% 16.9% -81.3%
5. Load Forecast -20% 15.74 15.3% 1.45 4.0% 0.8% -81.1%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 10.26 11.2%
FNPV = financial net present value, FIRR = financial internal rate of return

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11. Mataniko and Lungga, Honiara

Options to augment Honiara power supply with smaller scale hydropower IPPs has not
originally been part of this TA which focuses on outer island electricity supply. However, SIG
(Ministry of Finance) suggested to include an analysis of two projects that have been proposed
by a prospective private IPP investor. These projects are both run off river schemes without any
storage. They are located at the Lungga River and the Mataniko River which discharges into the
sea right in the town of Honiara. While both schemes have been considered and surveyed by
the consultant GHD does not believe that the proposed low head Lungga scheme is feasible.
Thus, only the Mataniko scheme has been fully analysed below.

11.1 The Honiara Power System


Honiara is Solomon Island’s largest town and with a population of approximately 90,000 and a
growth of around 4% p.a. Currently approximately 75% of the town population has access to
electricity. With steep hills rising within 2 – 5 km from the coast the bulk of the population live
along the coast. The coastal plains to the east and west of Honiara show rather low population
density and little development. Population growth has mostly occurred in Honiara town itself. I.e.
growth has manifested itself mostly by a significant increase in average household size.

Generation
Honiara’s electricity supply consists of two SIEA diesel power stations, one located at Lungga,
approximately 8 km east of the town centre (Lungga Power Station), and the other in the town
centre (Honiara Power Station). These two power stations are interconnected via two 33 kV
circuits, one of which is an overhead line and the other an underground cable. Each circuit is
approximately 10 km in length. These circuits both terminate at the Honiara Power Station. In
addition to these transmission circuits, several 33kV underground distribution cables have
recently been installed to supply new 33/11kV zone substations at East Honiara and White
River.
The diesel engine generators currently installed at Lungga Power Station are a mixture of
medium speed units (500, 750 and 1,000rpm) duty. Honiara Power Station established as
Honiara’s power supply in the 50ies currently operates a single high speed Perkins 1,500 kW
unit de-rated to only 800 kW. Due to the open walled construction of Honiara Power Station and
its location behind the town centre, residents have complaint about noise. SIEA intends
decommission the station in the next few years. Operational generator units could be relocated
to Lungga, leaving the station as a distribution substation only.

In total, available capacity in May 2011 was only 11.6 MW, as displayed in Table 11.1 below.
Two major generator sets (L6 and L7) representing a total of 6 MW available capacity are down
due to a crankshaft failiure at L6 and a major overhaul of L7. The available capacity is not
sufficient to meet a peak demand of over 13 MW and there is no reserve capacity at all.
Therefore, load shedding is common in the Honiara system and SIEA has established
arrangement with larger customers such as hotels who can operate their stand-by sets in times
of power shortage. In 2010, SIEA generated a total of 73.5 GWh in Honiara compared with
69.8 GWh in 2009. Fuel storage capacity at the Lungga station is 200,000 liters in four tanks.

The fuel efficiency of the re-rated generators is comparatively low for the size and design of the
generator sets. In 2010 it averaged at 3.8 kWh per liter. It appears that most generators at
Lungga station suffer from cooling problems, especially during the hot season.

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Table 11.1: Honiara Generator Status May 2011

Engine
Station Make Rated (kW) De-rated (kW) Available (kW) Remarks
No

L5 Mirrlees 1500 900 900 In service

L6 Mirrlees 2900 2200 00 Faulty crankshaft

L7 Wartsila 4200 3800 00 Major O/H in progress

Lungga L8 Wartsila 4200 2,900 2,800 In service

Mitsubis
L9 4200 3300 3,300 In service
hi

L10 Niigata 4200 4000 3,900 In service

H1 Perkins 1500 700 00 Retired

Honiara H2 Perkins 1500 800 700 In service

H3 Perkins 1500 800 00 Faulty radiator fan bearing

Total MW 11,600

Source: Generation Manager SIEA

Distribution
Power is distributed to consumers in Honiara via a number of overhead and underground 11kV
feeders, 11kV/415 substations, and overhead and underground 4-wire 415V/240V (LV) circuits.
Figure 11.1 overleaf displays a simplified single line diagram for the Honiara system.

At the present time, all 11kV feeders emanate from the two power stations. The current area of
SIEA electricity supply in Honiara stretches from the White River, approximately 3.5 km to the
west of the town centre to Henderson Airport, approximately 10 km to the east of the town
centre. Prior to the ethnic tensions, the supply area was greater and extended to the west as far
as Mamara and to the east as far as the Solomon Islands Palm Oil estate (SIPL) at Tetere. The
transmission line poles for these supply areas are still standing, but conductors, cross arms and
transformers have been removed.

SIEA’s Honiara operation suffers from a number of serious problems: Firstly, the system occurs
unacceptably high technical and non-technical losses in the order of 25%. A best practice utility
the size of SIEA’s Honiara operation would have total losses below 10%. With support from the
World Bank SIEA has started to address this issue and has embarked upon a project to fast
track pre-payment meters in order to reduce arrears and non-technical losses.

SIEA has also commissioned a loss reduction study that identified numerous options to bring
technical losses down to acceptable levels. The lack of adequate capacity is another serious
problem for SIEA. At present management investigates options to augment thermal capacity at
Lungga. In addition, the Tina River Hydro project is currently being investigated in the
framework of a feasibility study financed by the European Investment Bank.

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Figure 11.1: Single Line Diagram SIEA Honiara

Source: SKM SIEA Loss Reduction Study 2011

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11.2 Load Forecast


Electricity consumption in Honiara is dominated by the commercial/industrial sector, accounting
for approximately 85% of total Honiara electricity generation of 73 GWh in 2010. Load growth in
Honiara has historically been higher than has been seen in the outstations, reaching a long-
term average of about 5% per year. At present, 100% of generation in Honiara is by diesel and
supply is severely constraint due to shortages of generation capacity. A complicating factor in
this analysis is that another, much larger, hydro scheme on the Tina River is currently being
investigated 22.
It is understood that the Tina River scheme, as currently proposed, would be commissioned in
two phases: phase I would initially provide 56 GWh per year to the Honiara grid in 2015, rising
to 61 GWh/year by 2023, and Phase II would provide an additional 73 GWh of energy to the
grid beginning in 2019, rising to nearly 86 GWh/year by 2030. The two Phases combined would
provide approximately 147 GWh/year to the grid by 2030. However, the Tina River scheme
faces severe uncertainties (similar to those that have dogged other large hydro schemes
proposed for Guadalcanal in the past). Therefore, in respect of the proposed Mataniko scheme,
two cases are considered: (i) assuming that the Tina River scheme is installed and
commissioned as currently proposed, and (ii) assuming that the Tina River scheme is not
installed.

Existing loads and new domestic, commercial, and industrial loads are expected to grow at 5%
per year. The Honiara system load forecast, estimation of generation requirements, load
factors, projected diesel and hydro generation requirements, and a schedule of new diesel
generation capacity installations required to provide 100% backup for the system over the 20-
year planning period are summarised, once for the ‘with Tina’ scenario and once again for the
‘without Tina’ case, in Tables 11.2 and 11.3 respectively. Figure 11.2 illustrates the generation
requirements for the Honiara system implied by the load forecast. Figure 11.3 shows a
projected generation mix assuming that both Mataniko and Tina went ahead.

Figure 11.2: Generation Requirements Honiara

Honiara Power System Load Forecast


250,000

200,000

150,000
MWh

Sales to Commercial
Sales to Domestic
100,000 Station and Line Losses

50,000

-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

22
Tina River Hydropower Development - Phase 1 Optimisation Study, Hydro Tasmania Consulting, 2011
31/25866 February 12 Page 111
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Figure 11.3: Generation Mix With and Without Tina

Honiara Generation Mix


250,000

200,000

150,000
MWh/year

Diesel
Tina Hydro

100,000 Mataniko Hydro

50,000

-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Honiara Generation Mix 2030

250,000

200,000

150,000
MWh/year

Diesel
Tina Hydro

100,000 Mataniko Hydro

50,000

-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

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Table 11.2: Honiara System Load Forecast, Generation Requirements, Fuel Requirements, and Backup Generator Scheduling (With Tina)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 4.96%
Electricity Sales (MWh)
Domestic 10,626 11,153 11,706 12,287 12,897 13,536 14,208 14,913 15,653 16,429 17,244 18,100 18,998 19,940 20,929 21,968 23,057 24,201 25,402 26,662 27,985
New Domestic - - - - - - - - - - - - - - - - - - - - -
Commercial & Other 62,656 65,764 69,027 72,451 76,045 79,818 83,778 87,934 92,296 96,875 101,681 106,726 112,020 117,578 123,411 129,533 135,959 142,704 149,784 157,215 165,014
New Commercial - - - - - - - - - - - - - - - - - - - - -
Total Sales 73,282 76,917 80,733 84,738 88,942 93,354 97,986 102,847 107,949 113,304 118,925 124,825 131,018 137,518 144,340 151,501 159,017 166,906 175,186 183,877 192,999

Sales to Domestic 10,626 11,153 11,706 12,287 12,897 13,536 14,208 14,913 15,653 16,429 17,244 18,100 18,998 19,940 20,929 21,968 23,057 24,201 25,402 26,662 27,985
Sales to Commercial 62,656 65,764 69,027 72,451 76,045 79,818 83,778 87,934 92,296 96,875 101,681 106,726 112,020 117,578 123,411 129,533 135,959 142,704 149,784 157,215 165,014
Station and Line Losses 6,372 6,688 7,020 7,369 7,734 8,118 8,521 8,943 9,387 9,853 10,341 10,854 11,393 11,958 12,551 13,174 13,828 14,514 15,234 15,989 16,783

Load Factor 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70

AAGR Generation = 4.96%


Generation Requirement (MWh) 79,654 83,606 87,753 92,107 96,676 101,472 106,506 111,790 117,336 123,157 129,267 135,680 142,411 149,476 156,891 164,675 172,844 181,419 190,419 199,866 209,781
Station and Line Losses (MWh) 6,372 6,688 7,020 7,369 7,734 8,118 8,521 8,943 9,387 9,853 10,341 10,854 11,393 11,958 12,551 13,174 13,828 14,514 15,234 15,989 16,783
Peak Demand (MW) 12.99 13.63 14.31 15.02 15.77 16.55 17.37 18.23 19.14 20.08 21.08 22.13 23.22 24.38 25.59 26.85 28.19 29.59 31.05 32.59 34.21
Required Capacity with Reserve (MW) 16.89 17.72 18.60 19.53 20.50 21.51 22.58 23.70 24.88 26.11 27.40 28.76 30.19 31.69 33.26 34.91 36.64 38.46 40.37 42.37 44.47

Fuel Required, Diesel+Tina Scenario (10^3 litres) 22,758 23,887 25,072 26,316 27,622 12,992 14,252 15,583 16,989 - - 178 1,593 3,103 4,892 6,786 8,791 10,911 13,153 15,522 18,025

9 Mataniko Hydro Scenario Generation Calculation


Generation Mix with hydro (MWh/year)
Tina River Hydro Tina flag = 1
Stage 1 Output (HT Option 6) - - - - - 56,000 56,625 57,250 57,875 58,500 59,125 59,750 60,375 61,000 61,000 61,000 61,000 61,000 61,000 61,000 61,000
Stage 2 Output (HT Option 3) - - - - - - - - - 73,000 74,154 75,308 76,462 77,615 78,769 79,923 81,077 82,231 83,385 84,538 85,692
Total Existing Hydro (adjusted to load) - - - - - 56,000 56,625 57,250 57,875 110,456 116,566 122,979 129,710 136,775 139,769 140,923 142,077 143,231 144,385 145,538 146,692
Mataniko Hydro - - - - 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701
Diesel 79,654 83,606 87,753 92,107 83,975 32,771 37,180 41,839 46,760 0 0 0 0 0 4,421 11,051 18,066 25,487 33,334 41,626 50,388
Fuel Required, Hydro Scenario (10^3 litres) 22,758 23,887 25,072 26,316 23,993 9,363 10,623 11,954 13,360 0 0 0 0 0 1,263 3,157 5,162 7,282 9,524 11,893 14,397
Fuel Saved by Mataniko Hydro (10^3 litres) - - - - 3,629 3,629 3,629 3,629 3,629 (0) (0) 178 1,593 3,103 3,629 3,629 3,629 3,629 3,629 3,629 3,629

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (existing) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 2 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 3 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 4 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 5 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Unit 6 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Unit 7 (new) 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Total Installed Capacity (MW) 26 26 26 26 26 26 26 26 26 26 26 44 44 44 44 44 44 44 44 44 44
Firm Capacity Available 22 22 22 22 22 22 22 22 22 22 22 36 36 36 36 36 36 36 36 36 36
Memo: Units Added
Small Units (4 MW) - - - - - - - - - - - 1 - - - - - - - - -
Large Units (8 MW) - - - - - - - - - - - 4 - - - - - - - - -

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Table 11.3: Honiara System Load Forecast, Generation Requirements, Fuel Requirements, and Backup Generator Scheduling (Without Tina)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 Load Forecast AAGR Sales = 4.96%
Electricity Sales (MWh)
Domestic 10,626 11,153 11,706 12,287 12,897 13,536 14,208 14,913 15,653 16,429 17,244 18,100 18,998 19,940 20,929 21,968 23,057 24,201 25,402 26,662 27,985
New Domestic - - - - - - - - - - - - - - - - - - - - -
Commercial & Other 62,656 65,764 69,027 72,451 76,045 79,818 83,778 87,934 92,296 96,875 101,681 106,726 112,020 117,578 123,411 129,533 135,959 142,704 149,784 157,215 165,014
New Commercial - - - - - - - - - - - - - - - - - - - - -
Total Sales 73,282 76,917 80,733 84,738 88,942 93,354 97,986 102,847 107,949 113,304 118,925 124,825 131,018 137,518 144,340 151,501 159,017 166,906 175,186 183,877 192,999

Sales to Domestic 10,626 11,153 11,706 12,287 12,897 13,536 14,208 14,913 15,653 16,429 17,244 18,100 18,998 19,940 20,929 21,968 23,057 24,201 25,402 26,662 27,985
Sales to Commercial 62,656 65,764 69,027 72,451 76,045 79,818 83,778 87,934 92,296 96,875 101,681 106,726 112,020 117,578 123,411 129,533 135,959 142,704 149,784 157,215 165,014
Station and Line Losses 6,372 6,688 7,020 7,369 7,734 8,118 8,521 8,943 9,387 9,853 10,341 10,854 11,393 11,958 12,551 13,174 13,828 14,514 15,234 15,989 16,783

Load Factor 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70

AAGR Generation = 4.96%


Generation Requirement (MWh) 79,654 83,606 87,753 92,107 96,676 101,472 106,506 111,790 117,336 123,157 129,267 135,680 142,411 149,476 156,891 164,675 172,844 181,419 190,419 199,866 209,781
Station and Line Losses (MWh) 6,372 6,688 7,020 7,369 7,734 8,118 8,521 8,943 9,387 9,853 10,341 10,854 11,393 11,958 12,551 13,174 13,828 14,514 15,234 15,989 16,783
Peak Demand (MW) 12.99 13.63 14.31 15.02 15.77 16.55 17.37 18.23 19.14 20.08 21.08 22.13 23.22 24.38 25.59 26.85 28.19 29.59 31.05 32.59 34.21
Required Capacity with Reserve (MW) 16.89 17.72 18.60 19.53 20.50 21.51 22.58 23.70 24.88 26.11 27.40 28.76 30.19 31.69 33.26 34.91 36.64 38.46 40.37 42.37 44.47
Fuel Required, Diesel Only (No Tina) Scenario
(10^3 litres) 22,758 23,887 25,072 26,316 27,622 28,992 30,430 31,940 33,525 35,188 36,933 38,766 40,689 42,707 44,826 47,050 49,384 51,834 54,405 57,105 59,938

9 Mataniko Hydro Scenario Generation Calculation


Generation Mix with hydro (MWh/year)
Tina River Hydro Tina flag = -
Stage 1 Output (HT Option 6) - - - - - - - - - - - - - - - - - - - - -
Stage 2 Output (HT Option 3) - - - - - - - - - - - - - - - - - - - - -
Total Existing Hydro (adjusted to load) - - - - - - - - - - - - - - - - - - - - -
Mataniko Hydro - - - - 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701
Diesel 79,654 83,606 87,753 92,107 83,975 88,771 93,805 99,089 104,635 110,456 116,566 122,979 129,710 136,775 144,190 151,974 160,143 168,718 177,718 187,165 197,080
Fuel Required, Hydro Scenario (10^3 litres) 22,758 23,887 25,072 26,316 23,993 25,363 26,802 28,311 29,896 31,559 33,305 35,137 37,060 39,079 41,197 43,421 45,755 48,205 50,777 53,476 56,309
Fuel Saved by Mataniko Hydro (10^3 litres) - - - - 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629 3,629

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
10 Diesel Generator Scheduling
Unit 1 (existing) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 2 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 3 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 4 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00
Unit 5 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Unit 6 (new) 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Unit 7 (new) 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Total Installed Capacity (MW) 26 26 26 26 26 26 26 26 26 26 26 44 44 44 44 44 44 44 44 44 44
Firm Capacity Available 22 22 22 22 22 22 22 22 22 22 22 36 36 36 36 36 36 36 36 36 36
Memo: Units Added
Small Units (4 MW) - - - - - - - - - - - 1 - - - - - - - - -
Large Units (8 MW) - - - - - - - - - - - 4 - - - - - - - - -

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11.3 System Expansion Planning


At present there is insufficient information to determine how Honiara’s generation will be
expanded. What is certain is that capacity needs to be increased either through Tina or through an
upgrade of the thermal station at Lungga. The proposed Mataniko hydro scheme would displace
initially 13% of the need for other generation in Honiara immediately after it is commissioned,
declining to about 6% by 2030 as illustrated in Figure 11.3 above showing the contributions to
generation under the ‘with Tina’ case and the ‘without Tina’ case, respectively. On the distribution
side, SKM identified approximately 1,000 households and businesses that could be connected if
the Honiara system was extended to residential areas to the East and the West of the current
supply area.

11.4 Hydro Options for Honiara


In addition to the Tina project two more hydro options exists to supply the Honiara grid.
Figure 11.14 shows the location of the Lungga and the Mataniko projects.

Figure 11.4: Location of Lungga and Mataniko Projects

Mataniko

Lungga

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Lungga
The Lungga project which in its original design included a dam and a reservoir as well as
tunnelling had to be abandoned after more than 10 years of study because of numerous
geotechnical challenges including porous lime stone formations and a very thick layer of alluvium
that would render the construction of any larger structure in the riverbed a massive challenge. It
has now proposed by a prospective IPP investor to install barrages with low head turbines located
in the riverbed. Such a construction has to deal with extreme flooding assumed to be in the range
of 5,000 m3/s through the construction of large spillways. An analysis has been carried out with
heads varying from 10 to 35m and a capacity of the power plant varying from 15 to 40m3/s.
The flow duration curve for the site shows that a typical low flow is in the region of 4 m3/s. This
requires turbines to operate at a wide interval of discharge. At the lowest flow, ponding may
concentrate the flow in the peak hours of the day, so the minimum discharge would be raised to 8-
10 m3/s. As the possible design flow of 15-40 m3/s is small for a low head scheme, a single Kaplan
turbine would be an option, in the lower head interval. With more head and at the less design flow
a horizontal axis bulb turbine may be an option as well. With higher heads and smaller design
flows, a horizontal axis double runner Francis turbine seems to become least cost option.
The calculated levelized cost of energy produced excluding land acquisition and finance cost
seems to be about USD 0.18 per kWh at a head of 15 m, a design discharge of 35 m3/s and a
generating capacity of 4.46 MW, an average energy production of 22.3 GWh/yr and a direct
investment of USD 25 millions. The levelized cost per kWh increases beyond this with head until
about USD 0.23 per kWh at a head of 35 m as displayed in Table 11.4.

Table 11.4: Design Variations of Lungga Low Head Scheme

Head Qdesign m3/s MW Production GWh/yr Investment US$ Levelized USD/kWh


10 35 2.91 14.525 17,248,000 0.1846
15 35 4.46 22.261 24,910,000 0.1739
20 40 6.84 31.011 38,082,000 0.1909
25 40 8.60 38.990 50,373,000 0.2008
30 40 10.44 47.333 63,116,000 0.2073
35 35 10.66 53.208 78,371,000 0.2289

Technically the main concern of the proposed scheme is the seepage below the barrage through a
thick layer of gravel and limestone and the potential cavities in the limestone formation. It is
assumed that an apron is constructed upstream of the barrage and at the edge of that a cut-off
wall made to a depth of 8-10 m, below which cement injection is used to reduce the permeability of
the sediments and limestone. An additional challenge would be the seismic design of the barrage.
As the levelized cost for a low head scheme at the Lungga gorge would be more than double the
cost of the competing Mataniko scheme, the Lungga option is not analysed further.
The Mataniko scheme on the other hand has its own challenges, but at this stage seems to be a
more attractive option and is therefore analysed in detail below.

11.5 General Description Mataniko


Mataniko River discharges near the centre of Honiara, which would allow the construction of a
powerhouse 3 km from the coastline and about 500 m outside the town boundary. The Project is
fairly small, potentially 2-3.5 MW, which means that the power production can be absorbed to
100% into the Honiara which suffers severe shortage of power. It appears very competitive with a
levelized cost about 0.085 USD/kWh. The project is simple and allows a short construction period

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(the delivery and installation time for the turbine, which may be about 2 years). There are,
however, major obstacles to the development of the site. The most critical is perhaps the land
acquisition issue. Landowners in the area have already requested compensation of 1 million SB$
for the installation of a gauging station which was therefore not implemented and future
compensation claims may render the project un-feasible.

11.6 Hydrology
In the absence of any runoff records for the Mataniko River, it is assumed that it would be 70 % of
the specific runoff from Lungga Gorge, a catchment that is only a couple of km from Mataniko (see
Figure 11.4). The estimate of 70% is based on the generally lower altitude of the Mataniko
catchment and the formula for rainfall versus altitude developed in the Tina hydrology report.
Applying these assumptions leads to the flow duration curves shown below. The Mataniko
catchment is divided into two areas, one of 22.1 km2 on the main stream and a side catchment of
9.4 km2, which joins the main stream below elevation 120 m. An intake at elevation 162 m is
assumed on the mainstream, while the side catchment has to be tapped at Elevation 120 m and
pumped up into the main headrace canal when needed.

Figure 11.5: Flow Duration Curves for two Mataniko Catchments

5.0

4.0 Flow duration curves for Mataniko


3.0
M3/s

2.0

1.0

0.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of Time Exceeding

31.5km2 Catchment 22.1km2 Catchment

Assuming a similar extreme flood level as Lungga Gorge measured in m3/s/km2 and about
5,000m3/s at Lungga Gorge, the extreme floods of 485 m3/s could be expected for the Mataniko
river. However flood levels would have little impact on the design work for Mataniko HPP. As the
intakes are assumed to be constructed as submergible structures, flood levels would only be
relevant for the tail water level for the powerhouse.

11.7 System Layout


The long profile of the Mataniko River shown in Figure 11.6 reveal the characteristics that
determine the layout of the scheme. The bottom profile of the river indicates where the slope of the
river is high enough to make hydropower development viable. Typically about 20 m per km at a
flow of a few m3/s is considered as the lower limit. In other words it would not economic to push the
powerhouse further downstream for the purpose on increased head than what is shown on the
chart. At the top of the chart the level of the ridge is shown, which expresses how far a canal can
be constructed downstream along the river.
As it does not look attractive to move the powerhouse further upstream an intake elevation about
elevation 160-165 m seems to be the upper level. The slope towards the river from the ridge is

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very steep in certain areas in the upper part of the gorge. This requires the canal be placed as high
up on the ridge as possible above the steepest part of the slope. This would facilitate construction
and limited the risk of landslides damaging the canal.
At the proposed level about elevation 160 m, a large part of the canal is on the grass covered top
of the ridge with easy access for construction and maintenance. The disadvantage of the high
canal alignment is that the canal becomes longer, as the contour lines are much less straight as on
the steeper part below. At the top of the gorge a tributary joins from the east and only about 230 m
from the main stream it divides into several smaller streams. It is not practical to go locate an
intake beyond elevation 120 m, from where a short canal would be constructed and the water
pumped 41 m up into the main canal through a pump penstock. This is best achieved by using an
adjustable flow pump, as the flow to be pumped varies from about 150 to 850 liters/s.

Figure 11.6: Long Profile Mataniko River

200
180 Mataniko Long Profile
160
140
120
m.a.s.l.

100
80
60
40
20
0
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 9,000 9,500
Distance in m measured along river to the sea

Main River Penstock Main Canal Side river


Side canal Pump Penstock Ridge Level

Road Access
For construction and maintenance an access road is constructed to the fore bay at the end of the
canal and at the top of the penstock. The road may be rather narrow, but should be paved, as a
steep road between 1:10 and 1:8 will suffer heavily from erosion if designed as a gravel road. The
road may cross the river either with an Irish Crossing (a concrete ramp going down into the river
and up the other side, with some pipes below managing the minimum flow) or with a bridge with
sufficient clearance to pass the extreme flow (585 m3/s) along with some large trees floating on the
flood.
The powerhouse requires its own access road has to be. There are two possibilities: the road can
pass the river along with the other road and then follow the bank of the river up to the powerhouse.
The last few hundred meters may be quite steep on the slope. The alternative is on the opposite
side of the river, where there is significantly less slope. However this option required crossing of
two side valleys and a crossing of the river upstream of the powerhouse with an Irish crossing, as
the flow there 90 % of the time would not be an obstacle. Under flood condition the powerhouse
may be reached on foot from the other access road along the bank.
A 2-jet Turgo turbine is considered the optimal solution for all tested design flows. The use of less
expensive Francis turbines is not recommendable as Francis turbines cannot operate under about
45% of design load. For Mataniko however, minimum flows are about 7-15% depending on the
installed capacity. A double runner Francis would be able to operate down to 22.5% of design flow,
while a multi-jet impulse turbine may manage practically any flow. The Turgo turbine requires a

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fairly large turbine hall. For a turbine with a capacity of 3 m3/s and delivering 3.3 MW a turbine hall
of 21.6 m x 14 m (301 m2) would be required. The powerhouse would typically be remote
controlled through a SCADA system

Figure 11.7: Layout of Mataniko Scheme

Seismic design loads


For Honiara about 5 m/s2 design peak ground acceleration with a probability 10% in 50 yrs is
assumed. This corresponds with a return period of 475 yrs. The project does not include dams and
reservoirs, which in case of failure would result in a flood wave passing through the centre of
Honiara. The seismic risk of the run off river design is loss of production until landslides damaging
the canal have been repaired. This consideration may require higher design acceleration in the
order of 6.5 m/s2. A higher specification impacts on the size of thrust blocks on the steep penstock
and may require the use of deep rock anchors. The slope stability around the canal is also affected
by seismic events. To mitigate this problem, the canal alignment has been pushed as far as
possible up the slope of the gorge, where the slope gradient is lower. On the steeper part, draining
off surface flow on the slope and subsurface drains under the canal would significantly reduce the
risk of landslides, which are typically triggered is by saturation of and cracks in the soil.

11.8 Variations
In order to establish the most economic design cost and energy production analysis has been
carried out for 8 different variations whose results are displayed in Figure 11.8 below. Accordingly
it appears that an installed capacity of 2.47 MW (design flow 2.0 m3/s), and an average annual
production about 12.6 GWh/yr would be the optimal configuration with a total investment of about
US$ 6.7 million and levelized energy cost of 0.085 USD/kWh.

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Figure 11.8: Cost and Energy Production Analysis Mataniko Variations

15

14
Annual Production versus Installed Capacity

13

12
GWh/yr

11

10

8
1,000 1,500 2,000 2,500 3,000 3,500 4,000
kW Installed

3,900
Investment per kW Installed Capacity
3,700

3,500

3,300
USD/kW

3,100

2,900

2,700

2,500
1,000 1,500 2,000 2,500 3,000 3,500 4,000
kW Installed

0.25
Production cost versus annual production
0.20
USD/kWh

0.15 Levelized
USD/kWh
0.10

0.05
9 10 11 12 13 14
GWh/yr

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Table 11.5: Technical Characteristics of Mataniko Variations

Penstock Runner Generator


Design Canal slope Canal Penstock Diameter diameter output Plant Production/yr
flow m/km Hm loss m m kW factor GWh/yr
1.067 1.40 0.74 1.53% 0.73 0.50 1,144 0.84546 8.833
1.447 1.29 0.85 1.36% 0.84 0.57 1,636 0.74858 10.583
1.828 1.21 0.93 1.25% 0.93 0.63 2,076 0.65777 11.793
2.194 1.15 1.01 1.18% 0.98 0.69 2,474 0.58605 12.619
2.285 1.14 1.03 1.16% 1.03 0.70 2,572 0.57160 12.785
2.590 1.10 1.08 1.12% 1.08 0.70 2,904 0.53639 13.226
3.047 1.05 1.16 1.06% 1.16 0.74 3,437 0.53639 13.725
3.500 1.01 1.23 1.02% 1.24 0.85 4,045 0.53639 14.027

11.9 Cost Estimates


The following Table 11.6 summarizes cost estimates for a scheme at the Mataniko river that has
an installed capacity of 2.74 MW and is able to supply up to 12.7 GWh per year to the SIEA
system in Honiara. Specific cost are relatively low in comparison with other schemes as there are
no long power extraction lines needed.

Table 11.6: Cost Estimates Mataniko Hydro


US$ SB$
Feasibility Study 221,000 1,768,000
Development 257,000 2,056,000
Engineering 396,000 3,168,000
Hydro Turbine 1,968,000 15,744,000
Road Construction 164,000 1,312,000
Transmission Line Extraction 60,000 480,000
Substation 36,000 288,000
Penstock 348,000 2,784,000
Canal 1,580,000 12,640,000
Other Civil Eng 2,119,000 16,952,000
Total 7,149,000 57,192,000
say $7.2 Million
US$/kW 2,609
say 2,600

The Cost Estimates presented here have been prepared for the purpose of prioritizing sites for
further investigation and should not be used for any other purpose. They are subject to the
limitations described in Section 1.4. Further detailed investigations, including geotechnical and
hydrological investigations, would be required to firm up the cost estimates for budget setting
purposes.

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11.10 Financial Analysis


For the purpose of the financial analysis it is assumed the project to be commissioned in 2014,
with its output representing about 13% of the total generation requirement of the Honiara grid in
that year. A complicating factor in this analysis is that another, much larger, hydro scheme on the
Tina River is currently being investigated 23. It is understood that the Tina River scheme, as
currently proposed, would be commissioned in two phases: phase I would initially provide 56 GWh
per year to the Honiara grid in 2015, rising to 61 GWh/year by 2023, and Phase II would provide
an additional 73 GWh of energy to the grid beginning in 2019, rising to nearly 86 GWh/year by
2030. The two Phases combined would provide approximately 147 GWh/year to the grid by 2030.
However, the Tina River scheme faces severe uncertainties (similar to those that have dogged
other large hydro schemes proposed for Guadalcanal in the past). Therefore, in respect of the
proposed Mataniko scheme, two cases are considered: (i) assuming that the Tina River scheme is
installed and commissioned as currently proposed, and (ii) assuming that the Tina River scheme is
not installed.

Profit and Loss with Tina


In comparison with the Diesel + Tina scenario for Honiara, the Mataniko hydropower scenario
results in marginally reduced costs and marginally higher profitability under the current tariff as
illustrated in the following three figures, Figure 11.9, Figure 11.10 and Figure 11.11. I.e. in case the
Tina project went ahead, Mataniko does not appear to be an attractive option. The detailed
financial projections for Honiara under the with-Tina case are shown in the Annex 4 and 5.

Figure 11.9: Revenue versus Operating Expenses Mataniko with Tina

Revenues vs Operating Expenses,


Honiara Matakino Hydro Scenario
$1,400.00

$1,200.00

$1,000.00
SBD millions

$800.00

$600.00 Operating Revenues


Operating Expenses
$400.00

$200.00

$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

23
Tina River Hydropower Development - Phase 1 Optimisation Study, Hydro Tasmania Consulting, 2011

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Figure 11.10: Revenue versus Operating Expenses Honiara with Tina

Revenues vs Operating Expenses,


Honiara Diesel+Tina Scenario
$1,400.00
$1,200.00
$1,000.00
SBD millions

$800.00
$600.00 Operating Revenues

$400.00 Operating Expenses

$200.00
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

Figure 11.11: Profit/Loss SIEA Honiara with Tina

Profit/(Loss) After Tax and Finance Charges, Honiara


$800.00

$700.00

$600.00

$500.00
SBD Million

$400.00
Mataniko + Tina Hydro
Diesel + Tina
$300.00

$200.00

$100.00

$-
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Profit and Loss without Tina


In comparison with the Diesel Alone (without Tina) scenario for Honiara, the Mataniko hydropower
scenario results in significantly reduced costs and higher profitability under the current tariff as
illustrated in the following three Figures. The detailed financial projections for Honiara under the
without-Tina case are shown in the Annex.

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Figure 11.12: Revenue versus Operating Expenses Mataniko without Tina

Revenues vs Operating Expenses,


Honiara Matakino Hydro Scenario
$1,400.00

$1,200.00

$1,000.00
SBD millions

$800.00

$600.00 Operating Revenues


Operating Expenses
$400.00

$200.00

$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

Figure 11.13: Revenue versus Operating Expenses Honiara with Tina

Revenues vs Operating Expenses,


Honiara Diesel Alone Scenario
$1,400.00
$1,200.00
$1,000.00
SBD millions

$800.00
$600.00 Operating Revenues

$400.00 Operating Expenses

$200.00
$-
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030

Figure 11.14: Profit/Loss SIEA Honiara with Tina

Profit/(Loss) After Tax and Finance Charges, Honiara


$200.00

$180.00

$160.00

$140.00

$120.00
SBD Million

$100.00
Mataniko Hydro, No Tina

$80.00 Diesel Alone (No Tina)

$60.00

$40.00

$20.00

$-
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

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FIRR Analysis with Tina


In a comparison of ‘with project’ (Mataniko hydropower) and ‘without project’ (Diesel + Tina)
scenarios, the financial internal rate of return (FIRR) of hydropower investment is evaluated at
40.4%, greatly exceeding the WACC of 5.0%, with a financial net present value (FNPV, discounted
at a rate equal to the WACC) of SBD 215.7 million. The full FIRR/FNPV analysis table is presented
in the Annex.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and decreases in
benefits (reduction in the rate of real growth in diesel fuel prices, reduction in average annual
hydro output, and reduced load forecast). The hydro option was found to be robust to changes in
any of these parameters, and to an adverse change in all of them simultaneously, as shown in
Table 11.7 with Tina, the financial viability of the Mataniko scheme is most sensitive to a reduction
in the load forecast (as then Tina becomes a larger portion of the total load), followed by a
reduction in Mataniko output.

Table 11.7: Sensitivity Analysis, Mataniko (with Tina)


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 215.74 40.4%
Increases in Costs
1. Capital Cost (SBD m) 20% 200.70 32.3% 0.35 57.19 221.25 286.9%
2. Hydro O&M Cost (SBD/kWh) 20% 213.46 40.0% 0.05 0.08 1.59 1887.0%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 195.65 38.6% 0.47 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 162.36 31.1% 1.24 58.6% 14.2% -75.8%
5. Load Forecast -20% 125.52 36.7% 2.09 5.0% 0.0% -100.0%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 62.69 17.4%

FNPV = financial net present value, FIRR = financial internal rate of return

FIRR Analysis without Tina


In a comparison of ‘with project’ (Mataniko hydropower) and ‘without project’ (Diesel Alone (without
Tina)) scenarios, the financial internal rate of return (FIRR) of hydropower investment is evaluated
at 47.4%, greatly exceeding the WACC of 5.0%, with a financial net present value (FNPV,
discounted at a rate equal to the WACC) of SBD 301.5 million. The full FIRR/FNPV analysis table
is presented in the Annex. The higher financial performance of the Mataniko project in the without-
Tina case in comparison with the with-Tina case is expected, as the project without Tina displaces
more diesel generation than it does in the with-Tina case.
Sensitivity analysis has been carried out for increases in costs (capital and O&M) and decreases in
benefits (reduction in the rate of real growth in diesel fuel prices, reduction in average annual
hydro output, and reduced load forecast). The hydro option was found to be robust to changes in
any of these parameters, and to an adverse change in all of them simultaneously, as shown in
Table 11.8. In the without Tina case, the financial viability of the Mataniko scheme is most
sensitive to a reduction in hydro output, but is not at all sensitive to a reduction in the load forecast
(because diesel generation is dominant in the total supply).

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Table 11.8: Sensitivity Analysis, Mataniko (without Tina)


Test Switching
Variation Sensitivity Basecase Switching Value
Test Case (+/- %) FNPV FIRR Indicator Parameter Value (+/-%)
Base (reference case) 301.49 47.4%
Increases in Costs
1. Capital Cost (SBD m) 20% 299.21 47.1% 0.04 57.19 286.45 400.9%
2. Hydro O&M Cost (SBD/kWh) 20% 263.22 42.7% 0.63 0.08 2.19 2637.0%
Decrease in Benefits
3. Diesel Fuel Cost (real
increase/annum) -20% 276.35 45.6% 0.42 3.0% 0.0% -100.0%
4. Hydro Output (capacity factor) -20% 226.15 37.9% 1.25 58.6% 11.7% -80.0%
5. Load Forecast -20% 301.49 47.4% 0.00 5.0% 0.0% -100.0%
Initial Costs Increased (+) and
Benefits Decreased (-) 20% 189.17 29.8%

FNPV = financial net present value, FIRR = financial internal rate of return

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12. Environmental Aspects

12.1 Methodology
In order to assist any subsequent environmental assessment, a narrative description of the
environment and of anticipated impacts is provided for each subproject. The ADB’s Rapid
Environmental Assessment (REA) checklist for hydropower was used to determine the
environmental categorization for each of the six sites selected for this pre-feasibility study.
The REA was undertaken by an independent consultant and completed in the period 6
September to 6 October 2011. It involved visits to each proposed location to determine the
broad environmental considerations relevant at each site and consultations with intended
project beneficiaries and landowners to ensure relevant primary data was collected. During
site visis broad stakeholder consultations were held. The following section examines the
potential environmental impacts and mitigation measures to be used in the construction and
operation of a mini hydropower facility at these sites. A separate REA sheet is provided in
Annex 6 for each subproject.

Public Consultation and Information Disclosure


Consultations and discussions were held with community groups, Provincial Government
officials, community leaders and schoolteachers in each location to raise awareness in the
proposed project and the environmental and social impacts that could be expected. In each
case, a broad range of questions was asked to prompt discussion on concerns relating to the
project. Concerns over the perception that dams or reservoirs were to be constructed and the
impact those facilities might have on the water quality and livelihoods were allayed once the
proposed hydro system was generally described. Questions were also asked over the
presence of sites of cultural or religious significance, wildlife and general community use
within the project catchments, which provided information as to the likely environmental
impacts from the project. Table 12.1 displays the public consultations held. Annex 6 also
contains a list of stakeholders consulted.

Table 12.1: Public Consultations

Site Date Community No. Male Female


Persons

Auki 10/9/1 Kwainoa 8 5 3

Lata 26/9/11 Pala 30 18 12

Mase 3/10/11 Mase 45 35 10

The participants in those sites where public consultations were carried out were all in favour
of improved electricity supplies because of the improvements it would bring to their ability to
develop business opportunities, schools and studies and general reduced reliance on the
household use of fossil fuels which are becoming prohibitively more expensive. There were
no negative impacts raised from the project and there was an overall desire in all sites to
start the works as soon as possible. There were no public consultations at Ringgi as the site
is within leasehold land of the forest company. At Taro, there was no village in the vicinity of
the proposed project site, and no consultation was carried out at Honiara as landowner
issues had already been identified.

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12.2 Project Description


The projects considered in this study are small run-of-river hydropower projects with
minimum technical complexity. They are similar but vary in size and scale depending on the
location. Typically, they will involve the following construction activities at each site, should
they satisfy the selection criteria for a more detailed feasibility study and progress to
construction.
a) Access roads – these will be constructed from the end of any existing roads to the
power house and fore bay structure to allow the delivery of construction materials,
penstock pipes and electromechanical equipment.
b) Intake structures – these are excavated on the river bank to divert run-of-stream flows
into a canal using a submerged intake sill to provide sufficient flow into the canal and
still provide for fish passage. A minimum stream flow level should be determined for
each site.
c) Headrace canal and fore bay – the concrete headrace canals are constructed on the
contour on an excavated bench on a very low gradient over varying distances from
the intake structure to the fore bay structure, which delivers water to the penstocks.
d) Penstock – these are prefabricated 250-300 mm steel pipes, buried in a trench or
placed on bearer blocks or foundations, which take water directly down slope from the
fore bay to the power house. The length of the penstocks varies at each site
depending on the available head.
e) Power house – generally a small structure located on the river bank at the bottom of
the penstock that houses the turbines and electromechanical equipment. Access is by
a road to be constructed.
f) Transmission lines – deliver the electricity from the power house site to the grid via
lines suspended from power poles along a corridor, often an existing road, but also
cleared through natural and plantation forest and across garden land.

12.3 Local Environment Auki, Malaita Province

Physical Resources
The Fiu River catchment is narrow and elongated and runs in a southeast to northwest
direction through predominantly Cretaceous and Tertiary limestone and sedimentary
formations. The headwaters arise on the slope of Tolosi Hill, 896 m asl, and run some 24 km
to the coast, entering the sea north of Auki.
The catchment has a width of around 1 – 2 km in the middle to upper reaches, gradually
widening to 2 – 4 km in the lower reaches. It is generally steep terrain with slopes in excess
of 35 – 40 degrees arising from the river near the powerhouse site and rising some 120 m
and more in altitude within 300 m of the river channel.
Numerous ephemeral gullies enter the river system, characterised by large boulders and
blocks of limestone, on both sides of the valley. Surface water flows are intermittent during
high intensity rainstorm events and often flow underground where there are sinkholes in the
limestone formations. Water was observed to enter at river level at many places along the
river. Seepage points at higher elevations are used for domestic water supply. The water is
very clear with little or no suspended sediments in normal flows.
The river passes through a steep sided gorge from below the village of Kwainoa before
widening around 1 km upstream from the end of the road. This lower section of the river to
the gorge is used for village access before the track climbs up around 80 m above the river.
The river channel is stable, with vegetation growing right down to the riverbanks. While high
flows of around 4m above normal flow in the gorge near Kwainoa are reported, these peak

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flows are of short duration and generally less than 24 hours. There is no evidence of stream
bank erosion and loss of vegetation along the river channel.
Tropical cyclones are a regular feature throughout Solomon Islands and can cause wide
scale destruction to forest and water resources and infrastructure. Average annual rainfall at
Auki is around 3,200 mm with higher monthly values from January to March. An automatic
rain gauge has been established near the village of Kwainoa on an exposed limestone
outcrop. An automatic water level recorder has been installed on the true left bank on the Fiu
River near the proposed power station site and the track linking the village houses on both
sides of the river. Both gauging stations were installed as part of the RETA 7329 project in
each of the project sites and will provide more reliable data on the hydrological
characteristics of the catchment.
Earthquakes of a magnitude greater than 5.5 on the Richter scale occur about twelve times
each year in the Solomon Islands. Most activity is in Santa Cruz, Makira, the south and south
east of Guadalcanal, the Russell Islands, southern New Georgia and the Shortland Islands.
Malaita, Santa Isabel and Choiseul are less active 24.

Ecological Resources
The forest within the middle to upper reaches of the catchment has not been subject to
commercial logging operations. Low intensity community logging has resulted in cleared land
for agriculture mid slope above the river gorge. Forest species include Canarium indicum and
Pometia pinnata, both used for local village construction activity. Some large diameter
species were observed within the gorge section, which has generally been untouched by
human activity due to it being largely inaccessible.
Slopes are stable with little evidence of active land slips or slumping. Garden activity is
generally located on mid slopes and does not exhibit soil loss due to rill and gully erosion.
The forest is considered generally poor in terms of wildlife for village hunting purposes. Wild
pig populations are very low and are not hunted. Bird life was hunted for food, particularly
kurkuru (pigeon) but this activity has been discontinued when all privately owned firearms
were confiscated ten years ago as a result of civil tensions within the country. Villagers report
the pigeon population has increased since the demise of hunting activity. Possum numbers
are reported to be plentiful but, for the same reasons, are not hunted.
Locals report there are now no large fish species within the catchment, when extensive
trapping and netting in the lower reaches resulted in the loss of the fish population some ten
years ago. Smaller endemic fish species are plentiful in the river but are not fished by local
communities. There is an abundance of amphibian species, with most pools and river
margins showing an abundance of frogs and tadpoles.
There are no known protected areas within the study area. The local community has ensured
the forest has not been extensively logged other than for their own requirements. The river
gorge section around the power station site is unlikely to be logged due to the very steep
terrain. Access and terrain are the main constraints to commercial logging activities that are
common in other catchments on Malaita.

Economic Development
The area proposed for this small-scale project lacks any infrastructure. It is remote and there
are no roads beyond the end of Fulisango Road, some 8 km from Auki. There is no
reticulation of power, water or other services in the project area.

24
Aldrick, John M, 1993. The Susceptibility of Lands to Deterioration in the Solomon Islands, Project Working
Paper 12. Ministry of Natural Resources, AIDAB.

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The main economic activity is subsistence agriculture with limited commercial quantities of
cocoa and coconut. Commercial crops include cocoa and coconut but distance from the
market and the lack of road access has severely restricted development of any activity. Local
production of sawn timber is a key activity. Access to the market is a major constraint in the
development of livelihoods, and all produce must be taken by foot.
There is no supply of crushed aggregate for construction in the vicinity of Auki although there
is reported to be gravel extraction from the lower reaches of the Fiu River near the coast.
While a mobile crushing plant is potentially available for use on Malaita and a suitable
resource has been identified, ongoing landowner issues and subsequent damage to property
and machinery have been cited as the reason why there is little interest from local operators
to establish one there. A mobile batching plant has been used for a range of recent provincial
infrastructure projects, but all crushed aggregate is sourced from Honiara.

Social and Cultural Resources


The resident population in this catchment is small. The customary owned land is used for
subsistence agriculture and limited scale logging activity for local use. All access to upper
catchment villages is by foot.
The community have described the presence of numerous tambu sites on the ridge top on
the north side of the river. These sites are not located near any proposed construction
activity associated with the project. A burial site is located near the village of Kwainoa.

12.4 Local Environment Taro, Choiseul Province

Physical Resources
The Sorawe River, the only river that has hydro potential near Taro, is located on the
mainland and drains into Choiseul Bay. This river, referred to as Sui River on the 1:50 000
topographic map Taro, arises in karst geology on the northern flanks of Mt Talaevondo,
494m asl, some 10 km east of the river mouth. The lower 3 km of river flows through an
undisturbed area of mangrove swamp forest. The river cascades over an exposed limestone
rock layer or around 8 – 10 m in height, which marks the end of the navigable waterway a
short distance beyond the old log access bridge that spans the river. The water to this point
is subject to tidal influences. The northern tributary arises on the slopes of Mount Arara,
224 m asl, some 5 km north east of the junction.
Soils in this karst lithology are generally very shallow and in many cases absent, with
exposed uplifted limestone deposits. The water runs clear, with no suspended sediment load
or significant bed load material, in an incised stream channel. The source of the water is
derived both from under ground recharge areas in the limestone formation and run off from
hill slopes. Stream flows can also be sourced from underground recharge zones from outside
of the catchment boundary in these formations.
The proposed power station site is practically at sea level and there are no un-dammed
tributaries below this site. The northern tributary river joining the Sorawe below the falls, and
only a few hundred metres upstream of the power station site does not contain large
quantities of sediments or gravel deposits, despite the extent of previous logging and road
construction activities. The stream flows in the upper reaches are reported to be intermittent
with many sections being subterranean flows. There is very little river gravel in this part of the
island. Some uncrushed river gravel for construction comes from Nukiki, 6km south east
along the coast of the main land, with the majority of the aggregate used for building coming
by barge from Honiara.
Average annual rainfall on the small off shore island of Taro is 3,200 mm, distributed evenly
throughout the year, with lower falls in December – January. Rainfall is expected to be higher
in the upper catchment of the Sorawe River. An automatic water level recorder has been
installed on the true left bank near the proposed water intake point to provide a more reliable

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assessment of discharge from the catchment. An automatic rain gauge has been installed at
the site of the old logging camp down river from the powerhouse site.
Tsunamis are a threat to the small islands and lower lying areas in Choiseul Bay. The last
tsunami in April 2007 resulted in damage in Taro and Gizo. In terms of seismic activity,
Choiseul is less active than other areas of Solomon Islands.

Ecological Resources
The headwaters of this northern tributary of Sorawe River have been subject to extensive
logging in the past by Eagon Resources Development Co Ltd, which has had a long history
operating in this part of Choiseul. The forest was mixed lowland forest of Pometia pinnata,
Calophyllum spp, Campnospermum brevipetiolata and Vitex cofassus. These species were
predominantly exported as round logs with limited in-country processing.
A small area of easier accessible land south of the Sorawe River was also logged for swamp
forest species. This is the area of the proposed new site for the Government township of
Taro, which has been under discussion for some 20 years. Logging did not extend further
south or to the upper Sorawe catchment due to the difficult karst terrain, with sharp ridges
and numerous sink holes making any logging activity inherently uneconomic and difficult for
machines to operate within.
Part of the logged area has been established in plantation species ten or more years ago,
including Eucalyptus deglupta (kamarere), Acacia mangium and Terminalia brassii. There is
no longer any logging activity and the camp has been abandoned, with all buildings in
disrepair. The log bridge over the river near the proposed power station site is in a state of
near collapse and will eventually fall into the stream channel. Other log bridges in the upper
catchment will be of a similar condition.
The upper Sorawe catchment will remain in an undisturbed state and will unlikely be subject
to any future logging activity due to the difficult karst formations. It will form a significant
protection area in the region, extending well beyond the area for the proposed project. This
limestone formation, with its specific flora and fauna, is widespread in this part of Choiseul.
There are no significant wetlands in the catchment due to the underlying karst formation.
The mangrove forest, which extends some 2km upriver from the river mouth, is used for local
construction purposes but is generally limited to the harvest of single trees. There is little
recent evidence of any harvest of mangrove species. The mangrove forest has not been
damaged by the commercial logging activity.
Hunting of pigs, flying fox and pigeons is considered difficult in the limestone terrain of the
Sorawe catchment, with more animals present in the logged forest and plantation areas to
the north where access is easier. The level of hunting activity for these animals generally has
significantly reduced as a result of civil tensions within the country when all privately owned
firearms were confiscated.
Fish are plentiful in Choiseul Bay and the lower reaches on the Sorawe River through the
mangrove forest. Salt water species are caught by local people right up near to the waterfall.
Freshwater prawns exist in the stream above the waterfall. Saltwater crocodiles exist in the
mangrove forest but, by law, are not hunted. There is no known protected area within the
catchment but Parama Island in Choiseul Bay is a designated conservation area for the
protection of reef fish habitat.

Economic Development
The provincial capital of Taro is located on a small offshore island and is the seat of the
provincial government departments. It is serviced by regular flights to Honiara via Gizo. The
airfield on Taro, one of only two in Choiseul Province, is currently being expanded and
strengthened to take larger capacity aircraft.

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The catchment of the Sorawe is not inhabited and the terrain is unsuitable for subsistence
agriculture. It is in undisturbed natural forest and is held in customary land ownership. The
existing road network established by Eagon has now largely been abandoned since the
departure of the camp and has become overgrown in many places.
A gravity-feed water supply to provide potable water to the secondary school, located on the
coast near the pier, arises from the Sorawe River, which supplies a consistent flow and
quality. The intake for this water supply is located some 4 km from the school and above the
proposed water intake site for the power project. It consists of 100 mm high density
polyethylene pipe buried in a hand-dug trench cut into the limestone substrate, now
completely overgrown by trees and ground cover species in the last 20 years since it was
installed. The exact location of the pipeline is now difficult to readily identify. The project will
not have any impact on the water supply to the school. Future plans to utilise this source for
a potable water supply for the planned Taro village relocation site have been investigated.
A concrete pier facing Emerald Entrance in Choiseul Bay, a few hundred meters north of the
high school, carries the regional tsunami early warning system. The log pond used by Eagon
for loading log ships just north of the pier is no longer in use.
No new quarry sites are anticipated. Should road construction material be required, there are
existing quarry sites developed for the forestry road network that lie outside of the immediate
project site which could be utilised.

Social and Cultural Resources


While all forest land is used for traditional purposes by customary landowners, access and
terrain limits the use of the forest in this location. However, traditional building materials are
gathered in the area as they are not readily available in logged areas or those that were
established in plantation species.
Tambu sites are reported to be on Mt Arara, which is located outside of the Sorawe
catchment being considered for the hydro project. There are no reported cultural sites within
the Sorawe catchment.

12.5 Local Environment Lata, Temotu Province

Physical Resources
The Luembalele River enters the southeastern part of Graciosa Bay, a large deepwater bay
extending some 5 km south of the provincial capital of Lata, located on the western side of
Ndendo Island (Santa Cruz). The headwaters arise from the southern flanks of the high
peak, 461m asl, some 8km from the river mouth. The catchment is narrow with numerous
ephemeral gullies along the dissected slopes entering the river system. The water flows
initially south down the side of the peak then heads west to enter the bay by way of a steep
sided gorge eroded into the raised reef formation. Short duration flash floods are evident in
this short catchment. The river mouth was extensively damaged in a recent storm and the
access bridge across the river was washed away. The river is now some 50 wide at the
mouth, with a large portion of the foreshore on the northern beach extensively eroded. There
are no mangroves on the lower river section.
The central part of Ndendo Island consists of Miocene basaltic lavas and pyroclastic flows,
with the western third of the island covered by an elevated terraced veneer of Quaternary
raised coral reef, arising some 150m above the current sea level. Overlying much of the
lower limestone formation are residual bauxitic clay soils of varying thickness.
The southeast trade winds blow from March to September, the period when cyclone activity
can occur. Cyclone Tia caused damage in the province in 1991. Average annual rainfall at
Lata is 4270 mm but this is expected to be higher in the upper catchment of the Luembalele
River. An automatic rain gauge has been established on the side of a now-overgrown logging

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road near the old skid track heading down to the river. An automatic water level recorder has
been installed on the true left bank of the river above the waterfall near the proposed water
intake point to provide a more reliable assessment of discharge from the catchment
While seismic activity is widespread in Temotu Province, with an active volcano, Tinakulu,
lying offshore Ndendo some 25 km north of Lata, the last significant quake was reported in
2010. Subterranean earthquakes can result in tsunamis, with some 13 significant tsunamis
being recorded in the Solomon Islands between 1926 and 1982, an average of one every 4.3
years (Aldrick 1993). Older people refer to tsunamis around Ndendo but there have been
none reported in recent history. A regional tsunami early warning system is located on the
main pier in Graciosa Bay.

Ecological Resources
The lowland forest type found on the western side of the island consists typically of Pometia
pinnata, Campnospermum brevipetiolata, Dysoxylum excelsum Canarium indicum,
Terminalia calamanesii, Eleocarpus, and Endospermum medullosum. Kauri, Agathis
macrophylla, found more at the higher altitudes, was the main species logged in earlier
times. Many large Agathis trees were retained for habitat and seed sources and seedling
regrowth is evident throughout the regenerating forest. The upper catchment of the
Luembalele River has not been extensively logged.
Allardyce Lumber Co Ltd had established a logging operation in the early 1970s in Temotu
Province but had ceased operations on Ndendo some time ago before another company
revived operations on the eastern side of Graciosa Bay in 2007. It is reported only two log
shipments were loaded out of a log pond located just north of the Luembalele River mouth.
The Provincial Government had imposed a ban on round log exports, which resulted in the
logging company ceasing its operations after around six months.
Pigs and kurukuru (pigeons) were regularly hunted but the level of hunting activity for these
animals generally has significantly reduced as a result of civil tensions within the country
when all privately owned firearms were confiscated. Hunting continues at a reduced level
using traditional means, including bow and arrow. In particular, pigeons are hunted during
high winds when they tend to take shelter on the ground. Pigeon meat and coconut crab is
regularly sold in the local market
Wild fowl (Spanish fowl) are abundant in the forests on Ndendo and are a relic of the
explorer Mendana who left them on the island during the 1600s. These are hunted and
trapped and kept locally for breeding.
Local residents report a decrease in fish stocks in Graciosa Bay. There are freshwater
prawns, small fish (sliver fish) and eels in the Luembalele River. Turtles are not found in the
area but crocodiles have been reported but, by law, are not hunted. There are reports of
people being attacked by crocodiles in the area.
Temotu Province does not have any formalised protected area 25.Traditional landowners do
not report any informal protected area within the Luembalele River catchment.

Economic Development
Lata is serviced by regular air and island shipping service from Honiara. It is also a port of
call for itinerant yachts as Graciosa Bay provides good deep-water shelter. The Provincial
Government has recently signed a Memorandum of Understanding for trade with Vanuatu,
which is closer to Temotu Province than is Honiara.
The majority of the Luembalele catchment is Government leased land, being LR 716 and LR
836. Only the lower 2 km of river section passes through customary land. Around 300 ha of

25
Temotu Provincial Government, Strategic Development Plan 2011

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plantation forest had been established by Allardyce Lumber as part of requirements of the
concession agreement, using predominantly Sweitenia macrophylla (mahogany), Tectona
grandis (teak), Campnosperma brevipetiolata and Eucalyptus deglupta (kamarere). The
quality and form of the Campnosperma is generally poor, having been extensively damaged
by cyclones. Local landowners have subsequently established smaller holdings of plantation
species, mostly mahogany, on customary land. The size of this resource was not determined
but it is not considered to be extensive.
Seven portable sawmilling operations for local construction requirements occur on customary
land. Some 20 m3 of Pterocarpus indicus (rosewood) is shipped to Honiara per month for the
furniture market, the only species exported from Lata.
There is very little river gravel on the island suitable for construction. Coarse sands in
Graciosa Bay are used for the production of building blocks for local construction. Most
crushed aggregate is sourced from Honiara but some is sourced locally from river mouths on
the northern and eastern sides of the island. There is an abundance of limestone for use as a
road surfacing material and there are existing quarry sites available outside the proposed
project site.
Three head of cattle remain on the western side of Ndendo as a result of a 1990s cattle
project, with a small number on the eastern side of the island.

Social and Cultural Resources


The Luembalele River catchment is not inhabited and the Pala community, the customary
landowners of the area, report there are no tambu sites or known items of cultural
significance recorded in the vicinity of the project.
A spring fed water supply arising from the bottom of the limestone cliffs near the mouth of the
Luembalele River provides piped water to Lata and all villages along the shore. A diesel
generator pumps water to a reservoir but the use of the pump is limited to twice a day due to
fuel rationing. A more reliable source of power would provide an uninterrupted water supply
to Lata.

12.6 Local Environment Ringgi, Western Province

Physical Resources
The Vila River, the largest catchment on Kolombangara Island, arises from the caldera an
extinct Pleistocene volcano, with the highest peak, Mt Veve, being 1,770 m asl. Like all
catchments on the island, it is long and narrow and less than 2 km wide. It flows generally
south through deeply dissected terrain, forming a large alluvial fan extending into the Blackett
Strait. Slopes in the upper catchment above 400 m are steep to precipitous while valleys
become well incised with numerous small gullies below this level.
Kolombangara Forest Products Ltd (KFPL) has operated a rain gauge at Ringgi since 1993
which shows a mean annual rainfall of 4,000 mm with a monthly average of 250-300 mm.
There is a slight drier period in August-September. Kolombangara is located on the northern
limit of the tropical cyclone belt. Another rain gauge has been installed near the Imbu Rano
Lodge and automatic water level recorder is located on the true right of the Vila River below
the lodge to get better hydrological information near the site.

Ecological Resources
Kolombangara Island Biodiversity Conservation Association, an independent NGO, jointly
manages with KFPL the conservation area above 400m. This designated conservation area,
which includes the three highest peaks, covers 28% of the island and is the larges tin the
Solomon Islands. The Vila River Reserve is managed by KFPL as wildlife corridors and to
preserve water quality for drinking. The Vila River and the crater lie within the KFPL lease.

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As part of Forestry Stewardship Council (FSC) certification, KFPL is progressively working


on identifying the High Conservation Value Forest areas within its Fixed Term Estate. The
report recommends the riparian buffer zones of the Vila River should be classified as HCVF
areas because it hosts two rare freshwater fish species and two endemic freshwater
species 26.
The recent WWF study showed Kolombangara supports more than a 100 bird species, with
many restricted ranged species, vulnerable species, endemics of the New Georgian islands,
and two island endemics. The IUCN status of two birds found on the island, Aplonis
brunneicapillus (White-eyed starling) and Columba pallidiceps (Yellow-legged pigeon) are
cited as endangered while Pseudobulweria becki (Beck’s petrel) is critically endangered.
Mammals are dominated by bats but also include prehistoric introductions such as the
marsupial Phalanger orientalis (Northern common cuscus) some rats, and pigs. Skinks
dominate the reptile fauna which are abundant in both open and secondary forests as well as
primary forests. Frogs make up some of the most abundant of terrestrial and mid canopy
vertebrates and new species are still found in high elevation forests 27.
Most of the lowland forests up to 400 m asl have been logged and replanted in commercial
plantation species including Eucalyptus deglupta, Gmelina arborea, Swietenia macrophylla
and Tectona grandis. Ridge and hill forests extend into montane and cloud forests, mostly
clad in lichens, wet moss and epiphytes, at the highest altitudes above 700 m asl.

Economic Development
KFPL has recently been sold to a Taiwan based company who have confirmed their
commitment to the principles of FSC. As part of the social responsibility component of FSC
certification, KFPL has allocated 300 ha in 57 blocks to local landowners to develop their
own business enterprises. The Imbu Rano Lodge, on the edge of the Vila River Reserve, is
an ecotourism business which provides a range of activities in the areas above 400 m and
within the Vila River Reserve. Coastal villagers use the reserves and protected forest
areas and above 400 m as their hunting and fishing grounds.
There is aggregate suitable for concrete available from the lower Vila River and this would
require a crushing and batching plant to operate in close proximity to the river.

Social and Cultural Resources


The most important cultural sites are located within the high altitude forests, which is also the
source for all water for the local people. Evidence of human settlement on the ridgelines and
hill forests above the Imbu Rano Lodge can be observed up to 700 m contour when these
were used as shelter during periods of head hunting. These are above the proposed project
sites which are below the 400 m contour line.

12.7 Local Environment Mase River, Western Province

Physical Resources
The Mase River arises from a remnant volcanic crater some 7 km by 6 km wide in the central
part of New Georgia. The headwaters are dominated by two peaks, Mt Mase on the north
side of the crater at 910 m asl and Mt Vinarori at the south side at 913 m asl. The river then
runs some 20 km from this wide crater through a narrow steep sided gully on deeply

26
Vigulu, V. 2011. The Documentation of High Conservation Value Forest, Standards and Procedures at
Kolombangara Forest Products Ltd on Kolombangara Island.
27
Pikacha, P and Sirikolo, M. 2010. Biodiversity of the Crater Area and Surrounding Mountain Forests,
Kolombanagara. Island. WWF

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dissected terrain on the north western side of the mountain before entering the New Georgia
Sound (The Slot) at Mase Inlet. There are a number of tributary streams entering the Mase
River below the 200m contour line on the lower flanks of the mountain.
Average annual rainfall is around 3,500 – 4,000 mm but this is expected to be significantly
higher in the upper catchment where there is frequent cloud cover. An automatic rain gauge
water level recorder has been installed to provide more reliable data on the hydrological
characteristics of the catchment.

Ecological Resources
Much of the forests in New Georgia below the 400 m contour line have been extensively
logged in the past 30 years for a range of lowland forest species including Pometia pinnata,
Campnospermum brevipetiolata, Canarium indicum, and Terminalia calamanesii. Community
forest plantations have been established close to the coast along the western side of the
island.
There are no known ecological reserves or conservation areas in this part of New Georgia.
Studies on the status of freshwater fish in the catchment are unknown but fish are recorded
by locals being present in the river.

Economic Development
There is an extensive network of old logging roads in various states of repair. All the major
ridge lines on the north west of the island have road access, in some cases up to the 500 m
contour line. Roads only cross streams near the coastline. There is vehicle access linking
Mase with the Noro - Munda Road that could also serve as the transmission line corridor.
Aggregate supplies could be available within the catchment but will require further
investigation to determine quantities and access options.
Pacific Porphyry are currently conducting an exploration drilling program for copper and gold
using portable rigs within the Mase caldera. Previous drilling programs have been carried out
lower down the catchment and the local community have raised concerns of the impacts on
water quality. It was reported the rivers carry a high sediment load during heavy rains, with
the consequent build up of sediment in the Mase Inlet. The source of this sediment was not
confirmed and could be a result of landslips or previous logging or drilling activities.
A gravity fed water supply system was installed at Mase in the mid 1990s. The intake for this
system is located in the first major tributary on the true right of the Mase River, some 3 km
from the village at an altitude of around 100 m asl28. The water supply will not be impacted by
the project.

Social and Cultural Resources


There are no permanent settlements in the upper reaches of the Mase River catchment due
to the terrain and area being unsuitable for the development of gardens. Nearly all
settlements are located close to the coast.
There are no known items of cultural significance that are reported by the local community.
Tambu sites are noted on the high peaks of the mountain but they will not be impacted by
project works.

28
P Woperis, pers comm

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12.8 Local Environment Mataniko River, Guadalcanal

Physical Resources
The Mataniko River is a large catchment arising from the Lungga plateau, at an altitude of
around 760 m asl some 15 km south west of Honiara. The river flows east through
Cretaceous and Tertiary volcanic formations for some 7 km, joined by two other significant
steep sided catchments, before joining with a smaller eastern tributary to flow north east
through a narrow gorge between the Mbao and Tanda Ridges. Numerous small streams and
rivers enter the Mataniko River all the way to Honiara where it enters Iron Bottom Sound
near Chinatown
This eastern tributary has its headwaters in the Queen Elizabeth National Park, on the ridge
dividing it with the large Lungga River catchment which lies immediately to the south of the
Mataniko catchment. The Mataniko Waterfall is located on this eastern tributary, made up of
three smaller steep catchments. All the tributary streams are incised in narrow steep sided
catchments.
The northern coast of Guadalcanal lies in a rain shadow, but rainfall is significantly higher in
the upper catchments. An automatic water level recorder to determine the hydrological
characteristics of the river was planned for installation until landowners made unrealistic
compensation claims, a precursor for future claims for any power development within the
catchment.

Ecological Resources
The area is generally degraded lands with ridge lines in a cover of grass. The gorge and
upper catchment area are comprised of lowland hill forest species. These have not been
logged due to the terrain. Studies on the status of freshwater fish in the catchment are
unknown but fish are recorded by locals being present in the river.

Economic Development
The current access road to the Mataniko ends at Tavaruhu village from where local guides
are engaged by tourists to visit the Mataniko Waterfall and caves. There are no other
infrastructure facilities and little development beyond this village, some 2 km from the coast.
Garden activity is confined to the lower slopes near the village.
While there is a suitable gravel source within the river system, there is an adequate supply of
readily available crushed aggregate in Honiara from an established crushing plant on the
nearby Lungga River.

Social and Cultural Resources


Tambu sites were not identified but the area contains many historical sites of intense combat
during the Battle of Guadalcanal.

12.9 Screening of Environmental Impacts

General
The following discussion describes likely impacts and indicates some possible mitigation
measures, to guide environmental assessment and EMP preparation when designs for each
scheme are in an advanced stage.
The construction of the type of run off river project considered here involves excavating or
blasting a canal entrance on the bank of the river, with water flow being directed into the
headrace canal with large anchored boulders placed below the intake to provide the

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necessary flow. No concrete structures or weirs across the stream channel are proposed.
Since there is no barrier to cause mobile sediments and gravels to build up in the streambed,
there will be little impact on the stream hydrology as a result of the intake structure. Flow
characteristics are currently being determined for each site with automatic water level
recorders. Fish passage upstream shouldl not be impacted by the design of this intake
structure but fish may end up in the headrace canal. There will be a short-term impact on
water quality and sediment loads in the river during the construction of the intake structure
but this will be mitigated if the appropriate construction methods are followed.
Road construction and associated earthworks provides by far the greatest source of mobile
sediments and debris with the resultant reduction in water quality. This is especially so in
steeper terrain where higher cut slopes and longer fill slopes are required, unless all
excavated material is end-hauled for disposal in another more stable site. Roads must be
properly designed, constructed and supervised to mitigate the impacts of sediments and
debris entering watercourses. Poorly located and constructed roads generally result in on-
going soil erosion and increased sediment loads in adjacent water courses long after the
construction period has ended. A robust maintenance program will be necessary to ensure
the ongoing integrity of the system and that potential negative environmental outcomes as a
result of impaired drainage and surface water runoff are managed.
The steeper the terrain on which the road or headrace canal is positioned, the wider the
effective cleared corridor through the natural forest becomes. The wider this corridor is, the
more unstable any residual trees become, especially when the root plate of trees on the top
of the cut slopes is damaged. It would be critical to ensure any large diameter trees are not
subject to future toppling in high winds or cyclones as these could cause a major failure of
the concrete canal structure should they fall or slip down onto it. While logging of forest land
on slopes greater than 30 degrees and above the 400m contour is not permitted under the
Forest Act, the removal of trees and vegetation above the river channel without debris and
soil entering the watercourse will be feasible if the appropriate technologies are utilised and
incorporated into the environmental management plan (EMP).
Slips and debris slides along the canal alignment pose a potential risk to the integrity for the
canal structure, with the resultant diversion of canal flows into non-stream receiving areas.
Gully erosion and potential slope failure below the canal corridor will lead to a massive
increase in debris and sediment loads entering the watercourse. The resultant impact on
water quality will be ongoing for a considerable period of time until the eroding gully and
debris becomes stabilised. This can be mitigated by the installation of automatic shut off
gates at the intake.
The proposed construction of trenches for the penstocks will be determined by the slope and
underlying geology. Any such trenching on steep slopes has the potential for significant soil
erosion of the back- filled material from surface water runoff. These factors would have to be
taken into consideration during the detailed design phase, with each site posing its own
specific technical requirements. The environmental issues raised can be mitigated with the
appropriate design and supervision during construction and a robust Environmental
Management Plan and Site Specific Management Plans to address each construction
activity.
Establishing a transmission corridor through primary forest generally requires a wide
clearance footprint to reduce the likelihood of power disruption from falling trees and broken
branches from wind, a significant cause of power outages. Any earthworks required for the
installation of poles will be subject to the conditions of a detailed Environmental Management
Plan and is not expected to result in any significant offsite impacts if appropriate water
control measures are adopted. Vegetation clearance along the transmission corridors will be
an ongoing maintenance matter. This will generally be carried out manually due to the
limitation of terrain and access and the activity will not result in any environmental impacts as
long as ground cover is retained. The use of Arial Bundle Cables (ABC) for the transmission
lines would reduce the need for vegetation management.

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Noise and vibration associated with the machines and construction activity will have no
significant impact on any community due to the scale of the work and the fact the areas are
relatively uninhabited. There will be no significant impact on air quality apart from the
presence of a small number of heavy earthmoving machinery during the construction period.
Air quality will improve with the completion of the power project as there will be less demand
for fossil fuels with the many small capacity generators.
In the following, the screening results for the individual sites will be summarized.

Fiu, Auki, Malaita Province


The power station site is located near a steep sided narrow section of the river with slopes in
excess of 35 degrees. In order to construct a road into this site, a larger corridor of
vegetation clearance will be necessary. Any road line leading down to power station would
need to be carefully surveyed to reduce the height of the steep cut slopes, with spoil and
vegetation cleared from the road line being end-hauled and disposed of elsewhere to reduce
the likelihood of large volumes of sediments entering the Fiu river channel. With an improved
road line or powerhouse location and appropriate sediment and erosion control measures
incorporated in a detailed EMP, coupled with strong site supervision, the impacts of road
construction activities can be mitigated. However, ongoing slips and erosion of the road line
can be expected.
The headrace canal runs some 3000 m mid slope through predominantly undisturbed forest
area and traverses five to six large ephemeral gullies from the intake to the fore bay. The
canal will span these gullies, which show evidence of large short-duration flows during
rainstorm events. The gullies are generally characterised by the presence of large limestone
boulders and sink holes. Water rapidly enters the recharge zone in the limestone formation
and enters the river at water level in many parts of the river channel. A consideration at these
gully crossings for the canal is to ensure any earthworks required for access do not alter the
integrity of the ephemeral gully by blocking sinkholes and fissures with sediments that might
affect the intricate network of subterranean flow channels on these steep slopes. The loss of
the subterranean flow channels will increase the volume of surface flows and thus the
amount of sediment transportation into the river below.
For local communities located above the intake site, the 3,000 m headrace canal will become
a de facto walking track to the end of the new road in the vicinity of the penstocks and fore
bay. This gives rise to the potential for children to play in or fall into the canal. However,
community access along the canal can also provide positive impacts and identify blockages
or fallen trees. Security fencing to ensure there is no access to the canal near the fore bay is
envisaged as part of the design criteria. Community consultation and education on these
matters will be necessary.
The 755 m long penstock corridor will drop some 260 m in altitude to the river below and,
depending on its exact location, will pass through both modified and unmodified natural
forest, and possibly some current or old garden sites. Clearing of vegetation will be
necessary so that the penstock can be constructed. While there was little evidence of rill or
gully erosion associated with the garden activity on the mid slope sections, reducing the
amount of mechanical clearing of the penstock corridor and soil disturbance will significantly
reduce the risk of accelerated erosion that will impact on downstream water quality. Any
earthworks associated with the construction of the thrust blocks and pipe supports should be
minimised to ensure the slopes remain stable, and will most likely be carried out manually on
very steep slopes.
While the exact location of transmission line has yet to be determined, there is not expected
any significant environmental impact from the installation of the lines. The delivery of the
electricity from the powerhouse to the SIEA power station at Auki would follow the road
wherever possible rather than create another corridor through the forest.

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Sorawe, Taro, Choiseul Province


An existing road network from the now disused log pond can be upgraded to the site. The log
bridge across the Sorawe River will require replacement, as it is close to collapse. A short
access to the intake site will require the removal of natural forest vegetation. The main
environmental impact will be the clearance of the natural forest cover along the nearly 400m
headrace canal and penstock corridor and any trees that may fall onto the structures.
However, given the relatively short length of canal at this site, the amount of forest clearance
will be minimal. A clear site plan with the width of the construction corridor for the canal will
minimise the extent of any vegetative clearance.
A major constraint in the construction phase will be getting earthmoving machinery access
into the site and being able to operate in karst limestone to clear the vegetation to commence
construction of the project components. While the terrain is generally flat, the presence of
sink holes, fractures and fissures on the terrace above the stream may result in a wider
construction corridor being cleared of vegetation than may be required to ensure machine
access is provided. There will be generally little soil erosion as a result of the construction
activity on this site as there is very little soil from the intake site to the penstock. There are no
high cut slopes that may result in slope failure or slumping along the canal corridor. Any
cuttings will generally be in limestone formations and will not result in significant erosion
affecting water quality.
Due to the porous nature of the limestone, water quality will not be impacted as a result of
construction as long as the appropriate erosion control measures within the Environmental
Management Plan (EMP) are carried out. Water will be taken from the river and returned to
the same river a short distance further down and there is not expected to be any change in
water quality over this distance.
The reticulation of power from the powerhouse site is expected to follow the existing network
of logging roads, and should not result in any further clearance of forest.

Luembalele, Lata, Temotu Province


An existing logging road near the proposed intake site can easily be upgraded with relatively
little earth works. The overgrown road is on a reasonable gradient and had a surface of
limestone. Some short sections of new road construction will be required to the powerhouse,
intake structure and fore bay. There is an abundance of limestone for use as a road
surfacing material and quarry sites are available in the area. An existing log bridge on the
access road will require replacement. An overgrown skid track extends from the logging road
down the steep sided valley to the river channel. Road construction within the approximately
1.5 km length of the river in the project location can be carried out with minimal impact on the
river channel and receiving waters if the appropriate sediment and erosion control measures
are put in place and construction is carefully supervised. This will be an integral part of the
EMP.
The construction of the intake structure upstream of the 8 - 10 m high waterfall will require
drilling and blasting in the volcanic rock outcrop at this site. There is the potential for waste
rock and fine sediments entering the watercourse as a result of this process but the extent of
the movement of large debris can be contained and removed afterwards. The river does not
contain a high volume of fine sediments above this site as they are regularly flushed
downstream during peak flows. The fines resulting from drilling will only result in a short term
impact due to the significant water flow at the site.
There are other streams below the intake, including ground water flows along the river
channel. Any intake of water will not dramatically affect stream volumes between the intake
and the powerhouse. The river channel is relatively stable and there is no significant stream
bank erosion. High short-duration peak flows have resulted in minor erosion in flow paths on
the upper banks.

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A feature of all construction activity will be the removal and disposal of vegetation and spoil
associated with the 1,200 m headrace canal and 740 m penstock corridor. This can be
disposed of in natural depressions well above the peak flood level to ensure sediments are
not deposited into the stream channel. This is readily countered with the identification of
suitable spoil disposal sites and will be incorporated into the EMP. A key consideration with
the location of the canal corridor will be the large kauri trees that have been retained for
habitat and seed source purposes. Adjustments to the corridor may be required if it is
affected by a number of these habitat trees.
Clearance of a power line corridor in this modified forest area will not have a significant
environmental impact as long as the principles of surface water management and disposal of
vegetation are adhered to and are incorporated in the EMP. The local community are aware
that power reticulation will require the removal of trees along the foreshore access road
through the various communities but accept this as part of gaining access to electricity. This
in itself does not pose an environmental impact but rather an aesthetic impact that can be
mitigated by careful line location as far as practicable and replanting of trees.

Vila, Kolombangara, Western Province


The most significant environmental impact will come from the considerable construction
activities associated with the three proposed stages in the steep sided and incised Vila
River Reserve. This will contribute to an increased sediment level into the river system
and an ongoing impact on the water quality. Mitigation measures would include end haul
of all debris and excavated materials for disposal outside of the catchment, slope
stabilisation works and upper slope interception drainage structures.
Given this has been designated a reserve area by KFPL as part of its FSC certification
process, the status of any proposed project activities on their FSC commitments will
require formal clarification by KFPL and FSC. The proposed project sites are located
below the 400 m contour within the Vila River Reserve, but access will require significant
earthworks in the construction of roads down into the river channel and the head race
canals. Detailed survey of the head race canal corridor will need to account for short
steep bluffs present above the river where it has eroded down to bedrock. Drilling and
blasting could be expected during construction.
A broad range of international experts have conducted extensive studies in the
biodiversity of Kolombangara, and as a consequence, the project could expect public
submissions against any activity within this recognised conservation area, and more
particularly in any activity above the 400 m contour. The key issues outside the
construction of the project will be the loss or damage to biodiversity and the High
Conservation Value Forests (HCVF) within the Vila River catchment. While KFPL have
indicated that a project in the Vila River Reserve would not compromise their
environmental objectives, a full EIA is expected to be a requirement for this site,
especially given the recommendation that the riparian buffer zones of the Vila River be
classified as HCVF areas.

Mase, New Georgia, Western Province


The similarities in the Vila River catchment and the Mase River, both arising from
calderas, are manifold and the environmental impacts during the construction of road
and canal access and the headrace canal in the steep terrain are expected to be the
same. While the exact location of any facility has yet to be determined, it will still require
a significant length of canal construction along the side of a steep hill face. Any
earthworks have the potential to result in slope failures and deposition of sediments from
the large cut and fill slopes which may eventually have an impact on the river mouth at
Mase Inlet over a period of time. Mitigation measures would include end haul of all debris

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and excavated materials for disposal outside of the catchment, slope stabilisation works
and upper slope interception drainage structures.
The presence of exploration drilling in the upper catchment suggests that a full EIA is
warranted to differentiate negative environmental impacts from that activity, particularly
so if it develops to the mining stage, and any activity associated with a mini hydro
project. The transmission line corridor from Mase to Noro is expected to follow the
existing logging road and should not present any significant environmental impacts.

Mataniko, Guadalcanal Province


As with other sites on steep terrain, the major environmental impact will come during the
construction phase, in particular the head race canal corridor and the roads to service the
construction activity. The proposed intake is located above the narrow steep sided gorge
section and the canal corridor is at the higher elevations around the160 m contour level on
the true left of the Mataniko River, and then along the Galloping Horse Ridge. The canal is
around 3.5 – 4 km long and will require a span across a number of small streams and gullies
or large culverts under the canal to ensure these flows are not obstructed. The lower part of
the canal corridor is located in a grassland environment near the top of a broad ridge. Slope
stability issues here are reduced as long as surface water runoff controls from dry grasslands
are incorporated into the design. There is greater potential risk of slope failure where the
canal is located above the steep gorge and leading to the intake site with an increased
amount of excavation required. The impacts of this construction work can be mitigated with
the removal of spoil and debris away from the canal corridor and disposed of in a more
stable location. Spoil disposal sites will required site-specific erosion control measures which
will be incorporated into the EMP.
The proposed hydropower project on the Mataniko River would divert a significant quantity of
the normal river flow. Depending on the size of the project and the design flow this would
have impacts on the recreational quality of the waterfall site. This aspect requires detailed
examination in further environmental studies.

12.10 Environmental Management Plan and Monitoring


In steep terrain earth flows, soil slips, gully erosion and downward movement of trees and
debris onto the headrace canal route and roads are anticipated. These risks need to be
addressed in the design brief. A key component of the EMP will be how to address surface
water runoff and soil slips from upper slopes along the length of the headrace channels
excavated on the contour. The effectiveness of such mitigation works will require ongoing
monitoring and will be incorporated into the works maintenance schedule to ensure the
integrity of the canals as there is a potential for a significant failure of the canal platform with
subsequent extensive gully erosion within non-stream receiving areas.
Any roads constructed to the project will require on going maintenance. This will be
undertaken by SIEA or by an IPP operator and the maintenance program must include
environmental mitigation measures on how to deal with erosion and sediment movement as
a result of slope failures and road drainage. These will present a significant on-going activity
in those sites on very steep terrain such as in the Fiu catchment in Auki and where there is a
considerable distance of new road and headrace canal construction.
A specific detailed Environmental Management Plan has not been prepared as part of this
pre-feasibility report as the engineering and design components at the proposed sites have
not been fully investigated. However, the EMP to be developed as part of a full feasibility
analysis will detail the environmental impacts to be monitored, the timing of monitoring
activities within the construction schedule, and the mitigation measures required, especially
those related to earth works in and around watercourses and on steep slopes. Parameters to
be monitored will include, amongst others, stream turbidity and other water quality indicators
before, during and after the construction; stream flows; incidence of soil slips, slope failures;

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and changes in land use and forest cover as a result of new access and compliance with the
EMP conditions.
The EMP will also identify the management structure and define specific responsibilities for
environmental monitoring both during and after construction activities. Responsibility for EMP
compliance will rest with the contractor who will be monitored by a social and environmental
officer to be recruited prior to the award of any civil works contract. The Project Management
Consultants shall have an experienced environmental specialist who has relevant expertise
in earthworks and civil construction works.

12.11 Conclusion and Recommendations


The screening and assessment of environmental issues in all project sites identified in this
pre-feasibility study demonstrate that the main impacts will stem from road construction and
the clearing of forest vegetation on steep terrain for head race canals, penstocks and
ancillary structures. While these are highly significant in those project sites on steeper
terrain, ensuring that environmental issues are an integral part of the design criteria can
substantially mitigate them.
The Environmental Management Plan (EMP) will cover key design considerations related to
sound construction and long term serviceability of infrastructure including provisions to
mitigate environmental effects during construction such disposal of debris and spoil instep
terrain, noise and dust nuisance, and safety. The Monitoring plan provides for community
feedback, linkage with ongoing water quality monitoring programs and monitoring for
compliance with the EMP.
The environmental categorisation of each of the project sites is summarised below and is
based on the summary of impacts in the REA checklists. Ringgi and Mataniko are the only
sites where there are significant environmental and public interest issues that require special
attention. This site has been assessed as a category A and a full EIA is anticipated.

Table 12.2: Environmental Categorisation

Environmental Categorisation
Site
A B C

Fiu, Auki B

Sorawe, Taro C

Luembalele, Lata B

Vila, Ringgi A

Mase, New Georgia B

Mataniko, Honiara A

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13. Social and Poverty Analysis

13.1 Introduction
The ADB’s Country Program Strategy (CPS) seeks to reduce poverty through equitable
private-sector-led economic growth by improving transportation infrastructure and services
and the business-enabling environment. Harnessing hydropower resources to serve
provincial centres and their environs will assist the Strategy by improving living conditions,
increasing access to markets and basic services, and creating income-generating
opportunities in the provincial centres and their rural hinterlands. Most of the provincial
centres where this study focuses on are economically moribund. People are keenly aware of
potential opportunities but the lack of electricity is a major constraint.
The project is a general intervention (GI) that will reduce poverty of opportunity by improving
the enabling environment for pro-poor growth and social development. It will provide wide
benefits to the well-being of the communities and also directly benefit some particularly
disadvantaged people. Each project site is described in detail below. In all sites, the
extension of electricity supply can improve access to and the quality of education, health,
water supply, sanitation and other basic services, increase social and economic opportunities
especially for small businesses and other forms of income-generation, improve living
conditions, and reduce the physical and time workload of women.
Full realisation of this potential will not occur automatically, however. In order for it to happen,
the enabling environment for inclusive planning, gender equity, community development,
small enterprise growth and the like needs to be nurtured through collaboration with other,
supporting development programs, some of which are already being implemented in
Solomon Islands by provincial and national governments, NGOs and aid partners.
While the cost of electricity will be some constraint to its use, all people interviewed believed
the opportunities created by a reliable power supply would balance out the costs involved.
Even the poorest households may benefit through the lowered cost of lighting and better
access to services. Use of pre-payment metering will help households to stay within their
means, and has been welcomed by both connected and prospective SIEA customers.
Despite its cost, electricity is highly desired by all sections of the community. In regard to
household expenses and the proportion of surplus income that could be used to pay for
electricity, however, there is no precise answer. The amount spent by households on non-
food essentials varies widely between urban (Honiara) households, provincial centre
households and rural households. 29 The proposed project areas include both the second and
third categories. The best indication of affordability is that most households without electricity
use kerosene for lighting, a more expensive fuel, and will reduce their expenditure when they
are connected to electricity.

13.2 Methodology
In September-October 2011, the consultant visited all proposed project sites, undertook
community consultations (involving both men and women) to assess interest in access to
electricity and types of use of electricity for households' activities; and the amount of income
that could be used for monthly payment for electricity, etc., discussions that built on surveys
previously conducted by the Project Team in Auki and Lata. These discussions as well as
interviews with local government officials, school teachers, health workers and community

29
Solomon Islands Statistical Office, 2006. Household Income and Expenditure Survey 2005/6 – National Report, Department of Finance and
Treasury, Honiara . The Basic Needs Poverty Line (BNPL), which includes an allowance for essential non-food expenditure was estimated at
SBD998.32 per week for a Honiara household; SBD465.41 for provincial urban households, and SBD225.02 for rural households. Rural
areas are more poor but also more equally poor. Urban areas have higher incomes but also greater income inequality.

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organisers also explored views about the advantages or disadvantages of electrification for
each region; acquisition of land and use of the river for hydropower; potential participation of
local communities, and introduction of pre-payment metering systems. In each province, she
discussed the findings of the study with senior members of the provincial governments. In
Honiara, the consultant met with SIEA, the Ministry of Provincial Affairs, the World Bank Tina
River Project Team, and the UN Country Office; discussed the capacities of SIEA,
government and NGO agencies to meet social safeguard standards and assist community
participation; and collected current provincial and national reports and other background
material.
Results of the 2009 national population census are not yet available, an indication perhaps of
technical difficulties that may limit the usefulness of census data even after their release.
There are also serious constraints on poverty or income data in Solomon Islands. The 2005-
6 Household Income and Expenditure Survey (HIES) report was not disaggregated to any
local level or by gender. 30 The 2007 Demographic and Health Survey (DHS) produced a wide
range of information, including about gender issues, but the report was disaggregated only to
the urban/rural level. Other sources of information are ministries of Health and Provincial
Affairs databases which are limited in extent and quality. Given the profound changes in
Solomon Islands over the past decade, the lack of timely, disaggregated statistics precluded
an extensive compilation of socio-economic profiles of women in the project locations,
although useful information was collected.
Surveys of unserved customers were conducted in low-income housing areas in Auki and
Lata to assess energy use and expenditure on kerosene, and their ability to pay for
electricity. Most energy expenditure now is on kerosene for lighting, although some
households use dry cell batteries, small solar systems or petrol generators. Kerosene is
expensive at $17-$18 per litre, or $7-$9 per 300 ml bottle at most rural shops. The surveys
found that unserved households spent more on average on kerosene – in Auki, SBD 180–
220 per household per month – than connected households spent on electric lighting. There
was clear enthusiasm to connect and pay for electricity, especially through pre-payment
metering, and willingness to support electrification through labour, materials and permission
for easements.

13.3 Stakeholder Analysis


At each site, three groups of stakeholders are primarily involved in the project: households
that will gain connections to the electricity supply; already connected households that will
gain a more reliable supply; and landowners of the proposed construction sites for
hydropower plants.
Of institutional bodies, the principal stakeholder is SIEA, a statutory body, which will benefit
from having a larger number of clients and a wider economic base in the provincial centres,
from cheaper power generation than diesel, and from a more reliable supply. SIEA has well-
established standards for working conditions and pay scales in accordance with Solomon
Island laws and regulations, and these standards should apply. Construction activities can be
expected to comply with national labour laws and regulations, with no risk of forced or
compulsory labour, SIEA has had management difficulties but with assistance from the World
Bank it has reformed its billing, accounting, and data management systems. As its
management improves, SIEA may be able to turn their attention to consumer education, as a
necessary part of expanding its client base.

30
Solomon Islands Statistical Office, 2006; ADB, 2005. Private Sector Assessment for Solomon Islands, ADB, Manila. IMF, 2005. Solomon
Islands: Selected Issues and Statistical Appendix, IMF Country Report No. 05/364, IMF, Washington DC. Limited data in Solomon Islands
makes it hard to measure over time or area. The 2006 HIES cannot be linked to those conducted in 1991.

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The Government encourages women’s increased participation in decision-making and this is


a priority of the Ministry for Women, Youth and Children’s Affairs (MWYCA). 31 Although the
MWYCA is a central agency to encourage gender inclusion, its Women’s Development
Division is hampered by its lack of capacity, poor physical facilities and small budget.
Opportunities for pro-poor design and social inclusion subcomponents to benefit gender
equity also exist in association with other ADB operations, government and NGO programs,
and law reforms, in particular programs that are improving women’s access to credit and
encouraging their participation in economic activity. A planned business law reform
implementation program will be targeted towards women’s businesses and women’s
community groups. The expected boost to economic activity in newly electrified areas
provides an opportunity to extend these activities to the provincial centres and their
hinterlands.
The Provincial Governance Strengthening Programme of the Ministry of Provincial
Government and Institutional Strengthening, is addressing problems in government systems
that have hampered service delivery to the provinces, through local capacity development
and inclusive planning, resulting in provincial development plans that involve all local
stakeholders. All provincial governments are enthusiastic about collaborating with the
project, as is the Provincial Governance Strengthening Programme, which now has
established procedures for participatory planning at the local level.
Because local ownership is important to the success of this project, a consultation and
participation (C&P) plan should be developed in the project design phase, to identify ways to
maximise stakeholder engagement throughout the project cycle. Table 13.1 summarizes the
result of the stakeholder analysis.

Table 13.1: Summary Stakeholder Analysis


Stakeholder Primary (a) Secondary (b) Key Stakeholders Interest in the Project
Unserved households in the X Beneficiaries: new and/or improved electricity
provincial centres and their supply
vicinity
Landowners of hydropower X Beneficiaries of land access/ acquisition
plant agreements, new electricity supply; in some
cases, improved access.
SIEA X Implementing Agency. Also benefit through
wider economic base, cheaper power
generation; more reliable supply
Rest of the provinces involved X Flow-on benefits of increased economic
in the project activity and opportunities
Government agencies X Provincial governments, the Ministry of
Provincial Government, and the MWYCA may
be central agencies.
Government of Solomon X Important intermediaries in the project delivery
Islands and ADB process

13.4 Poverty and social exclusion


Although it will principally expand and improve electricity supply to provincial centres and
their rural hinterlands, the project will reduce poverty of opportunity by improving the
environment for pro-poor growth and social development. Electricity supply can improve
access to and the quality of education, health, water supply, sanitation and other basic
services, increase social and economic opportunities especially for small businesses and

31
Solomon Islands Government, 2007, Grand Coalition for Change Policy Statement for Women, Youth and Children, Ministry for Women,
Youth and Children Affairs, Honiara.

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other forms of income-generation, improve living conditions, and reduce the physical and
time workload of women.
The wider benefits of the project are in line with the intention of the national development
plan to build better lives for all Solomon Islanders, in particular to improve access to income-
generating opportunities, improve access to basic services, and provide for an even
distribution of the benefits of growth and the development of all provinces. Better electricity
systems will link the towns and nearby rural areas and invigorate them both, thereby helping
to realise opportunities particularly in the rural agricultural sector for pro-poor growth. The
project will contribute to the achievement of MDG-related non-income poverty goals in
education; infant and child survival; water and sanitation; and gender equity through greater
access for women to health, education and other services and livelihood opportunities,
progress that is seriously needed, but lacking, in Solomon Islands.
Rather than as a monetary indicator (consumption or income), poverty in Solomon Islands is
more usefully defined in terms of lack of access to basic services and income opportunities. 32
Throughout the country, poor infrastructure constrains opportunities. Eighty four percent of
the population live in rural areas with very little access to education, health or other social
services, are serviced by poor or non-existent transport, electricity and telecommunications
infrastructure, and have few economic opportunities other than subsistence farming. 33 Only
16 percent of the national population have access to electricity, a very low figure by regional
standards. Residents of the provincial centres, where government services, businesses and
other paid jobs cluster, do better on average in regard to income but also live with unreliable
services, transport and power, in stagnant small economies where poverty of opportunity is
chronic.
Services in rural Solomon Islands are often rudimentary. Many people use kastom
(traditional) medicine by choice but distance to clinics, availability of transport and quality of
service are significant barriers to people seeking treatment at nurse aid stations, health
clinics or hospitals, especially during emergencies. The high incidence of malaria and other
infectious diseases and high fertility rates put a particularly heavy burden of illness on
infants, children and women. Most clinics and aid posts are poorly equipped and
unpowered, making it impossible to store vaccines and difficult to provide emergency
services at night. Frequent power fluctuations and cuts affect services at the provincial
hospitals and create real difficulty during emergencies.
Most schools lack electricity but this is increasingly seen to be necessary, especially at
senior residential schools where food storage and night study classes are necessary, where
teachers need to prepare lessons in the evenings, or where there is need for copiers,
computers, mobile phones and other new technology. Without electricity, senior schools
struggle to meet some curricula requirements, especially in science and home economics.
Schools with own generators face high costs and often frequent breakdowns, and tightly
curtail hours of use.

Economic and Social Benefits of Hydropower


The wider economic and social benefits of the project can include:
• Unserved communities in and around provincial centres will gain a much desired
electricity supply;
• Already connected consumers will gain a more reliable and possibly a cheaper supply;

32
Solomon Islands Statistical Office, 2006. D. Abbott and S. Pollard, 2004. Hardship and Poverty in the Pacific: Strengthening
Poverty Analysis and Strategies in the Pacific, Pacific Department, Asian Development Bank, Manila.
33
AusAID, 2006. Pacific 2020: Challenges and Opportunities for Growth, Canberra: AusAID; M. Clarke, 2007. A Qualitative Analysis of
Chronic Poverty and Poverty Reduction Strategies in Solomon Islands. Canberra: AusAid.

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• Living conditions will improve, especially for lighting and food storage, and especially
for women who are responsible for most homework and child and aged care.
• In Taro (Choiseul) and Lata (Temotu), the electricity supply will also improve the water
supply and potentially also sanitation conditions.
• Electricity supply will improve conditions at schools, health clinics, and community
facilities, especially in areas of new connection.
• Paid employment during construction and to a lesser extent during the operation of the
hydropower plants.
• Potential for new economic opportunities and higher incomes will be created. Possible
activities include better marketing of fish (through fish freezing, ice production), retail
activities, local timber milling, furniture making, cooking/catering, sewing, small tourism
development etc. In the Noro-Munda region and Gracious Bay in particular, improved
electricity supply will support industrial and tourism development.
• Cultural activities and church programs are important parts of community life. Many
programs such as dance and choir practices, youth group meetings and community
functions are held at night. Electric lighting for churches and community centers is
seen as a great benefit. Fund-raisers and functions are also important to community
life, especially for women. They usually involve food preparation for which it is
necessary - but difficult and expensive - to store food in a cool place.
• For remote communities in particular, access roads that will be built to service the
hydropower plants will significantly improve access to health services and schools. In
the upper Fiu Valley (Malaita) for example, all visits to health services and trips to
market or to buy essential foods, entail long, difficult and time-consuming journeys. All
goods and produce have to be carried in and out by manpower; the track is impassable
to animals or vehicles. Few children attend school, and no health services visit the
area. The physical and time burdens of everyday work curtail livelihood and all other
opportunities, especially for women. The people want electricity but they want the
access road and paths that will come with it even more.
Possible negative impacts of electrification are the risk of faulty connections, house-fires,
electrocution, and other accidents. These risks are minimised through the SIEA requirement
for all connections to be made and checked by qualified electricians. Another risk is
inefficient and unnecessarily expensive electricity use that drains household budgets. The
use of pre-paid meters reduces the risk of household budgets being over-stretched by the
new service, or that benefits will flow primarily to non-poor consumers. Community education
programs, operated through SIEA, can help people to use electricity in safe and efficient
ways.

Gender issues
The Government is committed to promoting gender equality but Solomon Islands ranks very
low in gender development indices. Women in Solomon Islands perform multiple roles as
household managers, subsistence and cash crop farmers, income earners, and active
members of churches and community groups. Women have lower literacy rates and less
access than men to post-primary education. 34 Women’s access to health and family planning
services is particularly poor in rural areas. Gender disparity is marked in employment. The
2007 DHS found that nationally only 42% of married women were employed, compared to
87% of married men, and over half (56%) of employed women were not paid at all for their
work, either in cash or kind. Often isolated from markets and services, rural women spend
much of their time collecting fuel wood and water and providing health care for preventable
diseases caused by lack of safe water and sanitation, and thereby experience both income

34
DHS, 2007. Among women and men aged 15–49, 21 percent of women and 11 percent of men cannot read at all.

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and time poverty. Decision-making and control of resources strongly favour men. The
traditional obligation system that undermines individual control of resources exacerbates
women’s lack of economic power. These obstacles constrain women’s potential social and
economic contributions.
While the project will benefit the whole community and region, access to electricity supply
can particularly benefit women through:
(i) Improved living conditions, especially by providing better lighting at night and
better food storage through refrigeration. Women are responsible for most
household chores and have heavy time and physical work loads.
(ii) In some areas, improved water supply and sanitation;
(iii) Reduced physical or time burden of some household tasks;
(iv) New opportunities for small businesses and other forms of income-generation.
Few women work outside the household or for cash but many could identify opportunities
that an electricity supply would provide. In all project sites, women expressed enthusiasm in
taking up opportunities for income-generation that an electricity supply can support, such as
catering, retailing, fish marketing and sewing.
Women need to be involved in design and delivery of targeted infrastructure to reduce
overwork and increase available time of activities such as community management, local
marketing of surplus produce, and developing alternative livelihoods. 35 But even when
women are present in the different decision-making structures (traditional, contemporary or
faith based), their views may be ignored. In both households and communities, decisions are
usually made by male leaders. 36 This situation may be difficult to change but the benefits of
inclusive and equitable development make the effort worthwhile.
Because the proposed project has significant potential to directly improve women’s and girls’
access to opportunities, services, assets and resources, further gender analysis is required
during the project’s next phase and a gender plan should be incorporated in its design.
Inclusion of a GAD Specialist in the design team can foster gender equity in accessing
related economic opportunities.

13.5 Management of Social risks and Vulnerabilities

Labour conditions
The proposed hydropower plants will be small. Construction activities are likely to engage a
small number of expert workers who will be brought into the area, as well as local unskilled
and semi-skilled labour (principally men) during the construction phase. Some paid work will
also be available during the life of the hydropower plant to maintain the intakes, canals and
power house.
SIEA has well established standards for working conditions and pay scales in accordance
with Solomon Island laws and regulations, and these standards should apply. Construction
activities can be expected to comply with national labour laws and regulations, with no risk of
forced or compulsory labour.

35
ADB, 2009. Solomon Islands: Interim Country Partnership Strategy, 2009-2011.
36
Maetala, 2007, op.cit. The 2007 DHS found that most women participate in household decisions about major household purchases,
daily needs, their own health care and visits to their family, although more than 40 percent do not participate in all these types of
decisions.

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Affordability
Provision of electricity to unserved communities should reduce, rather than raise, household
expenditure on basic energy, now mostly spent on kerosene and dry cell batteries. Already
connected consumers will benefit through more reliable supply and reduced future power
costs. There is no risk that the access of poor and vulnerable households to related goods
and services (either kerosene or electricity) will be worse as a result of the project. The new
supply, however, is likely introduce new ‘needs’ such as refrigeration, entertainment, and
possibly labour-saving equipment such as washing machines although, given mostly low
incomes in the project areas, electricity consumption is unlikely to abruptly jump. The use of
pre-paid meters reduces the risk of household budgets being over-stretched by the new
service, or that benefits will flow primarily to non-poor consumers. Community education
programs, operated through SIEA, can help people to use electricity in safe and efficient
ways.

Risk of HIV/AIDS transmission


Throughout Solomon Islands, the introduction of outside workers and a sudden inflow of
cash (usually in connection with the logging industry) has been associated with social
problems, sexual and domestic abuse, sexual exploitation of children, and heightened risk of
sexually transmitted disease, including HIV and AIDS. 37 The Solomon Islands Government
is now preparing legislation to protect children from sexual and other forms of exploitation.
GHD has its own child protection policy. SIEA also has responsible worker practices.
Community development activities associated with this project should include community
awareness about the risk of sexual, domestic and other forms of abuse in cash-rich
situations, and ways to address and prevent these situations. 38

Social Impacts of Conflicts or Natural Disasters


Solomon Islands are now recovering from a destructive period of internal conflict. A positive
outcome of this experience has been greater awareness about the risk and triggers of
internal conflict and ways to counter them through equitable development and peace-building
activities. 39 This project will assist achievement of the goal of the National Development Plan
to more evenly distribute the benefits of development. The only risk that benefits of the
project will be captured by influential stakeholders in the project areas is through failure of
landowner agreements. There is no risk that vulnerable groups will be negatively affected by
the project, or of any loss of livelihood or employment.

13.6 Social safeguards

Involuntary resettlement
In regard to Involuntary Resettlement, the project is categorised as C, with no IR impact
expected. The small scale of the proposed hydropower plants, their design and construction
requirements, the minor extent of resource diversion, and other environmental impacts are
described elsewhere in this report. The only locations where there may be some disruption to
food gardens or food trees are the Fiu River, Malaita, and Gracious Bay, Santa Cruz. The

37
See, for example, a report from Makira produced by the Church of Melanesia: T. Herbert, 2007. Commercial Sexual
Exploitation of Children in Solomon Islands: A Report Focussing on the Presence of the Logging Industry in a Remote Region.
Christian Care Centre, The Church of Melanesia.
38
[SPC/UNFPA report on gender violence in Solomon Islands]
39
For example: Solomon Islands Government Departments of Home Affairs and National Reconciliation, Unity and Peace,
National Peace Council, Vois Blong Mere Solomon, Solomon Islands Christian Association, and UNIFEM, 2005. ‘Monitoring
Peace and Conflict in Solomon Islands Using Gendered Early Warning Indicators.’

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proposed hydropower sites at Taro, Lata, Ringgi, Mase and Honiara are in uninhabited areas
where there are no houses or gardens and only occasional use by hunters or local loggers.

Indigenous People
Indigenous people’s issues are significant in the project. Solomon Islanders have a strong
attachment to their ancestral lands. In some parts of the country, land has been alienated
from traditional to government ownership but even here landowner concerns must be
addressed. Of the proposed sites, four are on customary land and two (Ringgi and Lata) are
on alienated land. In Lata, the plant will be on alienated land but transmission lines will cross
over customary land.
In regard to arrangements to be made with landowners of the proposed sites, a recent study
noted that since the early colonial period, women’s attachment to and dependence on land
has been mostly disregarded. 40 Matrilineal descent was once significant in parts of the
country (Guadalcanal, Makira and Isabel) although women’s leadership role in land matters
was not acknowledged publicly. 41 Some women retain important genealogical knowledge.
Although men are considered the natural trustees and beneficiaries of royalty payments,
without proper consultation with women this has resulted in unequal shares in the benefits,
led to false claims of landownership, and created an environment ripe for enmity among clan
members. 42
It is critical to the progress and sustainability of the project that landowner aspirations for
project benefits are fairly met. Project benefits, including as they are perceived by the
landowner community, need to be included in the final land access and/or acquisition
agreement to be negotiated with the landowners through wide-based community
consultations. This agreement needs to acknowledge and calculate a value for the
landowner’s contribution to the improved electricity supply and the lower cost of generation.
Principal responsibility for these negotiations rests with the provincial governments. Land
acquisition processes are complex and have at times frustrated the national and provincial
governments in their efforts to acquire land. 43
Of all stakeholders in this project, landowners are the only group that could potentially work
against it. All discussions and activities to date, however, confirm that there is solid and
unanimous support for the projects from traditional leaders and other landowners.
There is an important difference between the populations of the landowning group and the
village communities. Landownership is based on genealogical descent, which may or may
not be recorded in writing. Some of these people will live in the project area. Others will have
gone to live elsewhere but can be vocal when ‘compensation’ issues are discussed. The
village population will include non-landowners, mainly women who have married in to the
community but who would be excluded it project returns only go to landowners.
An in-perpetuity return to landowning communities, perhaps in the form of a development
trust fund, could enhance both community ownership and participation in the project and

40
E. Huffer (ed.) 2007. Land and Women: The Matrilineal Factor. The Cases of the Republic of Marshall Islands, Solomon
Islands and Vanuatu. Pacific Island Forum Secretariat.
41
R. Maetala, 2007. ‘Matrilinieal Land Tenure Systems in Solomon Islands: The cases of Guadalcanal, Makira and Isabel Provinces,’ in E.
Huffer, op.cit.; J. Bennett, 2002, Roots of Conflict in Solomon Islands. Though Much is Taken, Much Abides: Legacy of Tradition and
Colonialism, State, Society and Governance in Melanesia. Discussion Paper 2002/5. Australian National University.; A. Pollard, 2000,
‘Resolving conflict in Solomon Islands: The Women for Peace Approach’, Development Bulletin, no.53, pp. 44-48.;
Sullivan, Marjorie, 2007. Recognition of Customary Land in Solomon Islands: Status, Issues and Options. Resource Management in Asia
Pacific, Working Paper 66. Australian National University.
42
Maetala, 2007, op. cit.
43
Temotu Provincial Government, 2011. Strategic Development Plan. Lata: Office of the Premier and Honiara: Ministry of
Provincial Affairs.

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provide a fair distribution of returns to all of the community by gender and age, rather than
the usual ‘compensation payment’ modality which usually goes in cash to senior men and is
often spend on unproductive investments. Whether or not the community agrees with this
distribution, it is difficult for them to do anything about it. However, ensuring that proceeds for
resource use benefit the whole community would increase the poverty alleviation and
inclusive development outcomes of the project.
An important element of the feasibility and design phase will therefore involve the securing of
legal agreements with the landowners of the project sites, community consultations about
expected or desired benefits and, if there is community support, the possible formulation of
some type of in-perpetuity development fund arrangement.
In summary, the project will require limited land acquisition. No resettlement will be
necessary. In Taro, Lata and Mase, the hydropower plants will be built in areas where there
is little local use but transmission lines in Lata will run close to settlements and require some
clearing of timber and food trees. There will be some disruption to gardens in Auki. In Ringgi
and Honiara, there may be some disruption to local ecotourism activities, mainly during
construction. Land access and/or acquisition agreements will need to be negotiated with
indigenous landowners. This is primarily the responsibility of the provincial governments.
The project will impact indigenous peoples but in no negative way. The population of the
provincial centres and their environs is almost entirely indigenous. Indigenous landowners
will benefit from the agreements referred to above and all other benefits of the project,
including the expected stimulus to the local economy. Annex 7 displays questionnaires and
screening tables for resettlement categorization.

13.7 Site Specific Findings

Auki, Malaita Province


Over a third of the population of Solomon Islands, or around 170,000 people, live on the
island of Malaita. 44 This is the province with the lowest level of human development in the
Solomon Islands, while Solomon Islands has one of the lowest levels of human development
in the Pacific island region. 45 Much of the coastal fringe of the island is heavily populated,
especially around Auki, the provincial capital. The town’s population is around 5,300 people
and another 15,000 live in adjacent settlements. The mountainous interior is sparsely
inhabited; with few roads, people there have very restricted access to basic services and
markets. Only approximately 4% of the population of Malaita Province has access to
electricity, mostly in the SIEA service areas of Malu’u and Auki. Even parts of Auki town are
unserved. 46
The proposed site for the hydropower plant is on the Fiu River, approximately 8-10 km into
the mountains behind Auki and approximately 4 km beyond the end of the nearest road.
Approximately 100 people live in the vicinity of the proposed hydropower plant in two small
hamlets, Kwainoa and Okwaia. The proposed intake is further upstream near Ofenga and
other small hamlets. Although the distance from the Fulisango road-head is not great, the
arduous walking track along the river, which is impassable to all but the strongest during bad
weather, makes these communities very remote indeed.

44
This population figure is an inter-census estimate. A more accurate figure will soon be available from the 2009 national
population census. According to the Family Health Card system, in 2009 the total population of Malaita was 132,600.
45
ADB, 2009. Solomon Islands: Interim Country Partnership Strategy, 2009-2011; Ministry of Health, 2009. Family Health Card
Consolidated FHC for Malaita Province. Unpubl. The UNDP Human Development Index is a composite measure of access to
health and education services and income, specifically life expectancy, infant mortality, school attainment, adult literacy and
per capita income. In 2009 only 10% of households in Malaita had adequate sanitation and 50% have piped water, both of
which negatively affect household welfare and women’s work. The fertility rate is high (141/1000), modern contraception use
is low (17%), and only 76% of live births are delivered in health facilities. Available data cannot be disaggregated to the
project area which, being close to Auki, may have better rates overall but areas of deep disadvantage nevertheless.
46
Malaita Provincial Government, 2006. Iumi Tugeta Bildim Malaita: The Strategic Plan of the People of Malaita Province.

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The project will provide electricity to people downstream from the proposed hydropower plant
site, covering most areas in and around Auki that are now unserved and also improving the
reliability and reducing future costs of the power supply. Because of the cost of running
transmission lines back up the valley, people in the upper Fiu valley, in the vicinity of the
hydropower plant may need to be served with solar systems instead, but this is yet to be
confirmed and community acceptance of this proposal has not yet been ascertained.
Communities along the road to Auki and on the coast will gain a much desired electricity
supply, including people in the three low-income housing clusters of Western Fishing Village,
Eastern Extension Area, and Kilufu’u Extension Area, where most households depend on
fishing for their livelihood. As well as improving living conditions, electricity supply will create
opportunities for storage and better marketing of fish, and therefore higher incomes. 47
Electricity supply will improve conditions at schools and health clinics along Fulisango Road
and in other areas of new connection.
Poverty
By all measures of poverty and social exclusion, people living in the upper Fiu valley are
markedly disadvantaged. While they are eager to have electricity, they are also interested in
the feeder road that will be constructed by the project for this will address their principal
problem of poor access to services and markets. They have abundant good land on which
they grow cocoa, with potential for expanded production, but poor market access restricts
incomes and livelihood opportunities. All goods and produce have to be carried in and out by
manpower; the track is impassable to animals or vehicles. Few children attend school, or at
most for a year or two, despite their parents’ expressed desire for their education. Only a
child older than 8 or 9 can regularly use the path and then only in good weather. The late
start, frequent absences, and hard daily travel discourage them from continuing at school. No
health services visit the area. The only health ‘facility’ is a stretcher on which a sick person
can be carried out to the road and beyond to medical help. No elderly people beyond the age
of 65 or so live in the area. Another potential landowner benefit accrues to kin who now live
on the densely populated coast because their use of their traditional land is constrained by its
poor accessibility. Residents in the upper Fiu valley look forward to their return as this will
add social capital to the small communities there.
Involuntary resettlement
No resettlement will be required but there may be displacement of some garden plots.
Agriculture in the area is mostly on shifting plots although cocoa is an important cash crop.
Much of the area is covered in indigenous forest. The population of the area is very small
and there is reported to be no shortage of farming land. Small areas of trees will be
damaged or removed during construction of the feeder road and canal and some gardens
may have to be relocated. Prior to the final project design, it is not possible to know the exact
composition of these losses and the extent to which cocoa and other food or economically
valuable trees will be affected.
Indigenous people:
The land is held under indigenous ownership, with boundaries and membership of
landowning clans defined by known genealogies. In 2000, the clans organised themselves
into the Dalobada Sirahi Tafubala (DST) Tribal Association, which is headed by the
traditional leaders of the various sub-clans and meets regularly to deliberate on clan affairs
and adjudicate over possible conflicts. 48 Members report that disputes are rare. The chiefs
and other landowners have expressed their full support for the project.

47
Potential areas for expansion were identified in the 2007 World Bank SKM report ‘Solomon Islands Proposed Power Sector
Projects - Outer Islands Generation and Rural Electrification Components’.
48
The formation and self-definition of traditional landowner bodies such as DST is encouraged by the SI Government as a way
to build peace and promote development.

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Taro, Choiseul Province


Situated on a small island one km from the main island of Choiseul, Taro, the provincial
capital, hosts the government station, primary school, the hospital and health clinics, and
housing for government employees, The population of the area is approximately 2,000, or
470 households, of which around 100 households live on Taro Island. Of the little
commercial activity in the area, most cash comes from government wages and copra
production. More than 80 percent of households in Choiseul are active in coconut production
and fishing, and more than 90 percent in subsistence gardening or farming. 49
The lack of grid power is a major obstacle to economic and social development of the Taro
area. Taro has no electricity service but government offices, businesses and a few houses
run small generators, which are especially noisy at night. SIEA is now installing a low voltage
mini grid to cover Taro Island only but because of its small size the system is not likely to
trigger much commercial activity. Taro Island lacks any water supply apart from wells and
rainwater tanks. The proposed hydropower plant will also provide a safe piped water supply
to the new township site.
The proposed site for the hydropower plant is on the Sorawe River, on the main island of
Choiseul, almost directly across the bay from Taro Island and close to the proposed site for a
new provincial centre. Supported by the national government, the Choiseul Provincial
Government plans to relocate Taro to the mainland. The SI Government has allocated $3.5
million p.a. to this scheme and will increase this amount from 2012, and a purchase
agreement between the government and local landowners is almost finalised, with the first
payments to landowners expected in November, 2011. The move will increase access to
government offices and services and reduce the town’s vulnerability to natural disasters, a
plan which gained high priority after the 2007 tsunami near Gizo. 50 Availability of reliable
electricity and water systems, which this project will provide, are essential to the plan.
At present, students from the main island travel each day to the primary school on the island,
and all secondary students travel back across the bay to the regional secondary school on
the main island, or board there. The school operates on a maximum of three hours of
electricity a day and suffers frequent breakdowns of its generator. All clinics and aid posts on
the main island are unpowered, making it impossible to store vaccines and difficult to provide
emergency services at night. Higher-level health services are available only on Taro Island,
although periodic visits are made by health staff to villages on the main island. Mainlanders
must cross the bay to the island, which is difficult in bad weather, and often face long waits to
see a doctor.
The economy of Taro is quite stagnant but many people can identify opportunities once
electricity is available. Fishing is a major activity but without storage facilities the market is
limited. The high demand for fish on the nearby island of Bougainville can be met once
refrigeration is available and reliable, by taking small iceboxes across by boat. Furniture
making is potentially another local industry. Women recognise cooking, catering and sewing
as potential businesses.

Lata, Santa Cruz, Temotu Province


Temotu Province, one of the most remote parts of Solomon Islands, has some of the lowest
development levels in the country, measured by any of the MDGs. Only 3.6 per cent of the
population of the province has electricity supply. The 2009 population census recorded an
annual average growth rate of 1.2 per cent over the previous decade, a slower rate than the

49
Choiseul Provincial Government, 2009. Choiseul Province Medium Term Development Plan 2009-2011. Ministry of Provincial Affairs

50
Choiseul Provincial Government, 2011. Provincial Development Plan. Ministry of Provincial Affairs.

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national population because of out-migration. The population is mostly young, with 40 per
cent under the age of 15 years, and is almost entirely indigenous Solomon Islanders. 51
Lata, the provincial capital, is located on the main island of Santa Cruz and accommodates
provincial government offices, the provincial hospital, airport, sea port, statutory
organizations and NGOs. Most businesses on Santa Cruz, or in Temotu Province, are
clustered in central Lata, within the SIEA service area. According to the Ministry of Health,
3,260 people in 600 households live in Lata and villages along the western side of Graciosa
Bay. 52
Gracious Bay, one of the most densely populated rural areas in Solomon Islands, is entirely
without reticulated power. A few shops own generators and a few households have small
solar systems for lighting (which do not work well during cloudy periods). Piped water, which
is pumped along the coast from Pala at the head of Gracious Bay to Lata using a diesel
powered pump, is unreliable. It is rationed to two hours per day (in the early evening)
because of the small capacity of the system and high cost of diesel. Outages are common
because of budget overruns and breakdowns. Three to four households share a single
standpipe. During the short time water is available they must stand about and wait their turn
to bathe and collect water. Few households have proper sanitation. People in the community
consider that an improved water supply is a principal benefit of the proposed project.
The SIEA power supply is very small, supplying only 120 customers in Central Lata. Large
voltage drops and power cuts are common. But as Lata is the only place on Santa Cruz
(and in Temotu Province) with a regular electricity supply, most businesses are located
there. The proposed hydropower plant on Luembalele River and 11 kV distribution system
will cover the current supply area and extend power supply to the water pumping station,
schools, health clinics and homes in Gracioso Bay and North Lata.
The project fits well with the newly formulated Temotu Provincial Development Plan which
aims to (i) strengthen the economic base by encouraging and increasing income generating
activities; (ii) improve the wellbeing of the population and reduce poverty; and (iii) increase
and strengthen health and educational services throughout the province. 53 Temotu Province
has entered into a trade agreement with nearby Vanuatu and recognises potential in
agriculture fishing, tourism, forestry and other wood products. Much of the planned enterprise
development will be located on Santa Cruz and especially along Graciosa Bay.
The new system will provide electricity to four schools on the west side of Graciosa Bay,
namely Kati Primary School (180 primary students) Muna Primary School (290 primary
students), Balo Extension School (40 Grade 1 and preschool students) and Graciosa Bay
Community High School (90 students in Forms 1, 2 and 3.) if a bridge at the head of the bay
was rebuilt and road access restored, electricity supply could possibly extend along the west
side of the bay to Palo Luesalo Training Centre (approximately 100 residential students). 54
Water is stored at the schools in tanks but lack of water frequently disrupts science and
home economics classes. Typing and copying of class materials is difficult and expensive,
and requires a trip into Lata where there is power, involving a 7 km return trip by foot or $200
by hired vehicle. Graciosa Bay Community High School will have Form 4 students in 2012
and Form 6 by 2014 but without power there is no capacity to teach courses with computers
or other new technology. 55

51
Temotu Provincial Government, 2011. Strategic Development Plan. Lata: Office of the Premier and Honiara: Ministry of
Provincial Affairs.
52
Lata Hospital data from Malaria Spraying Program, 2011. The villages are Nemu, Mabu, Uta, Nou, Mirnair, Matembe, Banua,
Mateabir, Ne’ele, Luepe, Mnaban, Yoo, Nep, Mateone, Balo, Nabanonto, and Nepa.
53
Office of the Premier, 2011. Temotu Provincial Government Strategic Development Plan.
54
The Temotu Provincial Plan notes the importance of the Vocational Training Centre to this remote province where many
students drop out early due to remoteness and the cost of sending students elsewhere to study.
55
Graciosa Bay Community High School Board of Management, 2011. School Development Plan. Internet services are
sometimes available through a solar powered facility at Kati Primary School.

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A nurse aid post near Kati School, which lacks power supply, serves Gracious Bay.
Vaccinations are periodically provided by a mobile team or are otherwise available at the
hospital in Lata where there is refrigeration. Without lighting, clinic staff can provide limited
service to people who fall sick at night. Frequent power fluctuations and cuts affect services
at Lata Hospital which then links into the Telecom generator for essential power needs.
Involuntary resettlement
The proposed hydropower plant will be on previously logged state land along the Luembalele
River which flows into Graciosa Bay. Transmission lines, however, will cross customary land
at the end of the Bay and up the coastal road to Lata. Landowners have expressed full
support for the project but a legal agreement will need to be negotiated through the
Provincial Government for access and use of the land under the transmission corridor.
Some timber and food trees will need to be cleared along the route but this is unlikely to
affect local food security. Surveys have already been conducted and landowners are aware
of and comfortable with this requirement.
Indigenous People
Land along the transmission route is held under the indigenous ownership of the Mnaban
Clan, with boundaries and membership defined by known genealogies. The clan involved
with this project site has a good record of cooperation with development activities. It
previously leased a logging concession around the proposed plant site to Allardyce Logging
Company and Mega Timber. While there were some disputes they were amongst the
landowners themselves, did not disrupt logging activities, and were soon resolved.
Landowners of this area freely donated the land for Muna School (and now GBCHS) in 1962
for the education of their children.

Ringgi, Kolombangara, Western Province


The hydro site identified at Ringgi on Kolombangara is capable of meeting the power
requirements of Kolombangara Forest Products Ltd (KFPL), a large plantation based at
Ringgi, as well as nearby villages and the SIEA supply area at Noro and Munda on nearby
New Georgia, which together comprises a major population hub. Noro, a small industrial
centre and port, has a population of around 4,500, an international port with facilities for the
transhipment of timber and a tuna processing factory. Munda, with a population of
approximately 3,000, is a provincial government sub-station and major airstrip. Infrastructure
services in the area include a central water supply, rural hospital, police post, post office,
schools and government services. Development plans for the Noro-Munda area, which are
now hampered by a severe power shortage, include further industrial growth at Noro and
further tourism growth at Munda. Once these plans go ahead, there is likely to be a
substantial increase in electricity demand and population.
Since the early 20th century, a large proportion of the island of Kolombangara has been
plantation forest on land alienated from customary ownership. KFPL is part (40%) owned by
the SI government and, since late 2010, majority owned by a Taiwanese company,
Nienmade Enterprise. The KPFL estate is of national economic importance and the
Company is the major employer on the island and region. Approximately 3000 people live in
and around the estate, most in workers’ houses at Ringgi Station. Another 3500 live outside
the estate in the south west of the island or in villages along a 500-1000 m wide coastal strip
of estate land on which they freely reside, obtain timber and other products from logged
forest (such as firewood) and garden. The Ringgi Station has electricity but the hydropower
plant will increase its supply and lower costs. Potential enterprises include a sawmill, small-
scale furniture making, fish storage and marketing, small retail shops, and selling of cooked
food.
As part of its valuable Forestry Stewardship Council (FSC) rating, KFPL abides by conditions
of social responsibility to its workers and other island residents, which meet international

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standards. 56 (Maintenance of the FSC rating was a condition of the recent sale of majority
shareholding). KFPL’s Social Management Plan outlines company policies on labour
standards, access to social services, gender equity, etc. Outside of the company workforce
and their families, each community or village on the island has an elected Resident Advisor
who consults with KFPL about community concerns and with the community about company
concerns and plans.
Resettlement
With full support from KFPL, and managed by indigenous communities through the
Kolombangara Island Biodiversity and Conservation Association, the island now hosts a
major conservation area covering all land above 400 m. asl as well as an ecotourism
venture. The proposed hydropower site is on an adjoining protected area. No resettlement of
houses or gardens will be required but there may be some disturbance of the ecotourism
business during construction, and possibly some resistance from the managers of the
protected area.
Indigenous People
KFPL holds a 75 year lease over most of Kolombangara Island, including the proposed
project site. While indigenous owners wish to reclaim their land this is not a matter of
immediate dispute, and the national government is unlikely to relinquish their leasehold.

Mase, New Georgia


The Mase River provides a possible alternative site to Kolombangara, to supply the Noro-
Munda area. Most landowners of the site live at Mase, a large village with a population of
more than 500 people on the northern end of New Georgia and with a strong affiliation to the
Seventh Day Adventist (SDA) Church. Villagers welcome the project and the possibility of
electricity supply, which they look forward to using in their primary school and church, and for
lights, video watching, cooking, sewing at night, fish storage, furniture making, and so on.
They also anticipate that the access road to the site may join with logging roads on the island
and connect through to the services and markets at Noro and Munda, providing a safer and
easier trip than by boat. Villagers were however concerned that they only heard the ‘good
side’ about future projects, and were anxious to know what impact mineral exploration high in
the Mase River catchment is having on the river, believing that chemicals and siltation may
be spoiling it. This is unlikely, but their concern needs to be explored and may mask other
issues.
The proposed hydropower site is away from the village, in a part of the island that is rarely
used. The land above the site on which mineral prospecting is being conducted belongs to
neighbouring villages which are members of the independent and communally based
Christian Fellowship Church (CFC). The CFC was originally led by the charismatic Holy
Mama but now by one of his sons (another is the local Member of Parliament) who holds
unquestioned power over church members. With its large communal plantations and
business ventures, the CFC is a major economic force on New Georgia, investing in
businesses that benefit rural people. CFC communities have also been noted for their
opposition to large-scale foreign developments in logging and other enterprises but also their
support for conservation. 57 Mase poses a unique situation, therefore, where support for the
project will need to be sought not only from landowners but also the CFC leadership.

56
KFPL, 2010. Social Management Plan, 2011-2015.
57
1. E. Hviding, 1996. Guardians of Marovo Lagoon: Practice, Place, and Politics in Maritime Melanesia. Honolulu: University
of Hawaii Press

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Mataniko River, Honiara, Guadacanal


Honiara, the capital and largest city of Solomon Islands, has a population of approximately
90,000 that is growing quickly, at around 4% p.a. Approximately 75% of the town population
has access to electricity but demand is also growing quickly. There is a backlist of more than
1,000 households and businesses to be connected if the Honiara system can be extended to
residential areas to the east and west of the current supply area. There is no reserve
capacity in the diesel power generation, power cuts are common, and there has been
interest for some time in hydropower generation. Hydropower development on the
neighboring Tina River is being investigated through a study financed by the European
Investment Bank.
The Mataniko River emerges behind Honiara, through heavily dissected and forested hill
country. The river, its gorge and waterfall (above which the intake is planned) is a popular
hiking trail and a tourism attraction. There are no people living at the proposed hydropower
site although there are a few very small hamlets further up the river. Most landowners live
further down the river, on the outskirts of Honiara. They and other potential electricity
consumers in Honiara stand to benefit from a more secure electricity supply.
The most critical issue is land acquisition. Landowners also expect large payments for
access and resource use on their land, and traditional land claims are poorly documented in
this area. The Tina River Project recently paid out $200,000 to each of 27 ‘tribes’ with claims
to land ownership for investigation access to the area alone. Mataniko landowners have
already requested compensation of 1 million SB$ for the installation of a gauging station
which was therefore not implemented. Future compensation claims may render the project
unfeasible.

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14. Conclusions and Recommendations

Most inhabited islands of the Solomon Islands have hydropower potential. Rainfall in higher
catchment areas is evenly distributed over the year and the rivers draining catchments have
often sufficient slope to allow the development of high or at least medium head schemes with
estimated specific investment cost in the range of 2600 – 3600 US$ per installed kW for plants
in the class 1 – 5 MW. Smaller schemes in the 100 kW class are typically costing around US$
6,000 – 7000 per installed kW but can be significantly higher where conditions are
unfavourable. These figures do not include land acquisition cost. Factors limiting hydropower
development are unfavourable geological conditions (porous limestone formations and thick
layers of unstable alluvium) and high flood levels associated with extreme weather events
(cyclones). These constraints can, however, be overcome by appropriate designs that avoid
dams and tunnelling. Run off river plants with contour canals and steep, short penstock pipes
seem to be cost efficient and environmentally friendly as long as minimum flows are maintained
in the respective rivers. Another constraint is landowner resistance or unrealistic compensation
claims made by landowners. In addition, there is inadequate hydrological data to accurately
forecast river run off and energy potential of specific sites. This lack of data has been addressed
in this TA through the installation of 5 automatic river gauging and rainfall recording stations.
Costs and Benefits of Mini Hydropower
Despite the constraints mentioned above, hydropower is considered viable for most of SIEA’s
grids. SIEA’s plants in Buala (Santa Isabel) and Malu (Malaita) have already demonstrated that
hydropower is a reliable energy source with low operating and maintenance cost. As it requires
no fuel input, electricity from hydropower is in most cases less costly than equivalent diesel
energy. It also avoids the expense and insecurity of fuel logistics. It is as effective in rural
supply areas as it is in urban supply areas, provided that local topological and hydrological
conditions (rainfall, catchment area, runoff) are adequate and landowner issues can be
resolved. Its capital cost can vary enormously from site to site, depending upon local topological
and geological conditions.
For the five sites investigated in this prefeasibility study, hydropower has considerable potential
to provide access to affordable, renewable electricity to rural areas. In the investigated load
centres and perhaps others, hydropower has good potential to turn loss-making rural diesel
stations into profitable operations or to create new rural power supply systems that are
profitable, either for SIEA or for an independent power producer (IPP). Assuming that the
willingness to pay for electricity it is at least equal to the national electricity tariff, hydropower will
benefit the rural population by raising the quality of life, widening the opportunities for improved
social services, and perhaps stimulating commercial development.
The following Table 14.1 summarises the results of our investigations for the five sites that have
been selected in close consultation with SIG and SIEA senior management.

Table 14.1: Summary of Hydro Projects


Load Installed Annual Investment Levellized FIRR US$/kW Environmental
Center kW GWh US$m US$/kWh % Category
Auki 1,160 9.8 4.2 0,08 35% 3,600 B
Lata 107 0.8 2.2 0.2 13% 20,300 B
Ringgi A 1,210 10.4 4.4 0.07 45% 3,600 A
Ringgi B 4,320 26.3 11.3 0.06 47% 2700 A
Taro 260 2.1 1.7 0.12 18% 6,500 C
Honiara 2,740 12,7 7.2 0.08 40% 2600 A
+Tina
Honiara - 2,740 12,7 7.2 0.08 47% 2600 A
Tina

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These preliminary cost estimates have been prepared for the purpose of prioritizing sites for
further investigation and must not be used for any other purpose. They are subject to the
limitations contained in section 1.4 of this report.
While specific investment cost vary considerably, the results show that for projects above
1 MW, total costs (excluding land acquisition) are below US$ 3,000 per kW which results in
robust FIRR values in the 40% range and in levelized energy production cost below 10 US
cents per kWh.
Sensitivity analysis shows that even under pessimistic assumptions the projects turn out to be
competitive with diesel generation for which a real increase in fuel cost of 3% p.a. has been
assumed. Hydro development has the potential to fundamentally change SIEA’s financial
position in the centres investigated if SIEA invests in the projects. The larger projects (above 1
MW also seem to support development as privately financed IPPs with the benefits shared
between a developer and SIEA as an off-taker.

IPP Development
SIEA has expressed an interest in leaving hydropower development to private IPP investors.
The main reasons for this position are firstly a reluctance of SIEA to deal with landowner issues
that will inevitably arise in conjunction with hydro development and secondly the shortage of
investment funds. The IPP development modality can indeed overcome these two obstacles.
Landowners could be made shareholders in IPP developments with land acquisition
compensation paid as dividends tied to the performance of the projects. However, the IPP
modality requires effective and efficient risk management and an enabling framework that is
able to balance interests of investors, consumers and the off-taker SIEA. Such a framework or a
regulatory authority that could address risk management issues does not yet exist.
In case the IPP route is chosen for the hydro projects, it seems prudent to aim at preparing the
projects in the public sector to an international standard (possibly with TA support from donors)
and then competitively procure the projects in international tenders. This means that funding
needs to be located to perform the feasibility and preliminary design studies for the priority sites.

Priority Projects
From the consultant’s perspective, there is a clear merit order for the projects. The highest
priority should be given to the Ringgi project. It is not only the best performer in terms of FIRR, it
also has the highest quantitative impact in terms of kWh supplied. An additional advantage is
the absence of landowner issues, as the forest company owns the land where the hydropower
plant would be installed. It is recommended to focus on a variant that would not only supply the
demand of Ringgi, but also the demand of the demand centres Noro and Munda. SIEA will have
to restructure its power supply to these centres anyway and instead of building a new diesel
power plant, Noro and Munda could be supplied from Ringgi with diesel back-up provided by
the 3 MW of diesel capacity installed at the Soltai fish processing company in Noro. An
additional advantage of the Ringgi project is that the forest company has already all equipment
that would be necessary for the construction of the hydro plants on site. i.e. mobilization cost for
construction would be extremely low in comparison with other projects. This project has been
classified as a category A project due to environmental concerns related to the High
Conservation Value Forests within the Vila River catchment including the riparian buffer zones.
Whilst KFPL have indicated that the project would not compromise their environmental
objectives, a full EIA would be required.
The Mataniko project shows equally high FIRR values, in particular under the assumption that
the Tina river project will not go ahead. Developing this project will, however, have to include
resolving some critical land acquisition issues as compensation demands for the installation of a
simple automatic gauging station were already quite substantial. In addition the project has
been classified as a category A project due to environmental concerns related to the potential
negative impact on a waterfall site that is regularly visited by tourists.

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The Fiu River hydro scheme on Malaita has the potential to provide low cost electricity for the
provincial capital Auki including surrounding areas. At 35% the FIRR is still significantly above
the WACC and the project should also be considered as a priority.
The smaller projects Lata and Taro show significantly higher specific investment cost and while
still viable under standard assumptions taken, they may require some donor support to
materialize.

Next Steps
Securing a continuation of collection and processing of the hydrological data at five sites is
critical as any subsequent study and design work would have to depend on these data. The
responsibility for data acquisition should be transferred to SIEA as the utility has already
personnel in the provinces that can visit the sites, check the state of the equipment and
download the data from the loggers. Site visits should be performed every three months. Data
collected should be shared with MMERE’s water and energy departments.
It is recommended to prioritize both Fiu (Auki) and the Vila (Ringgi) projects for full feasibility
studies. For Ringgi, a full EIA would also be required as part of the feasibility work.

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Annex
Annex 1: Automatic Stations Used on ADB RETA 7329

Background
Due to lack of reliable hydrological data for the rivers and catchments analysed under RETA
7329 it was decided to include rainfall and water level recording in the project. 7 automatic
water level and rain gauge stations have been procured by GHD for installation on successful
projects under pre-feasibility studies.

The “ARG100” Rain Gauges


The rain gauges are produced by:
Environmental Measurements Ltd. (EML), Business & Innovation Centre, Sunderland Enterprise
Park, Sunderland SR5 2TA, U.K., Tel: +44 191 5010064, Fax: +44 191 5010065, Email:
sales@emltd.net , Web: www.emltd.net

The rain gauge is a tipping gauge, generating an electric impulse with two magnets passing
each others when tipping and it tips about each 0.203 mm (see individual calibration sticker
inside the rain gauge) of rainfall. The innovative design of the rain gauge allows catching all
rainfall in windy situations. When using conventional cylindrical rain gauges, 15-30% of the rain
is lost when wind and rain coincide unless a cylindrical curtain of some sort is established
around the gauge with a diameter of 1.5-3 m at about the level of the top of the rain gauge.

The rain gauge has an inbuilt level to support installing the gauge completely horizontal, which
is needed to achieve accurate measurements. Levelling is achieved by adjusting the nuts that
hold the unit on its steel base plate.

The Solinst “3002 Rainlogger c/w connection cable” shown above has been installed in the
gauges. After installation, the time interval between registering observations is set. The logger
counts the number of tips in the period and registers the final result at the end of the time
interval. The logger has a memory of 32,000 observations and once this has been exceeded, it
overwrites the oldest data. If as example the time interval is set to 15 minutes, it will take 333
days before overwriting of data starts. With an interval of 30 minutes, 666 days would pass
before overwriting of old data begins.
At the initial installation of the stations in Solomon Islands 15 minutes time interval has been
selected, which allows almost 11 months in between data collection visits and at the same time
provides adequate data resolution for hydro power planning. If a more scientific analysis of
extreme rainfall intensity is planned for any other purpose than hydropower (urban runoff from
paved areas as example) it would make sense with a shorter interval, otherwise not. The
datalogger comes with a connection cable, which has to be joined with the cables mounted
inside the rain gauge. After starting the datalogger, using a laptop computer and a
communication package, the cap is put back on the data logger and the datalooger is stored

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inside the rain gauge in a way so that the cables don't interfere with the tipping mechanism. If
the cap is not put back on, the battery of the logger will be drained, as the optical sensors for
communication will be switched on as long as any light reaches the sensors. The inbuilt battery
is quoted to have a lifetime beyond 10 yrs at 15 minutes scanning interval.

The Water Level Stations Using Solinst “3001 LT Levelogger Gold M5/F15” and
“3001 LT Barologger M1.5/F5”

The water level loggers installed are supplied by:

Solinst Canada Ltd.


35 Todd Road Georgetown, ON, L7G 4R8
Fax: (905) 873-1992 (800) 516-9081 Tel: (905) 873-2255 (800) 661-2023
E-mail: instruments@solinst.com Web Site: www.solinst.com

This modern level logging units measure both the pressure of the water above the sensor and
the air pressure at the site. The Levelogger is placed in the water, measuring the total of air
pressure and the pressure of the water column above the sensor, while the Barologger, placed
above the highest water level, is measuring the air pressure, which later has to be deducted
from the readings of the Levelogger to calculate the relative water level. Either a staff gauge has
to be installed on the site of the Levelogger or a reference point has to be established above
normal water levels to take reference water levels at the time of checking the the station and
during discharge measurements for the rating curve for the station.

The Levelogger and the Barologger have the same capacity ad the Rainlogger and store the
latest 32,000 sets of reading in the memory of the logger. The Levelogger stores pressure and
water temperature and with a pressure range from 0 to 5 m absolute water pressure, which for
practical purposes means a 4m water level interval. The barologger registers air pressure
between 0 and 1.25 m equivalent water pressure and is used to calculate the actual water level.
With more Leveloggers in a local area only one Barologger is needed. The Levelogger is set at
15 minutes between measuring water levels, which gives 333 days to fill the memory before
over-writing begins. With this frequency the battery time of the loggers should be slightly above
10 yrs. With 15 minutes resolution, it will catch the rapid changes of water levels for streams
with small catchments, where flood waves can pass in short periods in the case of a localized
rainfall.

Selection of Sites
The selection of a suitable site for the station is critical for the cost of maintaining it for getting
reliable data.

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Conventional installation require considerable civil works be undertaken for such a station,
including building a measuring well in which the Levelogger is installed and the construction of a
V-shaped where the slopes on the weir is painted as a staff gauge. Some conventional stations
include the construction of a permanent house. This, however, is seen as uneconomical for
temporary stations as considered here.
A significantly cheaper solution has been used in the project: A stable controlling section
downstream of the gauging is identified. A controlling section is a place where the flow to the
downstream is super critical (like a rapid or water fall) and to the upstream is subcritical (like a
slow flowing stream or a pool). The width of the controlling section should be rather narrow,
which result in significant change of water level with changes in discharge, which is critical for
the precision of flow measurement. The bottom of the controlling section should be rock or
stones which are overgrown with algae, indicating that they are stable on the location. If the
cross section is changed during each major flood, a new rating curve has to be established
every year as described below and this typically involves 4-5 visits for discharge measurements,
incuring significant cost.

Installation
The Levelogger is mounted on a significant size steel grill, placed on a protected spot in the
pool upstream of the controlling section and covered by large boulders, which will not be
washed away. Should extreme floods occur during a major cyclone all stations have to be
visited and reinstalled if necessary. A suitable place is either immediately upstream or less ideal
downstream of a large boulder or rock, where it will be protected from large tree trunks
potentially damaging the station. The Levelogger has to be placed below the lowest occurring
water level in the river, which typically represents a significant challenge.

After the establishment of the station the rating curve has to be established by discharge
measurements at different water levels. Typically more than 4 – 5 observations are required to
document a rating curve. It may expressed as a formula:

Q = a x (H-Ho)^b

where:
 Q is the discharge in m3/s
 a is a constant related mainly to the width of the controlling section
 H is the water level as registered by the Levelogger
 Ho is the corresponding water level of no flow (according to the formula) in the height
interval the formula covers, as on complicated sections, several intervals with each their
formula may apply, especially when the section is inundated from sections to the
downstream or the width above a certain level becomes large, when the water level
exceeds the level of the immediate river bank
 b describes the shape of the cross section and may typically be a figure between 1.6
and 2.4, depending on the shape of the cross section (rectangular or V-shaped)

As seen 3 values have statistically to be estimated and initially b may be assumed about the
value of about 2.0, leaving a and Ho as the most critical ones at the beginning of the
measurements. Ho may be physically assessed as well, but it is difficult to estimate the zero
flow level. It is a common mistake to assume that it occurs when zero water level readings are
shown in the logged data.

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The Levelogger is connected to the 15m long direct read cable before being fixed on the grill
with plastic cable ties. The grill is fixed at a 5mm galvanized steel rope with a loop through the
grill and a cable clamp fixing holding it in place. First the 15m long steel cable is connected to
the storage box for the Barologger fixed with a galvanized chain in a tree above the highest
water level, from where it follows the surface down to the Levelogger. If possible a small trench
is made for the cable and covered with rocks after installation of the cable. As the connection to
the grill typically is less than the 15m, the excess steel rope follows the direct read cable and
the steel rope back towards the storage box, and the direct read cable is placed between the
two steel rope cross sections and fixed with cable ties every 250mm.

Discharge measurements
There are three types of discharge measurements:
 Float method
 Salt dilution method
 Propeller method

The methods differ in terms of equipment used, cost and accuracy. They are briefly described
below:

The float method


A measuring tape or steel cable with 1m marks is tied across the stream. At a minimum of 8
sections or for each meter the surface velocity is measured with a floating piece of stick floating
down along a measuring stick. The time is recoded for the float to cover the distance for each
segment, starting in the middle of the segment below the tape or steel rope. At the same time
the depth is taken at every 0.5m, so the average depth for each segment is known as well.
Assuming the average velocity is about 0.8 times the surface velocity the discharge per
segment is then calculated and the sum is the total discharge. As long as all the details above
are maintained the results of such a measurement are of acceptable accuracy. The equipment
used is inexpensive and easy to transport. The problem with the method is that people doing it
often take shortcuts, simplifying the procedures in order to save time.

The Salt Dilution Method


For this a conductivity meter is used (in this case a Hanna HI-8733, which is self calibrating and
includes temperature compensation). The probe is kept in the stream so the flow always passes
inside the plastic cover passing the sensor and out through the holes on the side. The
calibration indicator is set to 2.0, which secures full temperature correction for conductivity with
a temperature sensor inbuilt in the probe.
Salt, normally 3kg per assumed m3/s of flow (with 100% more in limestone areas), is bought in
500g or 1kg bags in the local shops and spread out across the stream upstream of the
measurement spot at a minimum distance of 30 times the average width of the stream. This
ensures a good mixing of the salt in the flow. The following 3 conditions for the stretch between
the salt spreading spot and the metering spot need to be observed:

 There must be no pools on the stretch, which would delay the passing of the salty water
 The stretch has to have turbulent flow for the mixing, typically a number of small rapids
between stones
 The stream has to maintain only one path, no separation into different parallel streams
on the way, which prevents mixing across the total width of the stream.

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Violation of any of those conditions typically leads to serious errors in the range of +/- 50%. The
probe is installed in the water before the salt is spread upstream. The instrument first has to
stabilize the reading of the background conductivity, which typically will vary from above 50 in
volcanic soils to about 350 microSiemens/cm in ground water in limestone areas. If the
background is below 100 the scale to 199.9 is used and if higher the scale to 1999 is used.
After spreading salt, the time for the salt wave to reach the probe may be vary from 1 to 15
minutes. The background is monitored closely and noted down as it may change while waiting
the salt wave. Once the conductivity starts rising, the conductivity is noted every 10 seconds
until it is back to the background. After 15 consecutive constant readings above the original
background reading, this new level is used as the background value and the measurement is
completed.
The calculation of the discharge is done in a spreadsheet model where the amount of salt used,
the background reading and the observations every 10 seconds are entered. This allows
calculating the average concentration in the whole period and knowing the amount of salt used,
then the volume of water passing is computed. As the duration is also known the discharge is
calculated. The method yields accurate results if the location for the measurement is adequate.
It does not require heavy and expensive equipment to be carried and maintained.

The Propeller Method


This is the classical method used by professional organizations maintaining a larger network
with more than 50 or 100 stations. Propellers are typically expensive in procurement and are
extremely demanding in maintenance and use. Lubrication oil typically have to be changed at
every use of a propeller and every year it typically has to be sent for re-calibration at a hydraulic
laboratory at a cost of about USD 2,000 each time. It has been observed that institutions neither
changing oil every time nor have propellers re-calibrated on periodical basis might be operating
with systematic errors of up to about - 30% on average and much larger on low velocities.
In a small stream 10-20m wide sections are marked as described above for the float method,
measuring the depth every 0.5m and measuring the velocity for every 1.0m. If large stones are
located in the cross section, the area covered by those have to be effectively deducted from the
calculations. If the water depth in a section is above 0.6m the velocity is normally measured in
two depths instead of only one.
Unless the propeller measurements are carried out in a very disciplined way and the equipment
properly maintained, the results from propeller measurements may be very poor.

3001 Direct Read Comm. Package (USB) for the Levelogger


For the communication between a laptop computer and the loggers a set of cables and a
software package is needed. Two different cables are used for communication. One with a
socket for optical communication, where the datalogger is plugged into the socket (Rainlogger
and Barologger) and another with a serial interface to the direct read cable used on the
Leveloggers. A Windows based communication program installed on a laptop computer is used
to upload settings to the dataloggers and to download data.

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Annex 2 Legal Framework for Rural Electrification

General

In the following the legal system of the Solomon Islands relevant to hydro power development
and rural electrification is outlined 58. The legal system is built on the Constitution, which has
primacy, a system of Customary Law deriving from the country’s indigenous traditions, and
English Common Law inherited from its colonial past. The National Parliament is empowered
under the Constitution to enact laws.

The last fifteen years have seen an overhaul of some parts of the legislative framework to adapt
the legal system to cope with the pressures imposed on it by the opening up of the economy to
global markets. Foreign investment law, environmental legislation and much of the natural
resources legislation is relatively recent and adequate for present purposes, but the Electricity
Act, Petroleum Act and other key energy laws date from the sixties and even earlier. These are
in need of revision.

Legislation dealing directly or indirectly with rural electrification is outlined in the following
sections.

Electricity Act (1969)

The Electricity Act provides for the establishment of SIEA and authorises it to provide electricity
to urban and provincial centres and other supply areas as instructed by the Minister.

Electricity supplies provided by anyone other than SIEA must be licensed. The licensing
system authorises private and community-based operators to supply rural areas and
establishes a mechanism for regulating their activities and maintaining appropriate safety and
technical standards. Licences are issued by SIEA. SIEA is also the authority for licensing
electricity installations and electricity contractors and electricians.

The licensing regime also applies to back-up plant installed by consumers to counter the effects
of frequent load shedding by SIEA but owners are obliged to pay SIEA up to 50% of the value of
the electricity they generate during periods when the SIEA supply is available.

Exemptions to the licensing provisions of the Act are specified in the Electricity (Exemptions)
Order (1992). Supplies less than 50 kW are exempt (unless they serve hotels, resorts, labour
lines or staff quarters) and this puts the majority of rural electrification schemes beyond the
control of the licensing system.

The authority to sell electricity under a licence applies only within defined geographical areas
specified in the licence. The maximum term for a licence is 21 years unless express approval of
the Minister is obtained.

58
Review of Electricity Act, prepared for PIEPSAP by Maunsell, 2007

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The key provisions of the Electricity Act and subsidiary legislation address the following:

(i) Electricity Act

• Establishment of SIEA;
• Functions and duties of SIEA;
• Financial matters relating to SIEA (borrowing, income tax exemption, subsidies,
electricity pricing, expenditures and investments, reporting and auditing);
• Licensing others to supply electricity;
• Acquisition of land;
• General powers of SIEA and licensees (powers of entry, power to inspect, etc.);
• Reduction of supply/ disconnection of supply;
• Electricity use;
• Protection of SIEA power system;
• Compensation for damage;
• Offences and penalties.

(ii) Electricity (Tariff) Regulations


Electricity (Tariff) (Automatic Fuel Price Adjustment) Regulations
The Electricity (High Voltage)(Tariff) Order

Tariff regulations are promulgated from time to time through subsidiary legislation to adjust
the prices charged by SIEA and licensees for electricity supplied. The adjustments are
made to reflect changes in costs of generation and supply (refer §21 of Electricity Act and
this §2 of the Tariff Regulations). An automatic fuel price adjustment mechanism provides
for a regular 3-monthly adjustment of the retail price of electricity to take account of
changes in the price of imported diesel fuel.

(iii) The Electricity Regulations – Arrangement of Regulations (“Electricity Regulations”)

The Electricity Regulations prescribe applicable requirements and procedures in respect


of, amongst others:

• Technical standards of electricity supply (voltage, frequency, etc);


• Wiring of electrical installations;
• Compliance with wiring rules etc;
• Licensing of electrical contractors;
• Application for supply;
• Service connections;
• Provision of additional capacity;
• Consumers with large demand;
• Installation of emergency or standby generating plant;
• Metering;
• Rates and accounts;
• Security deposit and service charges;

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• Liability of consumers;
• Power to discontinue or disconnect supplies;
• Restrictions on the use of electricity.

The Electricity Act dates from the sixties and a review is overdue. Its principal focus is urban
electrification and is not concerned in any specific sense with rural electrification or renewable
energy. A possible role for the private sector is recognised in the Act’s licensing provisions, but
the conditions for participation are unattractive (refer Section 4).

A State-Owned Enterprises (SOE) Bill is understood to be under preparation. The intention of


the legislation is to establish an umbrella framework for the operation of all SOEs, including
SIEA. The SOE Act would therefore supersede certain sections of the Electricity Act including
those dealing with the Authority’s constitution, legal identity, reporting requirements, etc.

Foreign Investment Act (2005)

The Foreign Investment Bill was presented to Parliament in July 2005 and was assented in
December of that year. Foreign Investment Regulations were gazetted recently. The Act seeks
to advance the policy objectives of the Government by creating a business environment that
facilitates, monitors and controls beneficial investment by foreigners in the Solomon Islands.

Under the Foreign Investment Act (2005), investors must first obtain a Certificate of
Registration. A Registrar of Foreign Investment is appointed and will process applications,
issue Certificates of Registration, register investment activities, monitor compliance with the Act
and keep a register of foreign investment activities.

A Certificate of Registration is a prerequisite for negotiating or entering into any arrangement or


agreement in respect of an investment opportunity. The certification process has been
streamlined. The foreign investor first makes application to the Registrar in the form prescribed
in the Act (the application form comprises two A4 pages) and pays the required fee. Within five
days of receiving a correctly completed application, the Registrar will assess the application and
give written notice whether it is accepted or rejected. In cases where a decision cannot be
made within the five day timeframe, it will be rendered as soon as practicable.

The Registrar may cancel a Certificate of Registration if the foreign investor fails to commence
an investment activity within twelve months of receiving the certificate. Other grounds for
cancellation are involvement in illegal or prohibited activities, or obtaining a certificate by fraud
or misrepresentation.

An Investment Facilitation Committee is established to help investors holding Certificates of


Registration to conduct their investment. The Committee is also empowered to review the
Registrar’s decisions relating to rejections of investment applications and cancellations of
Certificates of Registration.

Some investment activities are reserved for local investors and foreign investors are precluded
from participation. These activities are listed on a “Reserved List” and the criteria governing

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their inclusion are specified in §9. The Reserved List is reviewed at least every two years. Any
change will require Cabinet approval. It is unclear at this stage whether any activities relating to
the electrification of rural communities will be included on the Reserved List.

Environment Act (1998)

The Environment Act (1998) was gazetted in September 2003 but regulations are not yet in
place. The objectives of the Act are specified in §3. They are to:

• Provide for and establish integrated systems of development control, environmental impact
assessment and pollution control;

• Prevent, control and monitor pollution;

• Reduce risks to human health and prevent degradation of the environment by all practical
means, and

• Comply with and give effect to regional and international conventions and obligations
relating to the environment.

“Environment” is given a broad definition (§2): it includes “all natural and social systems and
their constituent parts, and the interactions of their constituent parts, including people,
communities and economic, aesthetic, cultural and social factors”. Rural electrification projects
typically involve a complex interaction of these elements.

The Act provides for the establishment of an Environment and Conservation Division (the
“Division”) to administer its provisions. The Division is organised under the Ministry of Natural
Resources and is responsible for administering environmental approval provisions under the
Act. In considering whether to approve a development, the Division must “have regard as far as
practicable to the effect such development … would have on the environment”. The Act also
provides for the establishment of an Environmental Advisory Committee to advise the Minister
and the Division “on any matters connected with the environment and conservation referred to
it” (§14).

Part III of the Act defines formal environmental impact assessment procedures. Applications to
undertake developments described in a schedule of the Act as “prescribed developments” must
be referred to the Director of the Division for approval. Applications must be supported by an
environmental report and the Director must advise the developer whether this report should take
the form of an EIA. In determining whether an EIA is required, the Director is to take account of
the impact that the development is likely to have on the environment and any other factors
prescribed by regulation. The required scope of environmental reports and EIAs are outlined in
§20 and §23 respectively.

§17 stipulates that a foreign investor must also include with its application a copy of a certificate
of approval issued by the Investment Board; however, under the new Foreign Investment Act a
Certificate of Registration is probably required instead (refer Section 0).

When the environmental report is completed, it must be brought to the attention of stakeholders
who may send written objections to the Director. The Director shall then decide whether to

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consent to the development, or require the developer to produce an EIA, or refuse the
application. If the EIA satisfies the requirements of the Act, it will be made available to
stakeholders. The Director, after considering written submission, will decide whether to consent
to the development or refuse consent. If consent is granted, the developer must carry out the
development in accordance with the development consent.

Experience in the operation of the Act is limited. Although it contains no specific requirements
for power generation and distribution, fuel storage or other such projects, it is accepted that an
EIA would be needed for a significant hydropower development, particularly a storage project
such as Lungga. However, it is less clear how the operation of the Act will affect smaller rural
electrification projects.

River Waters Act (1964) / Water Resources Bill (2001)

An important source of generation for rural electrification schemes is hydropower. This might
be in the form of mini-, micro-, or pico-hydropower and notwithstanding their size and design,
each type will have some impact on the river or stream on which they are sited. They must
therefore be developed within the constraints of the River Waters Act and, when it passes into
law, the Water Resources Act.

The stated purpose of the River Waters Act is “to provide for the control of river waters and for
the equitable and beneficial use thereof”. The Act, under §5, requires a developer to obtain a
permit and comply with its conditions if it:

“(a) by means of a ditch, drain, channel, pipe or any other means whatsoever, diverts any
water from a river;

(b) fells any tree so that it falls into a river or river bed;

(c) in any manner obstructs or interferes with a river or river bed;

(d) builds any bridge, jetty or landing stage over or beside any river;

(e) damages or interferes with the banks of any river; or

(f) contravenes any order made under section 4 of this Act”.

The Minister has powers under §4 of the Act to “prohibit the construction or siting of any
building, structure or erection in the flood channel of any river or in any place in which it appears
to him that such building, structure or erection may impede, or obstruct, or otherwise affect the
flow of a river”. The Minister, under §7, may also “grant to any person a permit to divert water
from any river and such permit shall be published in such manner as he may determine”
provided that an application has been made in the prescribed form. In approving such
development, the Minister is obliged to “have regard to the existing use of water” and to
“safeguard such existing use of water as far as appears to him to be practicable and consistent
with the provisions and purposes of this Act”.

Ownership of water, as opposed to the common law right of use, is complex and tied to
customary land ownership. The Government has the power under the Land and Titles Act to
compulsorily acquire water sources in the public interest but, in practice, water rights is a
sensitive issue and the Government is reluctant to press matters. Most rivers are situated on

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customary lands and customary land owners are in a position to require reasonable rental
payments where water sources are being used. The River Waters Act does not properly
address these issues and new legislation is needed that recognises customary water and land
rights together in providing a framework for the orderly, equitable and environmentally
sustainable development of the country’s river systems.

The Water Resources Bill (2001) has been drafted to fill this need. The stated purpose of the
Bill is (refer §1):

“(a) To provide for the integrated management of the water resources of the Solomon Islands.

(b) To promote the most efficient, fair and beneficial use of natural water.

(c) To ensure that natural water resources are available for sustainable use for the benefit of
all present and future Solomon Islanders.

(d) To provide for the protection of natural watercourses and water catchments.

(e) To provide for the control of activities occurring over or beside waterways or
watercourses.”

The Bill recognises that all natural water within the territory of the Solomon Islands is dedicated
to the use of the people and that the right to control, manage and administer water resources is
vested in the Government.

The Bill would establish a licensing regime to control the utilisation of water and would prohibit
anyone from abstracting or diverting or damming natural water without a license. Domestic
uses would not require a license and people with customary rights to the land and water would
be exempt from the need to obtain a licence for subsistence irrigation and raising livestock. The
licensing provisions set forth in Parts 5 and 6 of the Bill specify the institutional arrangements
and procedures for granting, registering, altering, suspending, revoking a licence.

Provincial Government Act (1981)

The Provincial Government Act establishes provincial administrations in the Solomon Islands.
The legislation defines a framework for the creation and operation of Provincial Assemblies,
with each assembly made up of elected representatives from electoral wards within each
province. The Provincial Assembly may enact ordinances within its legislative competence (as
specified in the Act), such ordinances being consistent with Government policy for the Solomon
Islands as a whole.

The Act provides for the creation of a Provincial Executive to undertake the functions and
exercise the powers as set out in schedules to the Act and as ordered by the Minister.

With respect to the supply of electricity, §35(5) states that a Provincial Executive may provide
services for the province in respect of any of the matters listed in a schedule to the Act
(Schedule 6, Provincial Services). Schedule 6 includes: “Supply of electricity outside supply
areas (within the meaning of the Electricity Act).” It is not clear in practice, though, how this
might work and whether a provincial government has any say in the selection and sequencing

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of rural electrification projects. As the tier of Government closest to the remote rural
constituents most affected by such decisions, it might be argued that provincial assemblies
should have a direct role. However, their capacity in such matters is understood to be weak
and the quality of decision making might be correspondingly poor.

Land Tenure Legislation

Land in the Solomon Islands is a sensitive issue; group and individual identity are defined by
their relationship with the land. Two distinct systems of land tenure operate:

• Alienated land, comprising 13% of total land area. Alienated land was procured during
colonial times and its boundaries are surveyed and registered.

• Customary land, comprising 87% of total land area. Customary ownership of land is
based on traditional tenure and boundaries are fixed by geographical features such as
rivers and ridges. Ownership of customary land may in some cases be officially clarified
but not in others. Customary land is defined in the Land and Titles Act as “any land (not
being registered land, other than land registered as customary land, or land in respect of
which any person becomes or is entitled to be registered as the owner of an estate
pursuant to the provisions of Part III) lawfully owned, used or occupied by a person or
community in accordance with customary usage, and shall include any land deemed to be
customary by paragraph 23 of the Second Schedule to the repealed Ordinance.”

Key land tenure legislation is outlined:

(i) Land and Titles Act (1969)

Land is defined as including “land covered by water, all things growing on land and
buildings and other things permanently fixed to land but does not include any minerals
(including oils and gases) or any substances in or under land which are of a kind ordinarily
worked for removal by underground or surface working”. Under the Lands and Titles Act
and its thirteen amendments, no person other than a Solomon Islands citizen can hold
perpetual title to registered land. The Act allows a person to convert customary land into
registered land.

The Act is administered by the Commissioner of Lands. His duties and powers include
advising the Minister on land policy and dealing in land on behalf of the Government and
executing any instrument relating to any interest in land. The Commissioner has the
authority to grant or transfer an interest in land and to register leases. The rights and
obligations of lessor and lessee are defined in the Act.

The Act provides for the compulsory acquisition of alienated or customary land for a public
purpose and specifies the procedures to follow. An amendment to the Act also allows the
Minster to designate any area as a land settlement area where there is a need to resettle
people from one location to another.

All transactions relating to any land are recorded and kept in the Land Registry. The Act
sets forth the procedure for registering an interest in land.

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(ii) Customary Land Records Act (1994)

The purpose of the Customary Land Records Act is to provide a mechanism for recording
customary land boundaries. The Act is administered by the Commissioner of Lands and is
assisted by the Registrar of Titles and other lands officers. The duties and powers of the
Commissioner of Lands include advising the Minister on any matters concerning land
policy. He holds and deals in any land for and on behalf of the Government and, subject to
any general or special direction from the Minister, execute for and on behalf of the
Government any instrument relating to and interest in land.

Since its introduction, the Customary Land Records Act has not operated as intended. No
customary land has been recorded under the Act, a failure attributed to the Act’s
complexity and a lack of effective institutional backing.

The current system for resolving land disputes involves a hierarchy of chief’s committees, local
courts, Customary Lands Appeal Court and the High Court. The Customary Lands Appeal
Court was established for the specific purpose of hearing appeals from the Local Courts related
to customary lands disputes.

A number of commentators have identified land tenure as a significant obstacle for


infrastructure development generally and, more specifically, for private sector involvement. This
may apply to rural electrification schemes, particularly those involving hydropower generation,
although there should be no difficulties where schemes are located on customary land that is
owned by the village(s) that will benefit. Land reform proposals have been put forward but no
Government policy has yet emerged. 59

Consumer Protection Act (1996) and Price Control Act (1975)

The Consumer Protection Act was enacted to regulate aspect of business conduct.
Specifically, the objectives of the Act are to protect the rights of consumers and establish
standards of conduct by those engaged in the production, sale and distribution of goods and
services to consumers. For the purposes of the Act, "goods" include the supply of gas,
electricity, water and telecommunications, and "services" include any “rights, benefits privileges
and facilities that are, or are to be provided, granted or conferred under a contract for, or
involving, the provision of gas, electricity, water or telecommunications”.

The Consumer Affairs Division is constituted under the Act to protect of the interests of
consumers and see that manufacturers and traders offer goods that meet reasonable standards
and are suited for the purpose for which they are intended.

The legislation seeks to protect the rights of consumers by:

• Prohibiting supply of goods that are below approved standard;


• Prohibiting hoarding of goods;

59
For instance: Solomon Islands – Rebuilding an Island Economy, Economic Analytical Unit, Department of Foreign Affairs and
Trade, Australian Government, 2004, p 90, and Private Sector Assessment for Solomon Islands, ADB, 2005, p48.

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• Enforcing prices of goods prescribed under the Price Control Act;


• Requiring traders to display prices and issue receipts;
• Prohibiting misleading or deceptive conduct;
• Prohibiting exclusive dealing and discrimination in the pricing of goods of like grade and
quality
• Prohibiting the exploitation of monopoly power to eliminate or substantially to damage a
competitor.

The Price Control Act was enacted to require persons who sell certain goods or services to
clearly display prices, and to empower the Minister to restrict prices or charges. The Act also
provides for the establishment of a Prices Advisory Committee (PAC) to keep prices under
review and from time to time to consider what prices or charges should be restricted how the
restriction should be framed.

The products and services to which price controls apply are listed in Schedule 1 of Subsidiary
Legislation; they are listed under the following product categories: milk, meat, fish, sugar,
flower, soap, rice, cooking oil, curry powder, biscuits, LPG, petroleum products, bread,
electricity and water. Products within each category are referred to in the legislation by their
specific brand names and the legislation has not been updated to amend the list to remove
products no longer available or add equivalent products that have since entered the market and
are now retailed free of price restraint. Price limits that apply to products are listed in Schedules
2 to 6 but these schedules are silent on electricity charges. The prices of other products may be
dealt with if consumer complaints are received.

In practice, only petroleum products and LPG are systematically controlled. Of the liquid fuels,
this control can extend only to petroleum motor spirit, distillate, kerosene and outboard motor
fuel (as these are the only such products listed in the relevant schedule) and the legislation
would need to be amended to bring bio-fuels within its ambit. Electricity, too, is price-controlled,
but this derives from the operation of the Electricity Act rather than the Price Control Act.
SIEA’s electricity charges are set by tariff regulations, while pricing for licensed electricity
supplies may be fixed in the form of a licence condition. The Price Control Act could be
activated to regulate electricity supplies that are exempted from the licensing provisions of the
Electricity Act (refer §2 or §3 of the Electricity (Exemptions) Order, 1992).

The Price Control Act is outdated and the price controls unworkable in their current form, not
least because the fines imposed are too low to be effective. The PAC has advised the
Government that the Act should be updated and revised.

Companies Act (1961)

The role to be played by the private sector in the expansion of electricity access to rural areas is
important and the companies and associations formed to facilitate the development and
operation of rural electrification will be regulated by the Companies Act and other commercial
and industrial legislation.

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The Companies Act establishes a framework for setting up, administering and winding up
trading companies. The legislation dates from the sixties. The key provisions of the Act deal
with the following:

• Incorporation of companies
• Share capital and debentures
• Charges and mortgages
• Management and administration
• Winding up
• Receivers and managers
• Off-shore companies

Labour Legislation

The workforce in the Solomon Islands is regulated under a number of laws, including the
following:

• Employment Act (Chapter 72)


• Labour Act (Chapter 73)
• Safety at Work Act (Chapter 74)
• Trade Disputes Act (Chapter 75)
• Trade Unions Act (Chapter 76)
• Unfair Dismissal Act (Chapter 77)
• Worker’s Compensation Act (Chapter 78)

A number of restrictive regulatory and cultural factors limit labour market flexibility and constrain
general economic development. Among the issues potentially retarding the performance of
rural electrification companies and associations are:

• Shortage of trained, experienced and qualified workers, particularly those with electrical
skills;
• Legal and cultural barriers to redundancy and dismissal;
• High labour overhead costs associated with contributions to the National Provident Fund,
and payment of medical, transport, clothing and housing allowances.

Petroleum Act (1939)

The Petroleum Act regulates the storage and handling of petroleum. It sets forth rules for
transporting and storing petroleum products and establishes a licensing regime to control the
possession of petroleum.

The legislation was introduced in 1939 and is now sadly out of date. The existing Petroleum Act
defines "petroleum" as being of mineral extraction, i.e. “any oil, liquid or spirit derived wholly or
in part from any petroleum, shale, coal, peat, bitumen or similar substance, but does not include
any oil ordinarily used for lubricating purposes or having a flash-point above two hundred
degrees Fahrenheit”. The emerging bio-fuel industry promises to revolutionise the liquid fuels

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sector, a development of particular relevance to the electricity sector, but bio-fuels currently fall
outside the ambit of the Act.

The Petroleum Act and other agricultural, industrial and energy legislation needs to be revised
to broaden and adapt the legal framework to provide for the regulation of production, storage,
transport and marketing of bio-fuels.

Town and Country Planning Act (1980)

The Town and Country Planning Act, together with the Environment Act, provide a legal
framework for the regulation of national and provincial level planning, providing for the
preparation of local planning schemes and the control and development of land.

The Act is administered through the Physical Planning Division of the Ministry of Lands, but
physical functions under the Act devolve to Town and Country Planning Boards established
within the Honiara Town Council and each Provincial Assembly. The Board is responsible for
preparing Local Planning Schemes to facilitate orderly development of an area.

Permission of the Board is also required for any “development” that is carried out within any
area of land governed by the Act. “Development”, for the purposes of the Act, is defined as “the
carrying out of building, engineering, mining or other operations in, on, over or under land, or
the making of any material change in the use of any buildings or other land”. Some exceptions
are made, including “the use of any land for the purposes of agriculture, livestock keeping,
fishing and forestry”.

The provisions of the Act overlap with those sections of the Environment Act dealing with the
development of land. The Town and Country Planning Board is not obliged to consider
environmental matters in preparing a Local Planning Scheme or considering development
applications, although the requirements of the Environmental Act will prevail over those of the
Town and Country Act.

In practice, the Town and Country Act is generally applied only in relation to urban matters and
there is very little formal planning in rural areas. This is perhaps explained, at least in part, by
the lack of authority of the Town and Country Planning Board over customary lands. As such,
the Act may not apply to many rural electrification developments.

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Annex 3: Risk Analysis for Hydropower IPP in SI


CONSEQUENSES OF RISK MANAGEMENT ACTION
TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS EPC CONTRACTOR

• Regulatory • Change-in-law and Extension of • Liability for losses due to • Possible adjustment to • Compensation for regulatory • Debt service capacity of • Possible adjustment to EPC
Sovereign/ Changes Time clauses in concession regulatory changes electricity prices changes available under Project Co. protected by contract price
agreement, PPA, EPC contract • Possible extension of • Possible delay in commercial contract contractual remedies • Possible extension of Time
Political commercial operation date operation; extension of PPA • Possible delay in commercial
and concession term term operation; extension of PPA
term
Risk • Government guarantee • Liability for claims under • No effect • Compensation for regulatory • Debt service capacity of • Capacity of Project Co. to
guarantee changes available under Project Co. supported by meet EPC progress payments
guarantee. guarantee supported by guarantee
• Political risk insurance or MLA • Government liable for MLA • No effect • Costs of political risk • Debt service obligations • Capacity of Project Co. to
(Also applicable for partial risk guarantee guarantee claims under insurance and MLA guarantee secured by insurance or meet EPC progress payments
Operation Phase ) counter-guarantee • MLA guarantee conditional on guarantee. improved by proceeds of
high project implementation insurance and guarantee
standards
• Expropriation, • Government guarantee • Government liable under • Cancellation of PPA and • If government defaults and • If government defaults and • If EPC contract terminated,
Nationalization or guarantee for compensating possible delay to commercial Project Co. terminates, Project Co. terminates, debt guarantee support improves
Cancellation of investor’s losses operation date due to compensation payable under service covered by prospects of recovering
Concession ownership transition guarantee. guarantee. outstanding money.
• Loan default if guarantee not
honored..
• Political risk insurance or MLA • Government liable for MLA • Cancellation of PPA and • If government defaults and • If government defaults and • If EPC contract terminated,
partial risk guarantees guarantee payments under possible delay to supply due Project Co. terminates, Project Co. terminates, debt insurance and guarantee
counter-guarantee to ownership transition compensation payable under service covered by proceeds support improves prospects
insurance. of insurance or guarantee of recovering outstanding
money.
• Default, termination and • Government contractually • Termination of PPA and • If government defaults and • If Project Co. terminates, • Compensation through back-
disposal of assets clauses in liable for compensating possible delay to supply due Project Co. terminates, loans repaid from to-back provisions of EPC
Project Agreements investor’s losses (e.g. buy- to ownership transition government contractually compensation contract and concession
out) liable to compensate. agreement
• Inadequate • Transparent, independent • Recognition of international • Recognition of international • Enforceability of awards • Debt service capacity of • Enforceability of awards
Contract dispute resolution procedures arbitration for concession arbitration for PPA ensures effectiveness of Project Co. underpinned by ensures effectiveness of
Enforcement agreement contractual remedies . enforceability of awards. contractual remedies .
• Sound legal, regulatory & instit- • Framework development to • Sound framework encourage • Sound framework gives • Sound framework gives • Sound framework gives
utional framework increase investor confidence lower prices and simpler greater predictability and greater predictability and greater predictability and
contracts comfort about contract comfort about contract comfort about contract
enforceability enforceability enforceability
• Economic • Rise and fall and foreign • Foreign currency adjustments • If electricity price linked to • EPC price adjustment may • If EPC price increases, may • EPC contractor indemnified
Problems exchange adjustment formulas may affect central bank and EPC cost, price may be result in increased capital mobilize stand-by loans from inflation and/or currency
(e.g. high inflation, in EPC contracts macroeconomy. adjusted. cost, requiring stand-by movements (to extent defined
currency • Higher EPC cost reduces finance in formulas)
realignments) profitability of Project Co. • Increase in EPC price will
hence less tax receipts. affect profitability of Project
Co.
• Ensure adequacy of • Framework deficiencies to be • Consequences of mismatch • Project Co. is exposed to • Lenders are exposed those • No effect.
macroeconomic framework and remedied to reduce investor between electricity purchase those economic risks that economic risks that are not
fundamentals risk and encourage lower commitments and demand cannot be transferred to transferred to others or
prices others or mitigated. mitigated under the Security
Package
• Maximize local contribution in • No effect • No effect • Higher risk associated with • Higher risk associated with • Higher potential for revenues
construction work local contractors and lenders local contractors and lenders

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Table 1 b: Pre-Operation Phases

CONSEQUENSES OF RISK MANAGEMENT ACTION


TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS EPC CONTRACTOR

Completion • Non-Political • Force Majeure clauses in • Government’s contractual • Delay in completion defers • Delay in completion defers • Interruption in debt service – • Delay in completion
Risk Force Majeure concession, off-take and O&M obligations suspended for delivery of electricity revenue stream no recourse against Project • EPC contractor’s contractual
(e.g. major flood, agreements period of force majeure event • SIEA’s PPA obligations • Project Co.’s contractual Co. obligations suspended for
earthquake, fire) • Terminate if event is major suspended but no recourse obligations suspended but no period of force majeure event
against Project Co. recourse against parties. • Terminate if event is major
• Terminate if event is major • Terminate if event is major
• Insure against insurable non- • No effect • No effect • Indemnity from insurable risks • Debt service capacity of • Indemnity from insurable
political Force Majeure events • Higher costs associated with Project Co. protected by construction risks
insurance premiums insurance indemnities • Contractor’s All Risk
premiums
• Unforeseen • Thorough site investigations • If government is responsible, • If SIEA is responsible, it • If investors are responsible, • Reliance on stand-by finance • Good quality site investig-
Conditions and appropriate low risk project it must bear high front-end bears high front-end cost of they bear high front-end costs reduced with better site ations reduce EPC risk and
design cost of investigations and investigations and studies but of investigations and studies information encourage lower EPC prices
studies lower off-take prices but lower EPC contract price
• Arrange stand-by finance, • No effect • No effect • Costs incurred for stand-by • Provide stand-by finance for • No effect
emergency equity and/or finance and insurance possible increase in EPC
insurance • Increased equity commitment costs
• Transfer risk to EPC contractors • Indemnified against • Greater certainty in • Indemnified against • Indemnified against • Bears risk of losses due to
through fixed price & fixed date unforeseen conditions commercial operation date unforeseen conditions unforeseen conditions unforeseen conditions
contracts with liquidated and final off-take price • Pays a premium on EPC cost • Premium included in EPC
damages price to cover risk of
unforeseen conditions
• Transfer risk to SIEA through • Indemnified against • Off-take price may change • Indemnified against • Increased importance of • Additional costs and lost time
off-take price adjustment and unforeseen conditions • Commercial Operation Date unforeseen conditions stand-by finance to cover due to unforeseen conditions
extension of time clauses in may be extended possible increases in EPC are “pass-throughs”
PPA costs
• Transfer risk to government • Government tax or royalty • Greater certainty in • Indemnified against • Increased importance of • Additional costs and lost time
through adjustments in taxes or receipts reduced if unfore- commercial operation date unforeseen conditions stand-by finance to cover due to unforeseen conditions
royalties for higher EPC costs seen conditions encountered and final off-take price possible increases in EPC are “pass-throughs”
• Commercial operation date costs
may be extended
• Cost and Time • Contractual remedies: • Indemnified from late • Indemnified from late • Premium on EPC contract • Indemnified from late • Liable for liquidated damages
Overrun on EPC completion by liquidated completion by liquidated price for fixed price and date completion by provisions in for late completion
Contract - Fixed price/date EPC contract damages in concession damages in PPA. • Indemnified from late loan agreements
Back-to-back liquidated agreement completion by liquidated
damages in project contracts damages in EPC contract
• Contingency finance measures: • No effect • No effect • Higher financing cost • Provide stand-by finance for • Capacity of Project Co. to
- emergency equity • Increased equity commitment possible increase in capital meet increased project
- stand-by finance costs financing requirements
• Environmental and • Good quality EIA/SIA, Action • If government responsible for • If SIEA responsible for • If investors responsible for • Better understanding of • Greater certainty in
Social Impacts, Plans and Management Plans reports, high front-end Studies, high front-end reports, high front-end environmental impacts/risks environmental scope
landowner outlays. outlays. outlays.
resistance • Better understanding of • Better understanding of • Better understanding of
environmental impacts/risks environmental impacts/risks. environmental impacts/risks
• Landowner compensation or • High upfront cost in case of • SIEA indemnified from • Reduced risk for majority • Need to finance landowner • No effect
landowner shareholding landowner compensation landowner claims shareholder equity (by MLA)
• Dividend for landowners
• Environmental obligations and • Indemnified against • Higher electricity prices to • Enforceable environmental • Comfort in enforceability of • Enforceable environmental
constraints specified in Project environmental claims cover environmental scope. obligations environmental obligations obligations
Agreements • Additional costs for environ- • Higher EPC contract price to
mental scope passed on in cover environmental scope
form of higher power price
• Performance of • Performance damages in • No effect • Reduced quantity or quality of • Reduced revenue stream if • Project Co.’s debt service • Rectification of plant non-
Plant and Project Agreements project output. plant under-performs. capacity protected by EPC conformances
Equipment • Indemnified by performance • Indemnified by performance performance indemnities • Liability for damages for plant
clauses in PPA. clauses in EPC contract under-performance

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Table 2 a: Pre-Operation Phases

CONSEQUENSES OF RISK MANAGEMENT ACTION


TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS EPC CONTRACTOR

Commercial • Insolvency of • Default, termination and • Termination of concession • Termination of PPA • Disposal of assets (e.g. sale • Disposal of assets (e.g sale • Disposal of assets (e.g sale
Risk Project Co. disposal of assets clauses in • Mechanisms for smooth • Mechanisms provide for or buy-out) provide for or buy-out) provide for or buy-out) provide for
Project Agreements ownership transition, e.g. smooth ownership transition, recovery by investors recovery by lenders recovery by crediters
through sale or buy-out e.g. through sale or buy-out
• Lenders’ Step-in Rights • Government’s interests • Supply from project assured • Control of project transferred • Lenders may “step-in” to • Role of “Employer” in EPC
served by lender intervention by lenders’ intervention to lenders or their nominees assume control of project contract transferred
• Collateral Arrangements • Government may novate EPC • No effect • Project Co.’s subcontracts • Lenders may novate EPC • EPC contract novated to
contract to nominee (e.g. EPC contract) novated to contract to nominee another party nominated by
others Government or lenders

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Table 2 b: Risk Analysis and Assignment Matrix Operation Phase

14.1.1.1.1
CONSEQUENSES OF RISK MANAGEMENT ACTION
TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS O & M CONTRACTOR

• Regulatory Changes • Change-in-law and Extension of • Liability for losses due to • Possible adjustment to • Compensation for regulatory • Debt service capacity of • Possible adjustment to O&M
Sovereign/ Time clauses in concession regulatory changes electricity prices changes available under Project Co. protected by contract prices
agreement and PPA. • Possible extension of • Possible extension of PPA contract contractual remedies
Political concession term term • Possible extension of PPA
term
• Government guarantee • Liability for claims under • No effect • Compensation for regulatory • Guarantee supports debt • Guarantee supports capacity
Risk guarantee changes available under service capacity of Project of Project Co. to pay periodic
guarantee. Co. O&M contract payments
• Political risk insurance or MLA • Government liable for PRG • Insurance and PRG reduce • Costs of political risk insur- • Debt service obligations • No effect
partial risk guarantee (PRG) pay-outs under terms of a reliance on “capacity-type” ance and PRG secured by insurance or
(Also applicable for
counter-guarantee tariff structure to secure debt • PRG conditional on project guarantee.
Pre-Operation
service.. implementation to MLA
Phase)
standards
• Expropriation, • Government guarantee • Government liable under • Cancellation of PPA and • If government defaults and • If government defaults and • Likely termination of O&M
Nationalization or guarantee for compensating possible disruption to supply Project Co. terminates, Project Co. terminates, debt Agreement
Cancellation of investor’s losses during ownership transition compensation payable under service secured by • Must recover outstanding
Concession guarantee. guarantee. money from Project Co.
• Political risk insurance or MLA • Government liable for PRG • Insurance and PRG reduce • If government defaults and • If government defaults and • Likely termination of O&M
partial risk guarantee (PRG). pay-outs under terms of reliance on “capacity-type” Project Co. terminates, Project Co. terminates, debt Agreement
counter-guarantee tariff structure to secure debt compensation payable under service covered by proceeds • Must recover outstanding
service. insurance. of insurance or PRG money from Project Co.
• Default, termination and buy-out • Government contractually • Cancellation of PPA and • If government defaults and • If Project Co. terminates, • Likely termination of O&M
provisions in Project liable for compensating possible disruption to supply Project Co. terminates, loans secured by Project Agreement
Agreements investor’s losses during ownership transition government contractually Co.’s contractual remedies • If Project Co. terminates,
liable to compensate. O&M payments secured by
contractual remedies
• Inadequate Contract • Transparent, independent • Recognition of international • Recognition of international • Enforceability of awards • Debt service capacity of • Enforceability of awards
Enforcement dispute resolution procedures arbitration for concession arbitration for PPA ensures effectiveness of Project Co. underpinned by ensures effectiveness of
agreement contractual remedies . enforceability of awards. contractual remedies .
• Sound legal, regulatory & • Framework development to • Sound framework encourage • Sound framework gives • Sound framework gives • Sound framework gives
institutional framework increase investor confidence lower prices and simpler greater predictability and greater predictability and greater predictability and
contracts comfort about contract comfort about contract comfort about contract
enforceability enforceability enforceability
• Economic Problems • Rise and fall and foreign • May increase foreign • SIEA is exposed to the extent • PPA price adjustment • No effect – terms of debt • Project Co. is exposed to the
(e.g. high inflation, exchange adjustment formulas currency requirements – that the adjustment formulas indemnifies Project Co. for service fixed extent that adjustment
currency realignments) in PPA and O&M Agreement to effect on central bank and on transfer inflation and currency part or all of inflation and formulas transfer the risk
cover inflation and currency macroeconomy. risks currency risks
realignments.
• Insurance instruments to protect • No effect. • No effect • Premiums and fees of • Debt service payments are • No effect.
debt service capacity instruments Increase secured by instruments.
financing cost
• Ensure adequacy of macro- • Framework deficiencies to be • Unrealized electricity demand • Insure, transfer, mitigate • Maximize protection in
economic framework and remedied to reduce investor projections would leave SIEA macroeconomic risks where Security Package and bear
fundamentals risk and encourage lower committed under PPA to possible. remaining unprotected risks
electricity prices unwanted power. • Bear unprotected risks

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Table 2 b: Operation Phase (cont)

CONSEQUENSES OF RISK MANAGEMENT ACTION


TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS O & M CONTRACTOR
• Under-estimation of long • Quality hydrological analysis • If Government does studies: • If SIEA does studies: high • If Project Co. does studies: • Greater reliability of Project • No effect
Hydrological term mean monthly and using reliable data and indepen- high front-end outlays front-end outlays high front-end outlays Co.’s debt service capacity
annual flows dent self-checking • Less likelihood of Project Co. • Reliable estimates of capacity • Improved estimates of project
and Water failing and energy revenues
• Adjustment to concession terms • Reduction in taxes or royalties • No effect • Return on Equity underwritten • Government relief improves • No effect
Management to compensate for long term • Extension of concession term by government Project Co. debt service
hydrological variances capacity
• Minimum payment to guarantee • Higher electricity prices may • “Capacity-type” payment • Debt service payments • Debt service payments • No effect
Risk debt service involve political repercussions untied to energy sales secured by “capacity-type” secured by “capacity-type”
payment payment
• Variations in flow about • Optimize reservoir to ensure • No effect • Greater firm capacity and • Greater cashflow reliability • Greater debt service reliability • No effect
the mean carry-over of water from surplus minimum energy • Avoidance of penalties
to deficit periods
• Minimum payment to guarantee • Higher electricity prices may • “Capacity-type” payment • Debt service payments • Debt service payments • No effect
debt service involve political repercussions untied to energy sales secured by “capacity-type” secured by “capacity-type”
payment payment
• Adjustment to concession terms • Reduction in taxes or royalties • No effect • Annual revenues underwritten • Government support • No effect
to compensate for annual by government improves Project Co. debt
hydrological variances service capacity
• Declining catchment • Contractual safeguards on • Enforcement of watershed • Capacity and energy from • Greater cashflow reliability • Greater debt service reliability • No effect
yield catchment management and protection project sustained over • Improves likelihood of
use • Economic opportunity cost of concession term achieving Return on Equity
alternative catchment uses • Avoidance of penalties
Operating • Non-political Force • Force Majeure clauses in • Government’s contractual • Interruption to supply • Interruption to supply excused • Interruption in debt service – • O&M contractor’s contractual
Risk Majeure (major flood, concession, off-take and O&M obligations suspended for excused for duration of Force during Force Majeure event. no recourse against Project obligations suspended for
earthquake, fire, etc.) agreements. period of Force Majeure event Majeure event. • Revenue stream interrupted Co. period of Force Majeure event
• Terminate if event is major • Terminate if event is major. • Terminate if event is major. • Terminate if event is major.
• Insure against insurable non- • No effect • No effect • Indemnity from insurable risks • Debt service capacity of • Indemnity from insurable risks
political Force Majeure events • Higher costs associated with Project Co. secured by • Higher costs associated with
insurance premiums insurance indemnities. insurance premiums.
• Interruptions due to • Employ an experienced and • No effect • Greater reliability of supply • Greater reliability of project • Greater reliability of debt • Only reputable and effective
O&M Contractor default reputable O&M operator from project revenues service O&M contractors considered
• May pay more under the O&M for the role.
Agreement
• Liquidated damages remedies • No effect • Liquidated damages payable • Indemnified by back-to-back • Debt service capacity of • Damages for breach payable
by Project Co. for interruption liquidated damages in Off- Project Co. secured by to Project Co.
to supply Take and O&M agreements damages payable by O&M
contractor to Project Co.
• Lenders step-in–rights in • No effect • Temporary loss of supply • Lenders may bypass Project • Execute step-in-rights against • Role suspended, possible
chronic cases from project Co. in remedying problem Project Co. termination of contract.
with O&M contractor
• Include design safeguards to • No effect • Greater reliability of supply • Higher capital cost of project • Debt service payments less • Fewer problems and outages
reduce plant and transmission from project • Greater reliability in project susceptible to problems in • Lower O&M risks, hence.
line outages operation and revenues project operation. lower O&M contract price.

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Table 2 b: Operation Phase (cont)

CONSEQUENSES OF RISK MANAGEMENT ACTION


TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS O & M CONTRACTOR
• O&M agreement to specify high • No effect • Greater reliability of supply • Grater reliability of supply. • Debt service payments less • High standards demanded.
maintenance standards and from project • Non-performance by O&M susceptible to problems in • Penalty/bonus performance
clear penalties and bonuses. contractor is compensated. project operation. incentives provided.
• Insure against O&M contractor • No effect • Likelihood of recovery of • Cost of insurance premiums. • Debt service capacity of • Debt service capacity of
default O&M damages improved if • Indemnified from default by Project Co. secured by Project Co. secured by
Project Co. insured. O&M contractor. insurance indemnities. insurance indemnities.
Market • Ethnic tensions, • Tariff structure to secure debt • Higher electricity prices may • SIEA assumes market risk, • Reduced revenue but debt • Debt service payments • Power station dispatch
Risk Reduced demand service revenues (e.g. “take-or- involve political repercussions creating obligation to pay for service revenues secured secured against market risks arrangements reflect tariff
pay” or capacity-type charge) electricity not needed. against market risks structure
• Conflict over dispatch • Minimum payment mechanism • Higher electricity prices may • Dispatch priorities not based • Revenues insulated against • Debt service payments • Power station dispatch
(Take-or-Pay, capacity-type involve political repercussions on merit order dispatch economics and secured against dispatch arrangements reflect tariff
charge) policy uncertainties structure
• A well structured grid code to • No effect • Connection and dispatch • Connection and dispatch • No effect • Connection and dispatch
control system operation and standards, policy and standards, policy and standards, policy and
dispatch arrangements defined arrangements defined arrangements defined
Commercial • Assurance of adequate • Structure project and financing • No effect • May involve tariff front-ending • SIEA may require Project Co. • Minimum debt service • No effect
Risk debt service coverage plan to achieve acceptable Debt to boost debt service to guarantee the tail-end of coverage ratio must be met.
Service Coverage Ratio coverage. any front-ended tariff.
• Maintenance of debt service • No effect • No effect • Debt service reserve reduces • Provides for debt service for • No effect
cash reserve net profit over the period it is given period (6 mths) if
building up. project revenues interrupted
• Insolvency of Project • Default, termination and • Termination of concession • Termination of PPA • Disposal of assets (e.g. sale • Disposal of assets (e.g sale or • Disposal of assets (e.g sale
Co. disposal of assets clauses in • Mechanisms for smooth • Mechanisms for smooth or buy-out) provide for buy-out) provide for recovery or buy-out) provide for
Project Agreements ownership transition, e.g. ownership transition, e.g. recovery by investors by lenders recovery by subcontractors
through sale or buy-out through sale or buy-out
• Lenders’ Step-in Rights • Government interests served • Of=Taker’s interests served • Control of project transferred • Lenders may “step-in” to • O&M Agreement terminated
by lender intervention in by lender intervention in to lenders or their nominees assume control of project or transferred to another party
maintaining project operation maintaining project operation
• Collateral Arrangements • Government may novate • No effect • Project Co.’s subcontracts • Lenders may novate O&M • O&M Agreement novated to
O&M Agreement to nominee (e.g. O&M Agreement) Agreement to nominee another party nominated by
novated to others Government or lenders
• Inability of SIEA to • Enhance creditworthiness of • Ensure conducive commercial • Structure and manage SIEA • Check credit-worthiness of • Check credit-worthiness of • No effect
make payment SIEA. and regulatory environment. to earn credit rating. SIEA. SIEA.
• Allow economic tariff-setting
• Government guarantee of SIEA • Required to indemnify Project • Liable to compensate • Indemnified from SIEA non- • Government guarantee • No effect
obligations (including payment). Co. against SIEA default government for payments payment by government secures Project Co. debt
made under government guarantee. service capacity
guarantee.
• MLA partial risk guarantee • Government liable for any • PRG reduces reliance on • PRG reduces reliance on • PRG secures Project Co. debt • No effect
(PRG) to secure debt service PRG payment under terms of “capacity-type” tariff structure “capacity-type” tariff structure service capacity
payments counter-guarantee to secure debt service. to secure debt service.
Foreign • Availability of foreign • Analysis of economic indicators • No effect. • No effect. • Bears the cost and risk of • Bears the cost and risk of • No effect.
Exchange exchange for foreign including ability to generate for- economic analysis. economic analysis.
debt service and eign exchange to match
Rate Risk repatriation of profits payment obligations.
• Government guarantee of • Project Co. indemnified by • SIEA liable to government for • Government guarantee • Government guarantee • No effect
currency convertibility and government in event of SIEA compensation for payments secures PPA payment secures Project Co. debt
foreign exchange availability. default of PPA payment made under government obligations, including currency service capacity
provisions. guarantee. of payment.
• MLA partial risk guarantee • Under terms of counter- • Ability to pay debt service • PRG secures debt service • PRG secures debt service • No effect
(PRG) to secure debt service guarantee, government liable portion in foreign exchange payments. payments.
payments. for any PRG payment according to terms of PPA

Table 2 c: Operation and Transfer Phases

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CONSEQUENSES OF RISK MANAGEMENT ACTION


TYPE OF RISK EVENT RISK MANAGEMENT GOVERNMENT SIEA SPONSORS/INVESTORS LENDERS O & M CONTRACTOR
• Maximize local contribution in • No effect • Higher risk associated with • Higher risk associated with • No effect
No effect
construction work local contractors and lenders local contractors and lenders
• Devaluation of the local • Match PPA payment currencies • Government to ensure • May involve acceptance of • Debt service objective • Matching PPA payment • No effect
currency to financing package availability of foreign some exchange rate risk secured by matching revenue currencies to debt service
exchange for PPA payments hedges foreign exchange risk
• Hedging of debt service portion • No effect. • No effect. • Increased financing cost • Hedging secures debt service • No effect.
of electricity payments with against currency re-
financial instruments alignments.
Environmental • Environmental impact • EIA, Environmental Monitoring • If Government does studies: • If SIEA does studies: high • If Project Co. does studies: • Lenders derive comfort from • Implement environmental
and Social on river and Plan and Environmental high front-end outlays. front-end outlays. high front-end outlays. clear identification of impacts management (e.g. pattern of
surrounding Management Plan to • Environmental management • Less controversy • Implementation of Env. and avoidance of controversy releases) and monitoring.
Risks environment development agency standards and monitoring Management Plan
• Re-regulation of power station • Reduced impacts in the river • Latitude in operating patterns • Greater operating flexibility • Less controversy • Latitude in operating patterns
releases. downstream (peak/base/spinning reserve) giving higher revenues. (peak/base/spinning reserve)
• Less controversy without increasing impacts. • Higher capital cost without increasing impacts.
• Less controversy • Less controversy • Less controversy
• Reservoir clearing • Improved water quality • Less controversy • Improved water quality. • Less controversy • Less controversy
• Less controversy • Higher capital cost
• Less controversy
• Variable level intake structures • Improved water quality • Less controversy • Improved water quality. • Need to finance landowner • Draw-off level must be
for improved water quality • Less controversy • Higher capital cost equity monitored
• Less controversy • Less controversy
• Social impacts • Compensation to development • Management of • No effect • Higher capital cost • Less controversy • No effect
agency standards compensation process. • Local support for project.
• Landowner shareholding
• Regional development initiatives • Management of regional • No effect • Higher capital cost • Less controversy • No effect
in vicinity of project development initiatives. • Local support for project.
• Negative media and • Implementation of project to • Management of • Operating constraints to meet • Higher capital cost • Less controversy • Operating constraints
NGO coverage development agency standards environmental and social social and environmental • Operating constraints • Wider support for project.
.programs objectives • Wider support for project.
Transmission • Lightning strikes • Protection design • No effect • Minimizes interruptions to • Higher capital cost • Minimizes impact on debt • Minimizes interruptions
Line Security supply • Minimizes loss of revenue service capacity
• Liquidated damages for • No effect • Compensated for inter- • Liable for liquidated damages. • Back-to-back recovery from • Liable for liquidated damages
interruptions ruptions to supply • Back-to-back recovery from O&M Contractor secures for interruptions to supply
O&M Contractor Project Co.’s debt service
capacity
• Operation and • A well structured grid code to • No effect • Connection and dispatch • Connection and dispatch • No effect • Connection and dispatch
Maintenance of Line control system interconnection, standards, policy and standards, policy and standards, policy and
operation and dispatch arrangements defined arrangements defined arrangements defined

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Annex 4 Financial Analysis Profit and Loss


Auki
Auki Profit & Loss (SBD million) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Operating Revenues $ 7.934 $ 10.261 $ 14.087 $ 14.711 $ 15.366 $ 16.053 $ 16.774 $ 17.531 $ 18.326 $ 19.160 $ 20.035 $ 20.955 $ 21.922 $ 22.937 $ 24.004 $ 25.125 $ 26.304 $ 27.544 $ 28.848 $ 30.220 $ 31.664

Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Generation Mix (kWh)


Diesel 1,576,459 1,932,278 2,009,569 2,749,808 2,859,800 - - - - - - - - - - - - - - - - -
CNO - - - - - - - - - - - - - - - - - - - - - -
Hydro - - - - - 2,974,192 3,093,160 3,216,886 3,345,562 3,479,384 3,618,560 3,763,302 3,913,834 4,070,388 4,233,203 4,402,531 4,578,632 4,761,778 4,952,249 5,150,339 5,356,352 5,570,606
Total 1,576,459 1,932,278 2,009,569 2,749,808 2,859,800 2,974,192 3,093,160 3,216,886 3,345,562 3,479,384 3,618,560 3,763,302 3,913,834 4,070,388 4,233,203 4,402,531 4,578,632 4,761,778 4,952,249 5,150,339 5,356,352 5,570,606

Generation Mix (%)


Diesel 100% 100% 100% 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
CNO 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Hydro 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Load Factor 0.60 0.61 0.61 0.62 0.62 0.63 0.63 0.64 0.64 0.65 0.65 0.66 0.66 0.67 0.67 0.68 0.68 0.69 0.69 0.70 0.70
Peak Load (kW) 367.6 379.2 514.6 530.8 547.6 565.0 582.9 601.4 620.6 640.4 660.9 682.1 704.0 726.7 750.1 774.3 799.4 825.3 852.1 879.8 908.4

Operating Expenditures
Auki Share of HQ Expenses $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
Fuel
Diesel (litres) 579,683 602,871 824,942 857,940 - - - - - - - - - - - - - - - - -
Delivered Diesel Price (SBD/litre) $ 7.26 $ 7.48 $ 7.70 $ 7.93 $ 8.17 $ 8.42 $ 8.67 $ 8.93 $ 9.20 $ 9.47 $ 9.76 $ 10.05 $ 10.35 $ 10.66 $ 10.98 $ 11.31 $ 11.65 $ 12.00 $ 12.36 $ 12.73 $ 13.11
Diesel Fuel Cost (SBD million) $ 4.21 $ 4.51 $ 6.35 $ 6.81 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
CNO (litres) - - - - - - - - - - - - - - - - - - - - -
Delivered CNO Price (SBD/litre) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
CNO Fuel Cost (SBD million) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total Fuel Cost (SBD million) $ 4.21 $ 4.51 $ 6.35 $ 6.81 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Non Fuel Generation O&M $ 2.22 $ 2.31 $ 3.16 $ 3.29 $ 0.24 $ 0.25 $ 0.26 $ 0.27 $ 0.28 $ 0.29 $ 0.30 $ 0.31 $ 0.33 $ 0.34 $ 0.35 $ 0.37 $ 0.38 $ 0.40 $ 0.41 $ 0.43 $ 0.45
Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06
Administration and Payroll $ 0.19 $ 0.20 $ 0.20 $ 0.20 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26

Total Operating Expenditure Before


Depreciation and Bad Debts $ 6.67 $ 7.11 $ 9.87 $ 10.44 $ 0.59 $ 0.60 $ 0.61 $ 0.62 $ 0.63 $ 0.64 $ 0.65 $ 0.66 $ 0.67 $ 0.69 $ 0.70 $ 0.72 $ 0.73 $ 0.75 $ 0.76 $ 0.78 $ 0.79
Depreciation $ - $ 0.33 $ 0.33 $ 0.33 $ 1.27 $ 1.38 $ 1.38 $ 1.38 $ 1.38 $ 1.38 $ 1.49 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.72 $ 1.72 $ 1.72 $ 1.72 $ 1.83
Provision for Bad Debts $ 2.38 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total Operating Expenses $ 9.05 $ 7.44 $ 10.20 $ 10.78 $ 1.85 $ 1.98 $ 1.99 $ 2.00 $ 2.01 $ 2.02 $ 2.14 $ 2.27 $ 2.28 $ 2.29 $ 2.31 $ 2.32 $ 2.45 $ 2.46 $ 2.48 $ 2.49 $ 2.62

Operating profit/(loss) $ (1.11) $ 2.82 $ 3.89 $ 3.94 $ 13.51 $ 14.08 $ 14.79 $ 15.53 $ 16.32 $ 17.14 $ 17.89 $ 18.69 $ 19.64 $ 20.64 $ 21.70 $ 22.81 $ 23.86 $ 25.08 $ 26.37 $ 27.73 $ 29.04

Net finance charges


Interest on Long-Term Loans - - - - - - - - - (0.29) (0.28) (0.27) (0.26) (0.25) (0.23) (0.22) (0.21) (0.19) (0.18) (0.17) (0.15)
Principal Repayments - - - - - - - - - (0.42) (0.43) (0.44) (0.45) (0.47) (0.48) (0.49) (0.50) (0.52) (0.53) (0.55) (0.56)
Total Debt Service - - - - - - - - - (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71) (0.71)

Taxable Income $ (1.11) $ 2.82 $ 3.89 $ 3.94 $ 13.51 $ 14.08 $ 14.79 $ 15.53 $ 16.32 $ 16.85 $ 17.61 $ 18.42 $ 19.38 $ 20.40 $ 21.47 $ 22.59 $ 23.65 $ 24.89 $ 26.19 $ 27.56 $ 28.89

Taxation $ - $ 0.71 $ 0.97 $ 0.98 $ 3.38 $ 3.52 $ 3.70 $ 3.88 $ 4.08 $ 4.21 $ 4.40 $ 4.60 $ 4.85 $ 5.10 $ 5.37 $ 5.65 $ 5.91 $ 6.22 $ 6.55 $ 6.89 $ 7.22

Profit/(loss) after taxation $ (1.11) $ 2.12 $ 2.92 $ 2.95 $ 10.13 $ 10.56 $ 11.09 $ 11.65 $ 12.24 $ 12.64 $ 13.21 $ 13.81 $ 14.54 $ 15.30 $ 16.10 $ 16.94 $ 17.74 $ 18.67 $ 19.64 $ 20.67 $ 21.67

Operating profit/(loss) per kWh billed (SBD) $ (0.63) $ 1.14 $ 1.15 $ 1.12 $ 3.70 $ 3.71 $ 3.75 $ 3.79 $ 3.82 $ 3.80 $ 3.82 $ 3.84 $ 3.88 $ 3.93 $ 3.97 $ 4.02 $ 4.05 $ 4.10 $ 4.15 $ 4.19 $ 4.23

31/25866 February 12 185


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Lata
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Revenues $ 0.976 $ 1.259 $ 2.808 $ 2.930 $ 3.058 $ 3.192 $ 3.332 $ 3.480 $ 3.635 $ 3.798 $ 3.968 $ 4.148 $ 4.336 $ 4.535 $ 4.743 $ 4.962 $ 5.192 $ 5.434 $ 5.688 $ 5.956 $ 6.237

Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (kWh)
Diesel 246,346 318,885 331,640 537,471 558,969 9,777 14,694 19,980 25,668 31,794 38,401 45,532 53,240 61,581 70,619 80,428 103,924 139,721 176,950 215,668 255,935 297,813
Hydro - - - - - 571,551 589,888 608,785 628,247 648,277 668,874 690,033 711,748 734,007 756,792 780,080 791,004 791,004 791,004 791,004 791,004 791,004
Total 246,346 318,885 331,640 537,471 558,969 581,328 604,581 628,765 653,915 680,072 707,275 735,566 764,988 795,588 827,411 860,508 894,928 930,725 967,954 1,006,672 1,046,939 1,088,817

Generation Mix (%)


Diesel 100% 100% 100% 100% 100% 100% 2% 2% 3% 4% 5% 5% 6% 7% 8% 9% 9% 12% 15% 18% 21% 24% 27%
Hydro 0% 0% 0% 0% 0% 0% 98% 98% 97% 96% 95% 95% 94% 93% 92% 91% 91% 88% 85% 82% 79% 76% 73%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Load Factor 0.70 0.69 0.67 0.66 0.64 0.63 0.61 0.60 0.58 0.57 0.55 0.54 0.52 0.51 0.49 0.48 0.46 0.45 0.43 0.42 0.40
Peak Load (kW) 52.0 55.3 91.6 97.4 103.7 110.4 117.7 125.5 133.9 142.9 152.7 163.2 174.7 187.0 200.5 215.1 231.0 248.3 267.2 288.0 310.7

Operating Expenditures
Lata Share of HQ Expenses $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
Fuel
Diesel (litres) 127,554 132,656 177,365 184,460 3,226 4,849 6,593 8,470 10,492 12,672 15,026 17,569 20,322 23,304 26,541 34,295 46,108 58,393 71,170 84,459 98,278
Delivered Diesel Price (SBD/litre) $ 7.98 $ 8.22 $ 8.47 $ 8.72 $ 8.98 $ 9.25 $ 9.53 $ 9.81 $ 10.11 $ 10.41 $ 10.72 $ 11.05 $ 11.38 $ 11.72 $ 12.07 $ 12.43 $ 12.81 $ 13.19 $ 13.59 $ 13.99 $ 14.41
Diesel Fuel Cost (SBD million) $ 1.02 $ 1.09 $ 1.50 $ 1.61 $ 0.03 $ 0.04 $ 0.06 $ 0.08 $ 0.11 $ 0.13 $ 0.16 $ 0.19 $ 0.23 $ 0.27 $ 0.32 $ 0.43 $ 0.59 $ 0.77 $ 0.97 $ 1.18 $ 1.42

Non Fuel Generation O&M $ 0.37 $ 0.38 $ 0.62 $ 0.64 $ 0.06 $ 0.06 $ 0.07 $ 0.08 $ 0.09 $ 0.10 $ 0.11 $ 0.12 $ 0.13 $ 0.14 $ 0.15 $ 0.18 $ 0.22 $ 0.27 $ 0.31 $ 0.36 $ 0.41

Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24
Administration and Payroll $ 0.19 $ 0.20 $ 0.20 $ 0.20 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26
Total Operating Expenditure
Before Depreciation and Bad
Debts $ 1.62 $ 1.71 $ 2.65 $ 2.78 $ 0.62 $ 0.64 $ 0.67 $ 0.70 $ 0.73 $ 0.76 $ 0.80 $ 0.85 $ 0.89 $ 0.95 $ 1.01 $ 1.14 $ 1.35 $ 1.57 $ 1.81 $ 2.07 $ 2.36

Depreciation $ - $ 0.06 $ 0.49 $ 0.49 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 1.06 $ 1.06 $ 1.06 $ 1.09 $ 1.09 $ 1.09 $ 1.09 $ 1.09 $ 1.09 $ 1.09
Provision for Bad Debts $ 0.29 $ 0.38 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 1.91 $ 2.14 $ 3.14 $ 3.27 $ 1.59 $ 1.61 $ 1.64 $ 1.67 $ 1.70 $ 1.73 $ 1.77 $ 1.91 $ 1.95 $ 2.01 $ 2.10 $ 2.23 $ 2.44 $ 2.66 $ 2.90 $ 3.16 $ 3.44

Operating profit/(loss) $ (0.94) $ (0.89) $ (0.33) $ (0.34) $ 1.47 $ 1.58 $ 1.69 $ 1.81 $ 1.94 $ 2.06 $ 2.19 $ 2.24 $ 2.38 $ 2.53 $ 2.65 $ 2.73 $ 2.75 $ 2.77 $ 2.79 $ 2.79 $ 2.79

Net finance charges


Interest on Long-Term Loans - - - - - - - - - 0.15 0.15 0.14 0.13 0.13 0.12 0.11 0.11 0.10 0.09 0.09 0.08
Principal Repayments - - - - - - - - - 0.22 0.22 0.23 0.24 0.24 0.25 0.25 0.26 0.27 0.28 0.28 0.29
Total Debt Service - - - - - - - - - 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37

Taxable Income $ (0.94) $ (0.89) $ (0.33) $ (0.34) $ 1.47 $ 1.58 $ 1.69 $ 1.81 $ 1.94 $ 1.91 $ 2.05 $ 2.10 $ 2.25 $ 2.40 $ 2.52 $ 2.62 $ 2.65 $ 2.67 $ 2.69 $ 2.71 $ 2.71

Taxation $ - $ - $ - $ - $ 0.37 $ 0.39 $ 0.42 $ 0.45 $ 0.48 $ 0.48 $ 0.51 $ 0.53 $ 0.56 $ 0.60 $ 0.63 $ 0.65 $ 0.66 $ 0.67 $ 0.67 $ 0.68 $ 0.68

Profit/(loss) after taxation $ (0.94) $ (0.89) $ (0.33) $ (0.34) $ 1.10 $ 1.18 $ 1.27 $ 1.36 $ 1.45 $ 1.43 $ 1.54 $ 1.58 $ 1.69 $ 1.80 $ 1.89 $ 1.96 $ 1.99 $ 2.01 $ 2.02 $ 2.03 $ 2.04

Operating profit/(loss) per kWh billed (SBD) $ (4.29) $ (3.90) $ (0.67) $ (0.66) $ 2.06 $ 2.13 $ 2.19 $ 2.26 $ 2.32 $ 2.20 $ 2.27 $ 2.24 $ 2.30 $ 2.36 $ 2.39 $ 2.38 $ 2.32 $ 2.25 $ 2.18 $ 2.11 $ 2.03

31/25866 February 12 186


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Mataniko, With Tina


Honiara Profit & Loss (SBD million)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Operating Revenues $ 321.59 $ 422.02 $ 445.23 $ 469.78 $ 495.75 $ 523.23 $ 552.31 $ 583.09 $ 615.68 $ 650.19 $ 686.74 $ 725.45 $ 766.46 $ 809.92 $ 855.98 $ 904.81 $ 956.58 $ 1,011.48 $ 1,069.72 $ 1,131.50 $ 1,197.05

Mataniko Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (MWh)
Diesel 79,654 83,606 87,753 92,107 83,975 32,771 37,180 41,839 46,760 - - - - - 4,421 11,051 18,066 25,487 33,334 41,626 50,388
Tina River Hydro - - - - - 56,000 56,625 57,250 57,875 110,456 116,566 122,979 129,710 136,775 139,769 140,923 142,077 143,231 144,385 145,538 146,692
Mataniko Hydro - - - - 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701
Total 79,654 83,606 87,753 92,107 96,676 101,472 106,506 111,790 117,336 123,157 129,267 135,680 142,411 149,476 156,891 164,675 172,844 181,419 190,419 199,866 209,781
Generation Mix (%)
Diesel 100.0% 100.0% 100.0% 100.0% 86.9% 32.3% 34.9% 37.4% 39.9% 0.0% 0.0% 0.0% 0.0% 0.0% 2.8% 6.7% 10.5% 14.0% 17.5% 20.8% 24.0%
Tina River Hydro 0.0% 0.0% 0.0% 0.0% 0.0% 55.2% 53.2% 51.2% 49.3% 89.7% 90.2% 90.6% 91.1% 91.5% 89.1% 85.6% 82.2% 79.0% 75.8% 72.8% 69.9%
Mataniko Hydro 0.0% 0.0% 0.0% 0.0% 13.1% 12.5% 11.9% 11.4% 10.8% 10.3% 9.8% 9.4% 8.9% 8.5% 8.1% 7.7% 7.3% 7.0% 6.7% 6.4% 6.1%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70
Peak Load (MW) 13.0 13.6 14.3 15.0 15.8 16.5 17.4 18.2 19.1 20.1 21.1 22.1 23.2 24.4 25.6 26.9 28.2 29.6 31.1 32.6 34.2

Operating Expenditures
Honiara Share of HQ Expenses $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60
Fuel
Diesel (10^3 litres) 22,758 23,887 25,072 26,316 23,993 9,363 10,623 11,954 13,360 - - - - - 1,263 3,157 5,162 7,282 9,524 11,893 14,397
Delivered Diesel Price (SBD/litre) $ 6.83 $ 7.03 $ 7.25 $ 7.46 $ 7.69 $ 7.92 $ 8.16 $ 8.40 $ 8.65 $ 8.91 $ 9.18 $ 9.45 $ 9.74 $ 10.03 $ 10.33 $ 10.64 $ 10.96 $ 11.29 $ 11.63 $ 11.98 $ 12.34
Diesel Fuel Cost (SBD million) $ 155.44 $ 168.04 $ 181.67 $ 196.41 $ 184.44 $ 74.14 $ 86.63 $ 100.41 $ 115.59 $ - $ - $ - $ - $ - $ 13.05 $ 33.60 $ 56.57 $ 82.21 $ 110.74 $ 142.44 $ 177.59

Non Fuel Generation O&M $ 91.60 $ 96.15 $ 100.92 $ 105.92 $ 97.59 $ 43.18 $ 48.30 $ 53.71 $ 59.42 $ 11.54 $ 11.68 $ 11.82 $ 11.96 $ 12.11 $ 17.28 $ 25.00 $ 33.16 $ 41.78 $ 50.90 $ 60.53 $ 70.70

Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -


Administration and Payroll $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66
Total Operating Expenditure Before
Depreciation and Bad Debts $ 257.25 $ 274.40 $ 292.85 $ 312.59 $ 292.29 $ 127.58 $ 145.20 $ 164.39 $ 185.27 $ 21.80 $ 21.94 $ 22.08 $ 22.23 $ 22.37 $ 40.59 $ 68.86 $ 99.99 $ 134.25 $ 171.90 $ 213.23 $ 258.55

Depreciation $ - $ - $ - $ - $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19
Provision for Bad Debts $ 32.16 $ 42.20 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 289.41 $ 316.60 $ 292.85 $ 312.59 $ 293.89 $ 129.18 $ 146.80 $ 165.99 $ 186.87 $ 23.40 $ 23.54 $ 34.27 $ 34.41 $ 34.55 $ 52.78 $ 81.04 $ 112.18 $ 146.44 $ 184.09 $ 225.42 $ 270.74

Operating profit/(loss) $ 32.19 $ 105.42 $ 152.38 $ 157.19 $ 201.86 $ 394.05 $ 405.51 $ 417.11 $ 428.81 $ 626.79 $ 663.19 $ 691.18 $ 732.05 $ 775.37 $ 803.20 $ 823.77 $ 844.40 $ 865.04 $ 885.63 $ 906.08 $ 926.32

Net finance charges


Interest on Long-Term Loans - - - - - - - - - 0.50 0.48 0.46 0.44 0.42 0.40 0.38 0.35 0.33 0.31 0.28 0.26
Principal Repayments - - - - - - - - - 0.72 0.74 0.76 0.78 0.80 0.82 0.84 0.86 0.89 0.91 0.93 0.96
Total Debt Service - - - - - - - - - 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22

Taxable Income $ 32.19 $ 105.42 $ 152.38 $ 157.19 $ 201.86 $ 394.05 $ 405.51 $ 417.11 $ 428.81 $ 626.29 $ 662.71 $ 690.72 $ 731.61 $ 774.95 $ 802.80 $ 823.39 $ 844.05 $ 864.71 $ 885.32 $ 905.80 $ 926.06

Taxation $ 8.05 $ 26.36 $ 38.09 $ 39.30 $ 50.46 $ 98.51 $ 101.38 $ 104.28 $ 107.20 $ 156.57 $ 165.68 $ 172.68 $ 182.90 $ 193.74 $ 200.70 $ 205.85 $ 211.01 $ 216.18 $ 221.33 $ 226.45 $ 231.51

Profit/(loss) after taxation $ 24.14 $ 79.07 $ 114.28 $ 117.89 $ 151.39 $ 295.53 $ 304.13 $ 312.83 $ 321.61 $ 469.72 $ 497.04 $ 518.04 $ 548.71 $ 581.21 $ 602.10 $ 617.54 $ 633.03 $ 648.53 $ 663.99 $ 679.35 $ 694.54

Operating profit/(loss) per kWh billed (SBD) $ 0.33 $ 1.03 $ 1.42 $ 1.39 $ 1.70 $ 3.17 $ 3.10 $ 3.04 $ 2.98 $ 4.15 $ 4.18 $ 4.15 $ 4.19 $ 4.23 $ 4.17 $ 4.08 $ 3.98 $ 3.89 $ 3.79 $ 3.69 $ 3.60

31/25866 February 12 187


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Mataniko, Without Tina


Honiara Profit & Loss (SBD million)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Operating Revenues $ 321.59 $ 422.02 $ 445.23 $ 469.78 $ 495.75 $ 523.23 $ 552.31 $ 583.09 $ 615.68 $ 650.19 $ 686.74 $ 725.45 $ 766.46 $ 809.92 $ 855.98 $ 904.81 $ 956.58 $ 1,011.48 $ 1,069.72 $ 1,131.50 $ 1,197.05

Mataniko Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (MWh)
Diesel 79,654 83,606 87,753 92,107 83,975 88,771 93,805 99,089 104,635 110,456 116,566 122,979 129,710 136,775 144,190 151,974 160,143 168,718 177,718 187,165 197,080
Tina River Hydro - - - - - - - - - - - - - - - - - - - - -
Mataniko Hydro - - - - 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701 12,701
Total 79,654 83,606 87,753 92,107 96,676 101,472 106,506 111,790 117,336 123,157 129,267 135,680 142,411 149,476 156,891 164,675 172,844 181,419 190,419 199,866 209,781
Generation Mix (%)
Diesel 100.0% 100.0% 100.0% 100.0% 86.9% 87.5% 88.1% 88.6% 89.2% 89.7% 90.2% 90.6% 91.1% 91.5% 91.9% 92.3% 92.7% 93.0% 93.3% 93.6% 93.9%
Tina River Hydro 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Mataniko Hydro 0.0% 0.0% 0.0% 0.0% 13.1% 12.5% 11.9% 11.4% 10.8% 10.3% 9.8% 9.4% 8.9% 8.5% 8.1% 7.7% 7.3% 7.0% 6.7% 6.4% 6.1%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70
Peak Load (MW) 13.0 13.6 14.3 15.0 15.8 16.5 17.4 18.2 19.1 20.1 21.1 22.1 23.2 24.4 25.6 26.9 28.2 29.6 31.1 32.6 34.2

Operating Expenditures
Honiara Share of HQ Expenses $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60 $ 9.60
Fuel
Diesel (10^3 litres) 22,758 23,887 25,072 26,316 23,993 25,363 26,802 28,311 29,896 31,559 33,305 35,137 37,060 39,079 41,197 43,421 45,755 48,205 50,777 53,476 56,309
Delivered Diesel Price (SBD/litre) $ 6.83 $ 7.03 $ 7.25 $ 7.46 $ 7.69 $ 7.92 $ 8.16 $ 8.40 $ 8.65 $ 8.91 $ 9.18 $ 9.45 $ 9.74 $ 10.03 $ 10.33 $ 10.64 $ 10.96 $ 11.29 $ 11.63 $ 11.98 $ 12.34
Diesel Fuel Cost (SBD million) $ 155.44 $ 168.04 $ 181.67 $ 196.41 $ 184.44 $ 200.82 $ 218.58 $ 237.81 $ 258.66 $ 281.24 $ 305.70 $ 332.19 $ 360.89 $ 391.96 $ 425.61 $ 462.04 $ 501.48 $ 544.19 $ 590.41 $ 640.45 $ 694.61

Non Fuel Generation O&M $ 91.60 $ 96.15 $ 100.92 $ 105.92 $ 97.59 $ 103.10 $ 108.89 $ 114.97 $ 121.35 $ 128.04 $ 135.07 $ 142.44 $ 150.18 $ 158.31 $ 166.83 $ 175.79 $ 185.18 $ 195.04 $ 205.39 $ 216.26 $ 227.66

Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -


Administration and Payroll $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66 $ 0.66
Total Operating Expenditure Before
Depreciation and Bad Debts $ 257.25 $ 274.40 $ 292.85 $ 312.59 $ 292.29 $ 314.19 $ 337.73 $ 363.05 $ 390.27 $ 419.54 $ 451.03 $ 484.90 $ 521.33 $ 560.53 $ 602.71 $ 648.09 $ 696.93 $ 749.49 $ 806.07 $ 866.97 $ 932.53

Depreciation $ - $ - $ - $ - $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19 $ 12.19
Provision for Bad Debts $ 32.16 $ 42.20 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 289.41 $ 316.60 $ 292.85 $ 312.59 $ 293.89 $ 315.79 $ 339.33 $ 364.65 $ 391.87 $ 421.14 $ 452.63 $ 497.08 $ 533.52 $ 572.72 $ 614.89 $ 660.27 $ 709.11 $ 761.67 $ 818.25 $ 879.15 $ 944.71

Operating profit/(loss) $ 32.19 $ 105.42 $ 152.38 $ 157.19 $ 201.86 $ 207.44 $ 212.98 $ 218.45 $ 223.81 $ 229.05 $ 234.11 $ 228.36 $ 232.94 $ 237.20 $ 241.09 $ 244.54 $ 247.47 $ 249.81 $ 251.47 $ 252.34 $ 252.34

Net finance charges


Interest on Long-Term Loans - - - - - - - - - 0.50 0.48 0.46 0.44 0.42 0.40 0.38 0.35 0.33 0.31 0.28 0.26
Principal Repayments - - - - - - - - - 0.72 0.74 0.76 0.78 0.80 0.82 0.84 0.86 0.89 0.91 0.93 0.96
Total Debt Service - - - - - - - - - 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22 1.22

Taxable Income $ 32.19 $ 105.42 $ 152.38 $ 157.19 $ 201.86 $ 207.44 $ 212.98 $ 218.45 $ 223.81 $ 228.55 $ 233.63 $ 227.90 $ 232.50 $ 236.78 $ 240.69 $ 244.16 $ 247.11 $ 249.48 $ 251.16 $ 252.06 $ 252.08

Taxation $ 8.05 $ 26.36 $ 38.09 $ 39.30 $ 50.46 $ 51.86 $ 53.24 $ 54.61 $ 55.95 $ 57.14 $ 58.41 $ 56.98 $ 58.13 $ 59.20 $ 60.17 $ 61.04 $ 61.78 $ 62.37 $ 62.79 $ 63.02 $ 63.02

Profit/(loss) after taxation $ 24.14 $ 79.07 $ 114.28 $ 117.89 $ 151.39 $ 155.58 $ 159.73 $ 163.84 $ 167.86 $ 171.41 $ 175.22 $ 170.93 $ 174.38 $ 177.59 $ 180.52 $ 183.12 $ 185.34 $ 187.11 $ 188.37 $ 189.05 $ 189.06

Operating profit/(loss) per kWh billed (SBD) $ 0.33 $ 1.03 $ 1.42 $ 1.39 $ 1.70 $ 1.67 $ 1.63 $ 1.59 $ 1.56 $ 1.51 $ 1.47 $ 1.37 $ 1.33 $ 1.29 $ 1.25 $ 1.21 $ 1.17 $ 1.12 $ 1.08 $ 1.03 $ 0.98

31/25866 February 12 188


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Ringgi (Variant A)
Ringgi Profit & Loss (SBD million)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Revenues $ 15.807 $ 20.362 $ 21.297 $ 22.279 $ 23.275 $ 24.319 $ 25.415 $ 26.565 $ 27.772 $ 29.040 $ 30.371 $ 31.769 $ 33.237 $ 34.780 $ 36.402 $ 38.106 $ 39.898 $ 41.782 $ 43.764 $ 45.849 $ 48.043

Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (kWh)
Diesel 3,846,678 4,006,957 4,173,913 - - - - - - - - - - - - - - - - - -
Hydro - - - 4,347,826 4,521,739 4,702,609 4,890,713 5,086,342 5,289,795 5,501,387 5,721,443 5,950,300 6,188,312 6,435,845 6,693,279 6,961,010 7,239,450 7,529,028 7,830,189 8,143,397 8,469,133
Total 3,846,678 4,006,957 4,173,913 4,347,826 4,521,739 4,702,609 4,890,713 5,086,342 5,289,795 5,501,387 5,721,443 5,950,300 6,188,312 6,435,845 6,693,279 6,961,010 7,239,450 7,529,028 7,830,189 8,143,397 8,469,133

Generation Mix (%)


Diesel 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Hydro 0% 0% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Load Factor 0.61 0.63 0.64 0.65 0.67 0.68 0.69 0.71 0.72 0.73 0.75 0.76 0.78 0.79 0.81 0.82 0.84 0.86 0.87 0.89 0.91
Peak Load (kW) 658.8 672.3 686.0 700.0 714.0 728.3 742.8 757.7 772.9 788.3 804.1 820.2 836.6 853.3 870.4 887.8 905.5 923.6 942.1 960.9 980.2

Operating Expenditures

Fuel
Diesel (litres) 1,099,051 1,144,845 1,192,547 - - - - - - - - - - - - - - - - - -
Delivered Diesel Price (SBD/litre) $ 7.13 $ 7.34 $ 7.56 $ 7.79 $ 8.02 $ 8.27 $ 8.51 $ 8.77 $ 9.03 $ 9.30 $ 9.58 $ 9.87 $ 10.17 $ 10.47 $ 10.78 $ 11.11 $ 11.44 $ 11.78 $ 12.14 $ 12.50 $ 12.88
Diesel Fuel Cost (SBD million) $ 7.84 $ 8.41 $ 9.02 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Non Fuel Generation O&M $ 4.42 $ 4.61 $ 4.80 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.34

Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -


Administration and Payroll $ 0.19 $ 0.20 $ 0.20 $ 0.20 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26
Total Operating Expenditure
Before Depreciation and Bad
Debts $ 12.46 $ 13.22 $ 14.08 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60

Depreciation $ - $ 0.29 $ 0.29 $ 1.22 $ 1.22 $ 1.22 $ 1.22 $ 1.22 $ 1.22 $ 1.22 $ 1.22 $ 1.37 $ 1.66 $ 1.66 $ 1.66 $ 1.66 $ 1.66 $ 1.66 $ 1.66 $ 1.66 $ 1.66
Provision for Bad Debts $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 12.46 $ 13.51 $ 14.37 $ 1.82 $ 1.82 $ 1.82 $ 1.82 $ 1.82 $ 1.82 $ 1.82 $ 1.82 $ 1.97 $ 2.26 $ 2.26 $ 2.26 $ 2.26 $ 2.26 $ 2.26 $ 2.26 $ 2.26 $ 2.26

Operating profit/(loss) $ 3.35 $ 6.85 $ 6.92 $ 20.46 $ 21.46 $ 22.50 $ 23.60 $ 24.75 $ 25.95 $ 27.22 $ 28.55 $ 29.80 $ 30.98 $ 32.52 $ 34.14 $ 35.85 $ 37.64 $ 39.52 $ 41.50 $ 43.59 $ 45.78

Net finance charges


Interest on Long-Term Loans - - - - - - - - - - - - - - - - - - - - -
Principal Repayments - - - - - - - - - - - - - - - - - - - - -
Total Debt Service - - - - - - - - - - - - - - - - - - - - -

Taxable Income $ 3.35 $ 6.85 $ 6.92 $ 20.46 $ 21.46 $ 22.50 $ 23.60 $ 24.75 $ 25.95 $ 27.22 $ 28.55 $ 29.80 $ 30.98 $ 32.52 $ 34.14 $ 35.85 $ 37.64 $ 39.52 $ 41.50 $ 43.59 $ 45.78

Taxation $ 0.84 $ 1.71 $ 1.73 $ 5.11 $ 5.36 $ 5.62 $ 5.90 $ 6.19 $ 6.49 $ 6.81 $ 7.14 $ 7.45 $ 7.74 $ 8.13 $ 8.54 $ 8.96 $ 9.41 $ 9.88 $ 10.38 $ 10.90 $ 11.45

Profit/(loss) after taxation $ 2.51 $ 5.14 $ 5.19 $ 15.34 $ 16.09 $ 16.87 $ 17.70 $ 18.56 $ 19.46 $ 20.42 $ 21.41 $ 22.35 $ 23.23 $ 24.39 $ 25.61 $ 26.88 $ 28.23 $ 29.64 $ 31.13 $ 32.69 $ 34.34

Operating profit/(loss) per kWh billed (SBD) $ 0.71 $ 1.39 $ 1.35 $ 3.84 $ 3.87 $ 3.90 $ 3.93 $ 3.97 $ 4.00 $ 4.03 $ 4.07 $ 4.08 $ 4.08 $ 4.12 $ 4.16 $ 4.20 $ 4.24 $ 4.28 $ 4.32 $ 4.36 $ 4.41

31/25866 February 12 189


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Ringgi (Variant B)
Ringgi Profit & Loss (SBD million)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Operating Revenues $ 51.366 $ 66.171 $ 69.210 $ 72.403 $ 75.638 $ 79.032 $ 82.594 $ 86.331 $ 90.255 $ 94.374 $ 98.700 $ 103.243 $ 108.016 $ 113.030 $ 118.300 $ 123.840 $ 129.663 $ 135.787 $ 142.228 $ 149.004 $ 156.134

Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (kWh)
Diesel 12,501,704 13,022,609 13,565,217 14,130,435 - 9,059 53,110 98,041 143,872 190,618 238,300 286,935 336,543 387,144 438,756 491,400 545,098 599,869 655,736 712,720 1,203,071
Hydro - - - - 14,695,652 15,274,419 15,841,708 16,432,569 17,047,963 17,688,890 18,356,388 19,051,540 19,775,471 20,529,352 21,314,399 22,131,881 22,983,115 23,869,472 24,792,379 25,753,320 26,321,610
Total 12,501,704 13,022,609 13,565,217 14,130,435 14,695,652 15,283,478 15,894,817 16,530,610 17,191,834 17,879,508 18,594,688 19,338,476 20,112,015 20,916,495 21,753,155 22,623,281 23,528,213 24,469,341 25,448,115 26,466,039 27,524,681

Generation Mix (%)


Diesel 100% 100% 100% 100% 0% 0% 0% 1% 1% 1% 1% 1% 2% 2% 2% 2% 2% 2% 3% 3% 4%
Hydro 0% 0% 0% 0% 100% 100% 100% 99% 99% 99% 99% 99% 98% 98% 98% 98% 98% 98% 97% 97% 96%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Load Factor 0.48 0.49 0.50 0.51 0.52 0.53 0.54 0.55 0.56 0.57 0.59 0.60 0.61 0.62 0.63 0.65 0.66 0.67 0.68 0.70 0.71
Peak Load (kW) 2,729.5 2,785.2 2,842.0 2,900.0 2,958.0 3,017.2 3,077.5 3,139.1 3,201.8 3,265.9 3,331.2 3,397.8 3,465.8 3,535.1 3,605.8 3,677.9 3,751.5 3,826.5 3,903.0 3,981.1 4,060.7

Operating Expenditures

Fuel
Diesel (litres) 3,571,916 3,720,745 3,875,776 4,037,267 - 2,588 15,174 28,012 41,106 54,462 68,086 81,982 96,155 110,612 125,359 140,400 155,742 171,391 187,353 203,634 343,735
Delivered Diesel Price (SBD/litre) $ 6.95 $ 7.16 $ 7.37 $ 7.59 $ 7.82 $ 8.06 $ 8.30 $ 8.55 $ 8.80 $ 9.07 $ 9.34 $ 9.62 $ 9.91 $ 10.21 $ 10.51 $ 10.83 $ 11.15 $ 11.49 $ 11.83 $ 12.19 $ 12.55
Diesel Fuel Cost (SBD million) $ 24.82 $ 26.63 $ 28.58 $ 30.66 $ - $ 0.02 $ 0.13 $ 0.24 $ 0.36 $ 0.49 $ 0.64 $ 0.79 $ 0.95 $ 1.13 $ 1.32 $ 1.52 $ 1.74 $ 1.97 $ 2.22 $ 2.48 $ 4.31

Non Fuel Generation O&M $ 14.38 $ 14.98 $ 15.60 $ 16.25 $ 1.19 $ 1.20 $ 1.25 $ 1.30 $ 1.36 $ 1.41 $ 1.46 $ 1.52 $ 1.58 $ 1.64 $ 1.69 $ 1.76 $ 1.82 $ 1.88 $ 1.94 $ 2.01 $ 2.57

Distribution O&M $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -


Administration and Payroll $ 0.19 $ 0.20 $ 0.20 $ 0.20 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26
Total Operating Expenditure
Before Depreciation and Bad
Debts $ 39.40 $ 41.81 $ 44.44 $ 47.17 $ 1.45 $ 1.48 $ 1.63 $ 1.80 $ 1.98 $ 2.16 $ 2.36 $ 2.57 $ 2.79 $ 3.02 $ 3.27 $ 3.53 $ 3.81 $ 4.11 $ 4.42 $ 4.75 $ 7.15

Depreciation $ - $ 0.88 $ 0.88 $ 2.14 $ 3.98 $ 3.98 $ 3.98 $ 3.98 $ 3.98 $ 3.98 $ 3.98 $ 4.27 $ 4.86 $ 4.86 $ 4.86 $ 4.86 $ 4.86 $ 4.86 $ 4.86 $ 4.86 $ 4.86
Provision for Bad Debts $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 39.40 $ 42.69 $ 45.32 $ 49.31 $ 5.43 $ 5.46 $ 5.61 $ 5.78 $ 5.96 $ 6.14 $ 6.34 $ 6.84 $ 7.65 $ 7.88 $ 8.13 $ 8.40 $ 8.67 $ 8.97 $ 9.28 $ 9.61 $ 12.01

Operating profit/(loss) $ 11.96 $ 23.48 $ 23.89 $ 23.10 $ 70.21 $ 73.57 $ 76.98 $ 80.55 $ 84.30 $ 88.23 $ 92.36 $ 96.40 $ 100.37 $ 105.15 $ 110.17 $ 115.44 $ 120.99 $ 126.82 $ 132.95 $ 139.39 $ 144.13

Net finance charges


Interest on Long-Term Loans - - - - - - - - - - - - - - - - - - - - -
Principal Repayments - - - - - - - - - - - - - - - - - - - - -
Total Debt Service - - - - - - - - - - - - - - - - - - - - -

Taxable Income $ 11.96 $ 23.48 $ 23.89 $ 23.10 $ 70.21 $ 73.57 $ 76.98 $ 80.55 $ 84.30 $ 88.23 $ 92.36 $ 96.40 $ 100.37 $ 105.15 $ 110.17 $ 115.44 $ 120.99 $ 126.82 $ 132.95 $ 139.39 $ 144.13

Taxation $ 2.99 $ 5.87 $ 5.97 $ 5.77 $ 17.55 $ 18.39 $ 19.24 $ 20.14 $ 21.07 $ 22.06 $ 23.09 $ 24.10 $ 25.09 $ 26.29 $ 27.54 $ 28.86 $ 30.25 $ 31.70 $ 33.24 $ 34.85 $ 36.03

Profit/(loss) after taxation $ 8.97 $ 17.61 $ 17.92 $ 17.32 $ 52.66 $ 55.18 $ 57.73 $ 60.41 $ 63.22 $ 66.18 $ 69.27 $ 72.30 $ 75.27 $ 78.86 $ 82.63 $ 86.58 $ 90.74 $ 95.11 $ 99.71 $ 104.54 $ 108.09

Operating profit/(loss) per kWh billed (SBD) $ 0.78 $ 1.47 $ 1.44 $ 1.33 $ 3.89 $ 3.92 $ 3.95 $ 3.97 $ 4.00 $ 4.02 $ 4.05 $ 4.06 $ 4.07 $ 4.10 $ 4.13 $ 4.16 $ 4.19 $ 4.23 $ 4.26 $ 4.29 $ 4.27

31/25866 February 12 190


TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Taro
Taro Profit & Loss (SBD million)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Revenues $ 2.499 $ 3.151 $ 3.292 $ 3.439 $ 3.593 $ 3.755 $ 3.925 $ 4.104 $ 4.292 $ 4.489 $ 4.696 $ 4.914 $ 5.144 $ 5.384 $ 5.638 $ 5.904 $ 6.185 $ 6.480

Hydro Scenario Historical Projected --------------->


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Mix (kWh)
Diesel 494,358 - - - - - - - - - - - - - - - - -
Hydro - 618,276 643,007 668,727 695,477 723,296 752,227 782,317 813,609 846,154 880,000 915,200 951,808 989,880 1,029,475 1,070,654 1,113,480 1,158,020
Total 494,358 618,276 643,007 668,727 695,477 723,296 752,227 782,317 813,609 846,154 880,000 915,200 951,808 989,880 1,029,475 1,070,654 1,113,480 1,158,020

Generation Mix (%)


Diesel 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Hydro 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Load Factor 0.60 0.60 0.61 0.62 0.64 0.65 0.66 0.67 0.69 0.70 0.71 0.73 0.74 0.76 0.77 0.79 0.80 0.82
Peak Load (kW) 94.1 117.6 120.0 122.4 124.8 127.3 129.9 132.5 135.1 137.8 140.6 143.4 146.3 149.2 152.2 155.2 158.3 161.5

Operating Expenditures
Taro Share of HQ Expenses $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
Fuel
Diesel (litres) - - - 141,245 - - - - - - - - - - - - - - - - -
Delivered Diesel Price (SBD/litre) $ 7.98 $ 8.22 $ 8.47 $ 8.72 $ 8.98 $ 9.25 $ 9.53 $ 9.81 $ 10.11 $ 10.41 $ 10.72 $ 11.05 $ 11.38 $ 11.72 $ 12.07 $ 12.43 $ 12.81 $ 13.19 $ 13.59 $ 13.99 $ 14.41
Diesel Fuel Cost (SBD million) $ - $ - $ - $ 1.23 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Non Fuel Generation O&M $ 0.57 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07

Distribution O&M $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Administration and Payroll $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 0.26
Total Operating Expenditure
Before Depreciation and Bad
Debts $ 2.09 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37

Depreciation $ 0.09 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.47 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 0.56
Provision for Bad Debts $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

Total Operating Expenses $ 2.18 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.83 $ 0.92 $ 0.92 $ 0.92 $ 0.92 $ 0.92 $ 0.92 $ 0.92 $ 0.92

Operating profit/(loss) $ 0.32 $ 2.32 $ 2.46 $ 2.60 $ 2.76 $ 2.92 $ 3.09 $ 3.27 $ 3.46 $ 3.65 $ 3.77 $ 3.99 $ 4.22 $ 4.46 $ 4.72 $ 4.98 $ 5.26 $ 5.56

Net finance charges


Interest on Long-Term Loans - - - - - - 0.12 0.11 0.11 0.10 0.10 0.09 0.09 0.08 0.08 0.07 0.07 0.06
Principal Repayments - - - - - - 0.17 0.17 0.18 0.18 0.19 0.19 0.20 0.20 0.21 0.22 0.22 0.23
Total Debt Service - - - - - - 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29

Taxable Income $ 0.32 $ 2.32 $ 2.46 $ 2.60 $ 2.76 $ 2.92 $ 2.97 $ 3.16 $ 3.35 $ 3.55 $ 3.67 $ 3.90 $ 4.13 $ 4.38 $ 4.64 $ 4.91 $ 5.20 $ 5.50

Taxation $ 0.08 $ 0.58 $ 0.61 $ 0.65 $ 0.69 $ 0.73 $ 0.74 $ 0.79 $ 0.84 $ 0.89 $ 0.92 $ 0.97 $ 1.03 $ 1.09 $ 1.16 $ 1.23 $ 1.30 $ 1.37

Profit/(loss) after taxation $ 0.24 $ 1.74 $ 1.84 $ 1.95 $ 2.07 $ 2.19 $ 2.23 $ 2.37 $ 2.51 $ 2.66 $ 2.76 $ 2.92 $ 3.10 $ 3.28 $ 3.48 $ 3.68 $ 3.90 $ 4.12

Operating profit/(loss) per kWh billed (SBD) $ 0.52 $ 3.05 $ 3.12 $ 3.17 $ 3.23 $ 3.29 $ 3.22 $ 3.29 $ 3.35 $ 3.42 $ 3.40 $ 3.47 $ 3.54 $ 3.61 $ 3.67 $ 3.74 $ 3.80 $ 3.87

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Annex 5: Financial Internal Rate of Return


Auki FIRR/FNPV Calculation
Hydro ('With Project') Diesel ('Without Project')
Total Total
Diesel Diesel & Diesel & 'With 'Without Net
Fuel Hydro O&M Hydro Depr Project' Non-Fuel Diesel Depr Project' With Project' Financial
Year Capital Cost Costs Costs Costs Costs Fuel Costs O&M Costs Costs Costs CER Credits Benefit
2013 33.43 6.81 3.29 0.33 43.85 6.81 3.29 0.33 $ 10.43 - $ (33.43)
2014 - - 0.24 1.27 1.51 7.29 3.42 0.33 $ 11.04 - $ 9.54
2015 - - 0.25 1.38 1.63 7.81 3.56 0.44 $ 11.81 - $ 10.18
2016 - - 0.26 1.38 1.64 8.37 3.70 0.44 $ 12.51 - $ 10.87
2017 - - 0.27 1.38 1.65 8.96 3.85 0.44 $ 13.25 - $ 11.61
2018 - - 0.28 1.38 1.66 9.60 4.00 0.44 $ 14.05 - $ 12.39
2019 - - 0.29 1.38 1.67 10.28 4.16 0.44 $ 14.89 - $ 13.22
2020 - - 0.30 1.49 1.79 11.02 4.33 0.56 $ 15.90 - $ 14.11
2021 - - 0.31 1.60 1.92 11.80 4.50 0.67 $ 16.97 - $ 15.05
2022 - - 0.33 1.60 1.93 12.64 4.68 0.67 $ 17.99 - $ 16.06
2023 - - 0.34 1.60 1.94 13.54 4.87 0.67 $ 19.08 - $ 17.13
2024 - - 0.35 1.60 1.96 14.50 5.06 0.67 $ 20.24 - $ 18.28
2025 - - 0.37 1.60 1.97 15.54 5.27 0.67 $ 21.47 - $ 19.50
2026 - - 0.38 1.72 2.10 16.64 5.48 0.78 $ 22.90 - $ 20.80
2027 - - 0.40 1.72 2.11 17.83 5.70 0.78 $ 24.30 - $ 22.19
2028 - - 0.41 1.72 2.13 19.10 5.92 0.78 $ 25.80 - $ 23.67
2029 - - 0.43 1.72 2.15 20.46 6.16 0.78 $ 27.40 - $ 25.25
2030 - - 0.45 1.83 2.27 21.91 6.41 0.89 $ 29.21 - $ 26.94

FIRR = 34.7%
FNPVs 33.43 6.81 6.85 17.38 64.47 145.65 54.53 6.85 207.03 - 142.56

WACC = 5.03%

Lata FIRR/FNPV Calculation


Hydro ('With Project') Diesel ('Without Project')
Diesel & Diesel & Total Total With
Diesel Hydro Hydro 'With Non-Fuel Diesel 'Without Project' Net
Capital Fuel O&M Depr Project' Fuel O&M Depr Project' CER Financial
Year Cost Costs Costs Costs Costs Costs Costs Costs Costs Credits Benefit
2013 17.35 1.61 0.64 0.49 20.09 1.61 0.64 0.49 $ 2.74 - $ (17.35)
2014 - 0.03 0.06 0.97 1.06 1.72 0.67 0.49 $ 2.88 - $ 1.82
2015 - 0.04 0.06 0.97 1.08 1.85 0.70 0.49 $ 3.03 - $ 1.95
2016 - 0.06 0.07 0.97 1.11 1.98 0.72 0.49 $ 3.19 - $ 2.08
2017 - 0.08 0.08 0.97 1.13 2.12 0.75 0.49 $ 3.36 - $ 2.22
2018 - 0.11 0.09 0.97 1.17 2.27 0.78 0.49 $ 3.54 - $ 2.37
2019 - 0.13 0.10 0.97 1.20 2.43 0.81 0.49 $ 3.73 - $ 2.53
2020 - 0.16 0.11 0.97 1.24 2.60 0.85 0.49 $ 3.94 - $ 2.69
2021 - 0.19 0.12 1.06 1.37 2.79 0.88 0.57 $ 4.24 - $ 2.87
2022 - 0.23 0.13 1.06 1.42 2.99 0.91 0.57 $ 4.48 - $ 3.06
2023 - 0.27 0.14 1.06 1.47 3.20 0.95 0.57 $ 4.73 - $ 3.25
2024 - 0.32 0.15 1.09 1.56 3.43 0.99 0.60 $ 5.02 - $ 3.46
2025 - 0.43 0.18 1.09 1.70 3.67 1.03 0.60 $ 5.30 - $ 3.61
2026 - 0.59 0.22 1.09 1.90 3.93 1.07 0.60 $ 5.61 - $ 3.70
2027 - 0.77 0.27 1.09 2.13 4.21 1.11 0.60 $ 5.93 - $ 3.80
2028 - 0.97 0.31 1.09 2.37 4.51 1.16 0.60 $ 6.27 - $ 3.91
2029 - 1.18 0.36 1.09 2.63 4.83 1.20 0.60 $ 6.64 - $ 4.01
2030 - 1.42 0.41 1.09 2.91 5.18 1.25 0.60 $ 7.03 - $ 4.12

FIRR = 13.2%
FNPVs 17.35 5.28 2.28 12.01 36.93 34.42 10.66 6.54 51.62 - 14.69

WACC = 5.03%

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Mataniko FIRR/FNPV Calculation, With Tina


With Tina? Yes
Hydro ('With Project') Diesel ('Without Project')
Total Total With
Diesel Diesel & Diesel & 'With 'Without Project' Net
Capital Fuel Hydro O&M Hydro Depr Project' Non-Fuel Diesel Depr Project' CER Financial
Year Cost Costs Costs Costs Costs Fuel Costs O&M Costs Costs Costs Credits Benefit
2013 57.19 196.41 105.92 - 359.52 196.41 105.92 - $ 302.33 - $ (57.19)
2014 - 184.44 97.59 1.60 283.63 212.33 96.57 - $ 308.91 - $ 25.28
2015 - 74.14 43.18 1.60 118.92 102.87 42.17 - $ 145.04 - $ 26.12
2016 - 86.63 48.30 1.60 136.54 116.23 47.29 - $ 163.52 - $ 26.98
2017 - 100.41 53.71 1.60 155.73 130.90 52.69 - $ 183.59 - $ 27.87
2018 - 115.59 59.42 1.60 176.61 146.99 58.40 - $ 205.39 - $ 28.78
2019 - - 11.54 1.60 13.14 - 10.52 - $ 10.52 - $ (2.62)
2020 - - 11.68 1.60 13.28 - 10.66 - $ 10.66 - $ (2.62)
2021 - - 11.82 12.19 24.01 1.68 10.80 10.58 $ 23.07 - $ (0.94)
2022 - - 11.96 12.19 24.15 15.51 10.95 10.58 $ 37.04 - $ 12.89
2023 - - 12.11 12.19 24.29 31.12 11.09 10.58 $ 52.80 - $ 28.51
2024 - 13.05 17.28 12.19 42.52 50.54 16.27 10.58 $ 77.39 - $ 34.87
2025 - 33.60 25.00 12.19 70.78 72.21 23.98 10.58 $ 106.78 - $ 36.00
2026 - 56.57 33.16 12.19 101.92 96.35 32.14 10.58 $ 139.07 - $ 37.16
2027 - 82.21 41.78 12.19 136.18 123.17 40.77 10.58 $ 174.53 - $ 38.35
2028 - 110.74 50.90 12.19 173.83 152.94 49.88 10.58 $ 213.40 - $ 39.58
2029 - 142.44 60.53 12.19 215.15 185.90 59.51 10.58 $ 256.00 - $ 40.84
2030 - 177.59 70.70 12.19 260.48 222.36 69.68 10.58 $ 302.62 - $ 42.15

FIRR = 40.4%
FNPVs 57.19 979.75 555.54 75.93 1,668.41 1,282.14 544.11 57.91 1,884.15 - 215.74

WACC = 5.03%

Mataniko FIRR/FNPV Calculation, Without Tina


With Tina? No
Hydro ('With Project') Diesel ('Without Project')
Total Total With
Diesel Diesel & Diesel & 'With 'Without Project' Net
Capital Fuel Hydro O&M Hydro Depr Project' Non-Fuel Diesel Depr Project' CER Financial
Year Cost Costs Costs Costs Costs Fuel Costs O&M Costs Costs Costs Credits Benefit
2013 57.19 196.41 105.92 - 359.52 196.41 105.92 - $ 302.33 - $ (57.19)
2014 - 184.44 97.59 1.60 283.63 212.33 96.57 - $ 308.91 - $ 25.28
2015 - 200.82 103.10 1.60 305.53 229.55 102.09 - $ 331.64 - $ 26.12
2016 - 218.58 108.89 1.60 329.07 248.17 107.88 - $ 356.05 - $ 26.98
2017 - 237.81 114.97 1.60 354.38 268.30 113.95 - $ 382.25 - $ 27.87
2018 - 258.66 121.35 1.60 381.61 290.06 120.33 - $ 410.39 - $ 28.78
2019 - 281.24 128.04 1.60 410.88 313.58 127.02 - $ 440.60 - $ 29.72
2020 - 305.70 135.07 1.60 442.37 339.01 134.05 - $ 473.06 - $ 30.69
2021 - 332.19 142.44 12.19 486.82 366.50 141.43 10.58 $ 518.51 - $ 31.69
2022 - 360.89 150.18 12.19 523.26 396.23 149.17 10.58 $ 555.98 - $ 32.72
2023 - 391.96 158.31 12.19 562.45 428.36 157.29 10.58 $ 596.23 - $ 33.78
2024 - 425.61 166.83 12.19 604.63 463.10 165.82 10.58 $ 639.50 - $ 34.87
2025 - 462.04 175.79 12.19 650.01 500.65 174.77 10.58 $ 686.01 - $ 36.00
2026 - 501.48 185.18 12.19 698.85 541.26 184.16 10.58 $ 736.01 - $ 37.16
2027 - 544.19 195.04 12.19 751.41 585.15 194.03 10.58 $ 789.76 - $ 38.35
2028 - 590.41 205.39 12.19 807.99 632.61 204.38 10.58 $ 847.57 - $ 39.58
2029 - 640.45 216.26 12.19 868.89 683.91 215.24 10.58 $ 909.73 - $ 40.84
2030 - 694.61 227.66 12.19 934.45 739.37 226.64 10.58 $ 976.60 - $ 42.15

FIRR = 47.4%
FNPVs 57.19 4,184.17 1,743.66 75.93 6,060.95 4,572.30 1,732.23 57.91 6,362.44 - 301.49

WACC = 5.03%

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Ringgi (Variant A) FIRR/FNPV Calculation


Hydro ('With Project') Diesel ('Without Project')
Total Total With
Diesel Diesel & Diesel & 'With 'Without Project' Net
Fuel Hydro O&M Hydro Depr Project' Non-Fuel Diesel Depr Project' CER Financial
Year Capital Cost Costs Costs Costs Costs Fuel Costs O&M Costs Costs Costs Credits Benefit
2012 34.64 9.02 4.80 0.29 48.76 9.02 4.80 0.29 $ 14.11 - $ (34.64)
2013 - - 0.34 1.22 1.56 9.68 5.00 0.29 $ 14.97 - $ 13.41
2014 - - 0.34 1.22 1.56 10.37 5.20 0.29 $ 15.86 - $ 14.30
2015 - - 0.34 1.22 1.56 11.11 5.41 0.29 $ 16.81 - $ 15.25
2016 - - 0.34 1.22 1.56 11.90 5.62 0.29 $ 17.81 - $ 16.25
2017 - - 0.34 1.22 1.56 12.74 5.85 0.29 $ 18.89 - $ 17.33
2018 - - 0.34 1.22 1.56 13.65 6.08 0.29 $ 20.03 - $ 18.47
2019 - - 0.34 1.22 1.56 14.62 6.33 0.29 $ 21.24 - $ 19.68
2020 - - 0.34 1.22 1.56 15.66 6.58 0.29 $ 22.54 - $ 20.98
2021 - - 0.34 1.37 1.71 16.78 6.84 0.44 $ 24.06 - $ 22.35
2022 - - 0.34 1.66 2.00 17.97 7.12 0.74 $ 25.83 - $ 23.82
2023 - - 0.34 1.66 2.00 19.25 7.40 0.74 $ 27.39 - $ 25.39
2024 - - 0.34 1.66 2.00 20.62 7.70 0.74 $ 29.06 - $ 27.05
2025 - - 0.34 1.66 2.00 22.09 8.01 0.74 $ 30.83 - $ 28.83
2026 - - 0.34 1.66 2.00 23.67 8.33 0.74 $ 32.73 - $ 30.72
2027 - - 0.34 1.66 2.00 25.35 8.66 0.74 $ 34.74 - $ 32.74
2028 - - 0.34 1.66 2.00 27.16 9.00 0.74 $ 36.90 - $ 34.89
2029 - - 0.34 1.66 2.00 29.09 9.36 0.74 $ 39.19 - $ 37.19
2030 - - 0.34 1.66 2.00 31.16 9.74 0.74 $ 41.64 - $ 39.63

FIRR = 45.1%
FNPVs 34.64 9.02 8.49 15.42 67.58 186.12 76.99 5.32 268.42 - 200.84

WACC = 5.47%

Ringgi (Variant B) FIRR/FNPV Calculation


Hydro ('With Project') Diesel ('Without Project')

Diesel Diesel & Diesel & Total Total 'Without


Fuel Hydro O&M Hydro Depr 'With Project' Non-Fuel Diesel Depr Project' With Project' Net Financial
Year Capital Cost Costs Costs Costs Costs Fuel Costs O&M Costs Costs Costs CER Credits Benefit
2012 45.15 28.58 15.60 0.88 90.21 28.58 15.60 0.88 $ 45.06 - $ (45.15)
2013 45.15 30.66 16.25 2.14 94.20 30.66 16.25 0.88 $ 47.79 - $ (46.41)
2014 - - 1.19 3.98 5.17 32.84 16.90 1.47 $ 51.21 - $ 46.04
2015 - 0.02 1.20 3.98 5.20 35.18 17.58 1.47 $ 54.23 - $ 49.03
2016 - 0.13 1.25 3.98 5.36 37.69 18.28 1.47 $ 57.44 - $ 52.08
2017 - 0.24 1.30 3.98 5.52 40.37 19.01 1.47 $ 60.85 - $ 55.33
2018 - 0.36 1.36 3.98 5.70 43.25 19.77 1.47 $ 64.49 - $ 58.79
2019 - 0.49 1.41 3.98 5.88 46.32 20.56 1.47 $ 68.36 - $ 62.47
2020 - 0.64 1.46 3.98 6.08 49.62 21.38 1.47 $ 72.48 - $ 66.40
2021 - 0.79 1.52 4.27 6.58 53.16 22.24 1.76 $ 77.16 - $ 70.58
2022 - 0.95 1.58 4.86 7.39 56.94 23.13 2.35 $ 82.42 - $ 75.03
2023 - 1.13 1.64 4.86 7.63 60.99 24.05 2.35 $ 87.40 - $ 79.77
2024 - 1.32 1.69 4.86 7.87 65.34 25.02 2.35 $ 92.71 - $ 84.83
2025 - 1.52 1.76 4.86 8.14 69.99 26.02 2.35 $ 98.36 - $ 90.22
2026 - 1.74 1.82 4.86 8.42 74.97 27.06 2.35 $ 104.38 - $ 95.97
2027 - 1.97 1.88 4.86 8.71 80.31 28.14 2.35 $ 110.80 - $ 102.09
2028 - 2.22 1.94 4.86 9.02 86.03 29.27 2.35 $ 117.65 - $ 108.62
2029 - 2.48 2.01 4.86 9.35 92.15 30.44 2.35 $ 124.94 - $ 115.59
2030 - 4.31 2.57 4.86 11.75 98.72 31.65 2.35 $ 132.72 - $ 120.97

FIRR = 46.9%
FNPVs 87.96 65.76 45.92 46.10 245.74 589.61 250.21 19.97 859.79 - 614.05

WACC = 5.47%

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Annex 6: Rapid Environmental Assessment Checklists


The ADB’s Rapid Environmental Assessment (REA) checklist for hydro power was used to
determine the environmental categorization for each of the six sites selected for this pre-
feasibility study.
Fiu River, Malaita

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Fiu River, Auki, Malaita,

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, (MW) = 1160kW

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

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SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within
any of the following areas?

 Unregulated river
X Natural river on customary land
 Undammed river tributaries below the proposed
X Numerous streams enter along the Fiu River
dam
including many large ephemeral waterways
where groundwater discharge enters the river
channel at the water’s edge
 Unique or aesthetically valuable land or water
X Natural forest and garden activity in the upper
form
catchment is similar to nearby catchments
 Special area for protecting biodiversity
X No known area in the catchment
 Protected Area
X No known area in the catchment
 Buffer zone of protected area
X None known
 Primary forest
X Catchment has not been commercially logged but
is used for local village consumption and cleared
for garden activity
 Range of endangered or threatened animals
X None known
 Area used by indigenous peoples
X For traditional building materials and garden
activity
 Cultural heritage site
X Tambu sites along northern ridge of catchment
 Wetland
X None reported
 Mangrove
X None reported
 Estuary
X None reported

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil
X High likelihood of soil erosion on steep slopes as
erosion, deterioration of water and air quality,
noise and vibration from construction equipment? a result of road construction and clearance of the
penstock and canal corridors. Water quality will
be impacted
 disturbance of large areas due to material
X No quarrying required. Existing quarry for road
quarrying?
surface material is located on road out of Auki

 disposal of large quantities of construction X Spoil disposal during road construction will be
spoils? critical on the access road to the power house
 clearing of large forested area for ancillary
X There is currently no road access in the
facilities and access road?
catchment. A new access road is required.
Clearing forest for some 3000m canal corridor
and 750m of penstock corridor is required.
Minimise width of corridor where appropriate.
 impounding of a long river stretch?
X River will not be impounded

 dryness (less than 50% of dry season mean flow) X The system returns the flow back to the river
over a long downstream river stretch? some 3000m from the intake

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SCREENING QUESTIONS Yes No REMARKS


 construction of permanent access road near or
X New roads will be required to access the power
through forests?
station and penstock corridor. Reduce clearance
of undisturbed forest where possible
 creation of barriers for migratory land animals
X Crossing points under or over the 3000m canal
and 750m penstock can be created where there
is evidence of wildlife movement.

 loss of precious ecological values due to flooding X There is some potential for the loss or destruction
of agricultural/forest areas, and wild lands and to fish habitat from construction activity which can
wildlife habitat; destruction of fish be mitigated with appropriate construction
spawning/breeding and nursery grounds? methods and road location
 deterioration of downstream water quality due to
X No reservoir.
anoxic water from the reservoir and sediments
due to soil erosion?
 significant diversion of water from one basin to X The water used in the project is returned to the
another? same river system

 alternating dry and wet downstream conditions X The water used in the project is returned to the
due to peaking operation of powerhouse? same river system

 significant modification of annual flood cycle X Flood flows result in high short duration peak
affecting downstream ecosystem, people’s discharges, and will not be modified as there is no
sustenance and livelihoods? dam. Bed load material will not be impacted

 loss or destruction of unique or aesthetically


X The river system is not unique in Malaita
valuable land or water forms?
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing
water loss through transpiration?
 scouring of riverbed below dam? X No dam

 downstream erosion of recipient river in trans-


X No trans basin diversion
basin diversion?
 increased flooding risk of recipient river in trans-
X No trans basin diversion
basin diversion?

 decreased groundwater recharge of downstream X Numerous ephemeral gullies enter the river
areas? system below the power house site

 draining of downstream wetlands and riparian


X No wetlands and riparian areas involved
areas?
 decline or change in fisheries below the dam due
X No dam. River stretches not submerged
to reduced peak flows and floods, submersion of
river stretches and resultant destruction of fish
breeding and nursery grounds, and water quality
changes?
 loss of migratory fish species due to barrier
X No dam
imposed by the dam?
 formation of sediment deposits at reservoir
X No reservoir
entrance, creating backwater effect and flooding
and waterlogging upstream?
 significant disruption of river sediment transport
X No reservoir
downstream due to trapping in reservoir?
 environmental risk due to potential toxicity of
X No dam
sediments trapped behind the dams?
 increased saltwater intrusion in estuary and low
X No reduction in river flow
lands due to reduced river flows?
 significant induced seismicity due to large
X No reservoir or dam
reservoir size and potential environmental hazard
from catastrophic failure of the dam?

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SCREENING QUESTIONS Yes No REMARKS

 cumulative effects due to its role as part of a


X No dams in river system
cascade of dams/ reservoirs?
 depletion of dissolved oxygen by large quantities
X No reservoir or dam, run of river water used in
of decaying plant material, fish mortality due to
reduced dissolved oxygen content in water, algal project
blooms causing successive and temporary
eutrophication, growth and proliferation of aquatic
weeds?
 risks and vulnerabilities related to occupational
X Physical hazards with machine operation and
health and safety due to physical, chemical,
biological, and radiological hazards during project construction activities on steep slopes can be
construction and operation? mitigated with appropriate HSE plan
 large population influx during project construction
X Small scale construction using local labour where
and operation that causes increased burden on
social infrastructure and services (such as water possible
supply and sanitation systems)?
 creation of community slums following
X Small scale project with no large work force
construction of the hydropower plant and its
facilities?
• social conflicts if workers from other regions or
X A core specialist construction team with local
countries are hired?
labourers
 uncontrolled human migration into the area,
X Not anticipated in this customary land
made possible by access roads and transmission
lines?
 disproportionate impacts on the poor, women,
X No negative impacts are expected. Project will
children or other vulnerable groups?
have positive impacts on these groups by
providing regular power supply to the community
 community health and safety risks due to the
X Not anticipated as construction materials used in
transport, storage, and use and/or disposal of
materials likely to create physical, chemical and this project are similar to that already in the region
biological hazards?
• risks to community safety due to both accidental
X Potential for accidental falls into headrace canal
and natural hazards, especially where the
and fore bay increased to presence of villages
structural elements or components of the project
and use of canal corridor for access. Awareness
(e.g.,dams) are accessible to members of the
campaign required.
affected community or where their failure could
result in injury to the community throughout Slope failure along canal corridor could result in
project construction, operation and diversion of canal flow into non-stream receiving
decommissioning? areas resulting in significant erosion and slope
failures

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Sorave River Choiseul

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Sorawe River, Taro, Choiseul Bay

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, (MW) = 150kW

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

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SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within
any of the following areas?
 Unregulated river
X Natural river on customary land, source of
school water supply
 Undammed river tributaries below the proposed
X Another tributary arising from the north through
dam
logged over forest, joining below the waterfall,
with upper reaches being subterranean flow
 Unique or aesthetically valuable land or water
X Extensive undisturbed forest in karst formation
form
in upper catchment of Sorawe River
 Special area for protecting biodiversity
X Mangrove forest in estuary in Choiseul Bay.
Upper forest catchment has a range of flora
and fauna species which will remain
undisturbed due to difficult karst terrain
 Protected Area
X There is no known protected area in the
catchment but Parama Island in Choiseul Bay
is a designated conservation area for the
protection of reef fish habitat
 Buffer zone of protected area
X None known
 Primary forest
X The forest in the upper catchment is
undisturbed due to extensive karst formation
 Range of endangered or threatened animals
X None known
 Area used by indigenous peoples
X Limited use for hunting, building materials, no
garden activity
 Cultural heritage site
X None reported within the Sorawe River
catchment where the intake is planned but sites
exist on Mt Arara in the northern tributary
catchment
 Wetland
X No wetlands exist in karst formations
 Mangrove
X Mangrove forest in the lower reaches below the
proposed power station site remains
undisturbed except for some minor local use.
 Estuary
X Sorawe River enters Choiseul Bay through a
tidal mangrove lined channel

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil
X No deterioration of water quality during
erosion, deterioration of water and air quality,
noise and vibration from construction equipment? construction due to limestone formation and
relief. Little impact from soil erosion due to lack
of soil. Drilling and blasting required for intake
structure
 disturbance of large areas due to material
X No quarrying required.
quarrying?

200
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 disposal of large quantities of construction
X Small quantities of spoil can be easily disposed
spoils?
of alongside the construction corridor in
naturally formed depressions and sinkholes In
the karst formation.
 clearing of large forested area for ancillary
X A small amount of natural forest will be cleared
facilities and access road?
along the narrow corridor of the canal and the
penstock and the power station site.
 impounding of a long river stretch?
X No dam or reservoir
 dryness (less than 50% of dry season mean flow)
X The system returns the flow back to the river a
over a long downstream river stretch?
short distance from the intake
 construction of permanent access road near or
X Existing logging roads will be upgraded and
through forests?
used as much as possible. Reduce clearance
of undisturbed forest where possible
 creation of barriers for migratory land animals
X None expected
 loss of precious ecological values due to flooding
X No flooding in this catchment. No loss of wildlife
of agricultural/forest areas, and wild lands and
wildlife habitat; destruction of fish habitat due to small scale activity. Fish can not
spawning/breeding and nursery grounds? go beyond the waterfall.
 deterioration of downstream water quality due to
X No dam or reservoir. The river channel is
anoxic water from the reservoir and sediments
due to soil erosion? incised in limestone with no in-stream bed load
material. Construction will not result of
significant quantities of sediments
 significant diversion of water from one basin to
X The water used in the project is returned to the
another?
same river system
 alternating dry and wet downstream conditions
X The powerhouse is located at sea level
due to peaking operation of powerhouse?
 significant modification of annual flood cycle
X The water is returned at sea level
affecting downstream ecosystem, people’s
sustenance and livelihoods?
 loss or destruction of unique or aesthetically
X The catchment area associated with the project
valuable land or water forms?
is well represented in this part of Choiseul
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing
water loss through transpiration?
 scouring of riverbed below dam?
X No dam
 downstream erosion of recipient river in trans-
X No trans basin diversion
basin diversion?
 increased flooding risk of recipient river in trans-
X No trans basin diversion
basin diversion?
 decreased groundwater recharge of downstream
X No risk
areas?
 draining of downstream wetlands and riparian
X The proposed power station is at sea level
areas?
 decline or change in fisheries below the dam due
X No dam. The waterfall prevents fish access and
to reduced peak flows and floods, submersion of
river stretches and resultant destruction of fish no breeding areas are impacted
breeding and nursery grounds, and water quality
changes?
 loss of migratory fish species due to barrier
X No dam
imposed by the dam?

201
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 formation of sediment deposits at reservoir
X No reservoir
entrance, creating backwater effect and flooding
and water logging upstream?
 significant disruption of river sediment transport
X No reservoir. No sediment in generally smooth
downstream due to trapping in reservoir?
limestone river channel
 environmental risk due to potential toxicity of
X No dam
sediments trapped behind the dams?
 increased saltwater intrusion in estuary and low
X The water is returned to the river where it is
lands due to reduced river flows?
already subject to tidal influence
 significant induced seismicity due to large
X No reservoir or dam
reservoir size and potential environmental hazard
from catastrophic failure of the dam?
 cumulative effects due to its role as part of a
X No dams in river system
cascade of dams/ reservoirs?
 depletion of dissolved oxygen by large quantities
X No reservoir or dam, run of river water used in
of decaying plant material, fish mortality due to
reduced dissolved oxygen content in water, algal project
blooms causing successive and temporary
eutrophication, growth and proliferation of aquatic
weeds?
 risks and vulnerabilities related to occupational
X Physical hazards associated with working on
health and safety due to physical, chemical,
biological, and radiological hazards during project hard limestone during construction can be
construction and operation? mitigated with appropriate HSE plan. SIEA
committed to socially responsible working
conditions
 large population influx during project construction
X Small scale construction using local labour
and operation that causes increased burden on
social infrastructure and services (such as water where possible
supply and sanitation systems)?
 creation of community slums following
X Small scale project with no large work force
construction of the hydropower plant and its
facilities?
• social conflicts if workers from other regions or
X SIEA is committed to socially responsible
countries are hired?
working conditions
 uncontrolled human migration into the area,
X Not anticipated in this customary land
made possible by access roads and transmission
lines?
 disproportionate impacts on the poor, women,
X No negative impacts are expected. Project will
children or other vulnerable groups?
have positive impacts on these groups by
providing regular power supply to the
community
 community health and safety risks due to the
X No negative impacts are expected
transport, storage, and use and/or disposal of
materials likely to create physical, chemical and
biological hazards?
• risks to community safety due to both accidental
X Potential for accidental falls into canal and fore
and natural hazards, especially where the
bay is unlikely due to remote location of facility.
structural elements or components of the project
Community awareness program required.
(e.g.,dams) are accessible to members of the
affected community or where their failure could
result in injury to the community throughout
project construction, operation and
decommissioning?

202
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Luembalele River, Lata, Santa Cruz

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Luembalele River, Lata, Santa Cruz

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, = 107 kW

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

203
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within any of
the following areas?
 Unregulated river X Natural river with no other activity
 Undammed river tributaries below the proposed dam
X No dam. A number of perennial streams
enter the river below the intake site.
Flash flood water rise high up the
stream banks
 Unique or aesthetically valuable land or water form
X Small steep catchments on the island
with similar land form and hydrology
well represented on island
 Special area for protecting biodiversity
X Forest type typical of upper slopes of
the central mountain area well
represented on island
 Protected Area
X No formalised protected areas on the
island but many similar catchments on
the mountain slopes
 Buffer zone of protected area
X No formalised protected areas, previous
logging subject to river buffer zone
requirements under Forest Act
 Primary forest
X Undisturbed on upper slopes but logged
on easier terrain near river channel

 Range of endangered or threatened animals X None known


 Area used by indigenous peoples
X Limited use for hunting, building
materials, no garden activity

 Cultural heritage site X None reported in area

 Wetland X No wetlands in the reef limestone

 Mangrove X No mangroves in river

 Estuary X River flows directly into Graciosa Bay

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil erosion, X Drilling and blasting required for intake
deterioration of water and air quality, noise and structure in basalt formation above
vibration from construction equipment? waterfall.
 disturbance of large areas due to material quarrying?
X No quarrying required.
 disposal of large quantities of construction spoils?
X Disposal of material from headrace
canal corridors but suitable locations
available nearby that will not result in
debris entering watercourse
 clearing of large forested area for ancillary facilities and
X Clearing of logged natural forest and
access road?
plantation for headrace canal and
penstock corridors. Minimise width of
corridor where appropriate and avoid
habitat trees where practicable

204
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 impounding of a long river stretch?
X No dam or reservoir
 dryness (less than 50% of dry season mean flow) over
X None expected with other perennial
a long downstream river stretch?
flows entering river channel below
intake structure
 construction of permanent access road near or through
X Use of existing logging roads for much
forests?
of the access with some new roads
required. Reduce clearance of
undisturbed forest where possible
 creation of barriers for migratory land animals
X Not expected. Limited pig population
will not have impeded access

 loss of precious ecological values due to flooding of X No flooding of lands due to incised river
agricultural/forest areas, and wild lands and wildlife channel. No loss of wildlife habitat due
habitat; destruction of fish spawning/breeding and to small scale activity. Fish not reported
nursery grounds? above waterfall

 deterioration of downstream water quality due to anoxic


X No dam or reservoir, natural intake from
water from the reservoir and sediments due to soil
existing deep pool above water fall
erosion?

 significant diversion of water from one basin to X The water used in the project is
another? returned to the same river system

 alternating dry and wet downstream conditions due to X The water used in the project is
peaking operation of powerhouse? returned to the same river system
 significant modification of annual flood cycle affecting
X Flood flows result in high short duration
downstream ecosystem, people’s sustenance and
livelihoods? peak discharges nd will not be modified
as there is no dam. Bed load material
will not be impacted
 loss or destruction of unique or aesthetically valuable
X The catchment area associated with the
land or water forms?
project is well represented in this part of
Santa Cruz
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing water
loss through transpiration?
 scouring of riverbed below dam?
X No dam, existing waterfall over basalt
formation with a deep plunge pool

 downstream erosion of recipient river in trans-basin


X No trans basin diversion
diversion?
 increased flooding risk of recipient river in trans-basin
X No trans basin diversion
diversion?
 decreased groundwater recharge of downstream
X No risk
areas?

 draining of downstream wetlands and riparian areas? X No risk

 decline or change in fisheries below the dam due to


X No dam. The waterfall prevents fish
reduced peak flows and floods, submersion of river
access and no breeding areas are
stretches and resultant destruction of fish breeding and
impacted
nursery grounds, and water quality changes?

 loss of migratory fish species due to barrier imposed by X No dam, existing waterfall is natural
the dam? barrier to fish passage
 formation of sediment deposits at reservoir entrance,
X No reservoir
creating backwater effect and flooding and
waterlogging upstream?

205
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 significant disruption of river sediment transport
X No reservoir. Sediment transport will not
downstream due to trapping in reservoir?
be impacted
 environmental risk due to potential toxicity of sediments
X No dam
trapped behind the dams?
 increased saltwater intrusion in estuary and low lands
X Water is returned to the river, no
due to reduced river flows?
significant reduction in flow due to other
perennial stream flows
 significant induced seismicity due to large reservoir size
X No reservoir or dam
and potential environmental hazard from catastrophic
failure of the dam?
 cumulative effects due to its role as part of a cascade of
X No dams in river system
dams/ reservoirs?
 depletion of dissolved oxygen by large quantities of
X No reservoir or dam, run of river water
decaying plant material, fish mortality due to reduced
dissolved oxygen content in water, algal blooms used in project
causing successive and temporary eutrophication,
growth and proliferation of aquatic weeds?
 risks and vulnerabilities related to occupational health
X Physical hazards related to drill and
and safety due to physical, chemical, biological, and
radiological hazards during project construction and blast of volcanic rock at intake structure
operation? can be mitigated with appropriate HSE
plan. SIEA committed to socially
responsible working conditions
 large population influx during project construction and
X Small scale construction on remote
operation that causes increased burden on social
infrastructure and services (such as water supply and island using local labour where possible
sanitation systems)?
 creation of community slums following construction of
X No risk. Small scale project with no
the hydropower plant and its facilities?
large work force

• social conflicts if workers from other regions or countries


are hired?
 uncontrolled human migration into the area, made
X No resettlement will occur. Small local
possible by access roads and transmission lines?
population in remote location
 disproportionate impacts on the poor, women, children
X No negative impacts are expected.
or other vulnerable groups?
Project will have positive impacts on
these groups by providing regular
power supply to the community
 community health and safety risks due to the transport,
X No negative impacts are expected
storage, and use and/or disposal of materials likely to
create physical, chemical and biological hazards?
• risks to community safety due to both accidental and
X Potential for accidental falls into canal
natural hazards, especially where the structural
and fore bay is unlikely due to remote
elements or components of the project (e.g.,dams) are
location of facility. Community
accessible to members of the affected community or
awareness program required.
where their failure could result in injury to the community
throughout project construction, operation and
decommissioning?

206
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Vila River, Ringgi, Kolombangara

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Vila River, Ringgi, Kolombangara

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, (MW) = 12MW, 3 stages

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

207
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within any of
the following areas?
 Unregulated river
X Steep river catchment with no other
activity
 Undammed river tributaries below the proposed dam
X No dam, numerous lateral gullies and
small perennial watercourses
 Unique or aesthetically valuable land or water form
X Largest catchment on Kolombangara
arising from caldera, high biodiversity
 Special area for protecting biodiversity
X Area above 400m contour designated
as conservation area by KIBCA/KFPL
 Protected Area
X Area above 400m contour designated
as conservation area by KIBCA/KFPL
 Buffer zone of protected area
X Vila River Reserve from below 400m
contour to ring road to protect water
quality
 Primary forest
X In Vila River catchment from lowland
forest to cloud forest
 Range of endangered or threatened animals
X Endangered species indicated by recent
biodiversity and High Conservation
Value Forest studies as part of FSC
certification
 Area used by indigenous peoples
X Ecotourism enterprise and local hunting
 Cultural heritage site
X Upper catchment of Vila River
 Wetland
X
 Mangrove
X
 Estuary
X Small estuary at river mouth

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil erosion,
X Drilling and blasting required for intake
deterioration of water and air quality, noise and
vibration from construction equipment? structure and where head race canal
corridor passes through volcanic
outcrops and bluffs
 disturbance of large areas due to material quarrying?
X Potential source of aggregate in lower
reaches of river for construction .Will
require care in removal in order to retain
hydrological characteristics
 disposal of large quantities of construction spoils?
X Spoil and vegetation from 3 design
stages in catchment will require careful
disposal to reduce the amount of debris
and sediment into water course
 clearing of large forested area for ancillary facilities and
X Linear clearance of forest for canal and
access road?
penstock corridors on steep slopes.

208
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 impounding of a long river stretch?
X Steep catchment, no dam or reservoir
 dryness (less than 50% of dry season mean flow) over
X None expected
a long downstream river stretch?
 construction of permanent access road near or through
X To each of three power house sites plus
forests?
construction of canal and penstock
corridors
 creation of barriers for migratory land animals
X Not expected
 loss of precious ecological values due to flooding of
X Rare fish species reported in Vila River.
agricultural/forest areas, and wild lands and wildlife
habitat; destruction of fish spawning/breeding and
nursery grounds?
 deterioration of downstream water quality due to anoxic
X No dam or reservoir. Increased
water from the reservoir and sediments due to soil
erosion? sediments due to soil erosion at 3
construction sites
 significant diversion of water from one basin to
X The water used in the project is
another?
returned to the same river system
 alternating dry and wet downstream conditions due to
X The water used in the project is
peaking operation of powerhouse?
returned to the same river system
 significant modification of annual flood cycle affecting
X Flood flows result in high short duration
downstream ecosystem, people’s sustenance and
livelihoods? peak discharges, and will not be
modified as there is no dam. Bed load
material will not be impacted
 loss or destruction of unique or aesthetically valuable
X Change in condition of Vila River
land or water forms?
Reserve due to construction works
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing water
loss through transpiration?
 scouring of riverbed below dam?
X No dam
 downstream erosion of recipient river in trans-basin
X No trans basin diversion
diversion?
 increased flooding risk of recipient river in trans-basin
X No trans basin diversion
diversion?
 decreased groundwater recharge of downstream
X No risk
areas?
 draining of downstream wetlands and riparian areas?
X No risk
 decline or change in fisheries below the dam due to
X No dam.
reduced peak flows and floods, submersion of river
stretches and resultant destruction of fish breeding and
nursery grounds, and water quality changes?
 loss of migratory fish species due to barrier imposed by
X No dam
the dam?
 formation of sediment deposits at reservoir entrance,
X No reservoir
creating backwater effect and flooding and water
logging upstream?
 significant disruption of river sediment transport
X No reservoir. Sediment transport will not
downstream due to trapping in reservoir?
be impacted
 environmental risk due to potential toxicity of sediments
X No dam
trapped behind the dams?

209
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 increased saltwater intrusion in estuary and low lands
X Water is returned to the river, no
due to reduced river flows?
significant reduction in flow due to other
perennial stream flows
 significant induced seismicity due to large reservoir size
X No reservoir or dam
and potential environmental hazard from catastrophic
failure of the dam?
 cumulative effects due to its role as part of a cascade of
X A series of three systems within the
dams/ reservoirs?
catchment will increase the risk of
sediment loads in streams and increase
the amount of forest clearance for the
corridors
 depletion of dissolved oxygen by large quantities of
X No reservoir or dam, run of river water
decaying plant material, fish mortality due to reduced
dissolved oxygen content in water, algal blooms used in project
causing successive and temporary eutrophication,
growth and proliferation of aquatic weeds?
 risks and vulnerabilities related to occupational health
X Physical hazards related to drill and
and safety due to physical, chemical, biological, and
radiological hazards during project construction and blast of volcanic rock at intake structure
operation? can be mitigated with appropriate HSE
plan. Under FSC, KFPL is committed to
socially responsible working conditions
 large population influx during project construction and
X No risk. Small scale project with no
operation that causes increased burden on social
infrastructure and services (such as water supply and large work force
sanitation systems)?
 creation of community slums following construction of
X No risk. Small scale project with no
the hydropower plant and its facilities?
large work force
• social conflicts if workers from other regions or countries
X Under FSC, KFPL is committed to
are hired?
socially responsible working conditions
 uncontrolled human migration into the area, made
X No resettlement will occur
possible by access roads and transmission lines?
 disproportionate impacts on the poor, women, children
X No negative impacts are expected.
or other vulnerable groups?
Project will have positive impacts on
these groups by providing regular
power supply to the community
 community health and safety risks due to the transport,
X No negative impacts are expected
storage, and use and/or disposal of materials likely to
create physical, chemical and biological hazards?
• risks to community safety due to both accidental and
X Potential for accidental falls into canal
natural hazards, especially where the structural
and fore bay is unlikely due to remote
elements or components of the project (e.g.,dams) are
location of facility. Community
accessible to members of the affected community or
awareness program required.
where their failure could result in injury to the community
throughout project construction, operation and
decommissioning?

210
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

Mase River, Western Province

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Mase River, Western Province

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, (MW) = 3.5 MW

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

211
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within any of
the following areas?
 Unregulated river
X Natural river arising from the caldera on
New Georgia
 Undammed river tributaries below the proposed dam
X No dam. Small catchment in lower
reaches
 Unique or aesthetically valuable land or water form
X Largest river on island arising for the
caldera on the top of the island.
 Special area for protecting biodiversity
X None reported
 Protected Area
X None reported
 Buffer zone of protected area
X Riparian zones on steep sides of river
retained as part of logging requirements
 Primary forest
X Ridge systems generally logged, no
logging in steep river catchments

 Range of endangered or threatened animals Check on this from ecological studies


 Area used by indigenous peoples
X Limited use for hunting, building
materials, no garden activity

 Cultural heritage site X None reported in area

 Wetland X

 Mangrove X

 Estuary X

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil erosion,
X Construction of head race canal on
deterioration of water and air quality, noise and
steep slopes
vibration from construction equipment?
 disturbance of large areas due to material quarrying?
X No quarrying required.
 disposal of large quantities of construction spoils?
X Disposal of material from headrace
canal corridors but suitable locations
available nearby that will not result in
debris entering watercourse
 clearing of large forested area for ancillary facilities and
X Clearing of natural forest for headrace
access road?
canal and penstock corridors. Minimise
width of corridor where appropriate

 impounding of a long river stretch? X No dam or reservoir


 dryness (less than 50% of dry season mean flow) over
X None expected with other perennial
a long downstream river stretch?
flows entering river channel below
intake structure

212
TA 7329- Promoting Access to Renewable Energy in the Pacific
Mini Hydro PRE-FEASIBILITY STUDIES

SCREENING QUESTIONS Yes No REMARKS


 construction of permanent access road near or through
X Use of existing logging roads for much
forests?
of the access with some new roads
required into steep sided valley. Reduce
clearance of undisturbed forest where
possible

 creation of barriers for migratory land animals X Not expected

 loss of precious ecological values due to flooding of


X No flooding of lands due to incised river
agricultural/forest areas, and wild lands and wildlife
channel. No loss of wildlife habitat due
habitat; destruction of fish spawning/breeding and
to small scale activity.
nursery grounds?
 deterioration of downstream water quality due to anoxic
XS No dam or reservoir
water from the reservoir and sediments due to soil
erosion?
 significant diversion of water from one basin to X The water used in the project is
another? returned to the same river system

 alternating dry and wet downstream conditions due to X The water used in the project is
peaking operation of powerhouse? returned to the same river system
 significant modification of annual flood cycle affecting
X Flood flows result in high short duration
downstream ecosystem, people’s sustenance and
livelihoods? peak discharges, and will not be
modified as there is no dam. Bed load
material will not be impacted

 loss or destruction of unique or aesthetically valuable X The river system is not unique in New
land or water forms? Georgia
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing water
loss through transpiration?
 scouring of riverbed below dam? X No dam

 downstream erosion of recipient river in trans-basin


X No trans basin diversion
diversion?
 increased flooding risk of recipient river in trans-basin
X No trans basin diversion
diversion?
 decreased groundwater recharge of downstream
X No risk
areas?

 draining of downstream wetlands and riparian areas? X No risk


 decline or change in fisheries below the dam due to
X No dam.
reduced peak flows and floods, submersion of river
stretches and resultant destruction of fish breeding and
nursery grounds, and water quality changes?
 loss of migratory fish species due to barrier imposed by
X No dam
the dam?
 formation of sediment deposits at reservoir entrance,
X No reservoir
creating backwater effect and flooding and
waterlogging upstream?
 significant disruption of river sediment transport X No reservoir. Sediment transport will not
downstream due to trapping in reservoir? be impacted

 environmental risk due to potential toxicity of sediments


X No dam
trapped behind the dams?
 increased saltwater intrusion in estuary and low lands
X Water is returned to the river, no
due to reduced river flows?
significant reduction in flow due to other
perennial stream flows

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SCREENING QUESTIONS Yes No REMARKS


 significant induced seismicity due to large reservoir size
X No reservoir or dam
and potential environmental hazard from catastrophic
failure of the dam?
 cumulative effects due to its role as part of a cascade of
X No dams in river system
dams/ reservoirs?
 depletion of dissolved oxygen by large quantities of
X No reservoir or dam, run of river water
decaying plant material, fish mortality due to reduced
dissolved oxygen content in water, algal blooms used in project
causing successive and temporary eutrophication,
growth and proliferation of aquatic weeds?
 risks and vulnerabilities related to occupational health
X Physical hazards related to drill and
and safety due to physical, chemical, biological, and
radiological hazards during project construction and blast of volcanic rock at intake structure
operation? ad canal corridor can be mitigated with
appropriate HSE plan. SIEA is
committed to socially responsible
working conditions
 large population influx during project construction and
X No risk. Small scale project with no
operation that causes increased burden on social
infrastructure and services (such as water supply and large work force
sanitation systems)?
 creation of community slums following construction of
X No risk. Small scale project with no
the hydropower plant and its facilities?
large work force
• social conflicts if workers from other regions or countries
X SIEA is committed to socially
are hired?
responsible working conditions

 uncontrolled human migration into the area, made


X No resettlement will occur
possible by access roads and transmission lines?
 disproportionate impacts on the poor, women, children
X No negative impacts are expected
or other vulnerable groups?
Project will have positive impacts on
these groups by providing regular
power supply to the community
 community health and safety risks due to the transport,
X No negative impacts are expected
storage, and use and/or disposal of materials likely to
create physical, chemical and biological hazards?
• risks to community safety due to both accidental and
X Potential for accidental falls into canal
natural hazards, especially where the structural
and fore bay is unlikely due to remote
elements or components of the project (e.g.,dams) are
location of facility. Community
accessible to members of the affected community or
awareness program required.
where their failure could result in injury to the community
throughout project construction, operation and
decommissioning?

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Mataniko River, Honiara

Instructions:

(i) The project team completes this checklist to support the environmental classification of a project. It
is to be attached to the environmental categorization form and submitted to the Environment and
Safeguards Division (RSES) for endorsement by Director, RSES and for approval by the Chief
Compliance Officer.

(ii) This checklist focuses on environmental issues and concerns. To ensure that social dimensions are
adequately considered, refer also to ADB's (a) checklists on involuntary resettlement and
Indigenous Peoples; (b) poverty reduction handbook; (c) staff guide to consultation and
participation; and (d) gender checklists.

(iii) Answer the questions assuming the “without mitigation” case. The purpose is to identify potential
impacts. Use the “remarks” section to discuss any anticipated mitigation measures.

Country/Project Title: Solomon Islands, RETA 7329 Mini hydro Pre-feasibility Study

Sector Division:

A. Basic Project Design Data Mataniko River, Honiara

1. Dam height, m = no dam

2. Surface area of reservoir, (ha) = no reservoir

3. Estimated number of people to be displaced = nil

4. Rated power output, (MW) = 2 – 3.5

Other Considerations:

1. Water storage type: run of river

2. River diversion scheme: in-stream flow regulation

3. Type of power demand to address: base load

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SCREENING QUESTIONS Yes No REMARKS


B. Project Location
Is the dam and/or project facilities adjacent to or within any of
the following areas?
 Unregulated river X Natural river
 Undammed river tributaries below the proposed dam
X A number of perennial streams enter
the river below the intake site. Flash
flood water rise high up the stream
banks
 Unique or aesthetically valuable land or water form
X Queen Elizabeth National Park and
Mataniko waterfall are tourist sites
 Special area for protecting biodiversity
X Queen Elizabeth National Park

 Protected Area X Queen Elizabeth National Park

 Buffer zone of protected area X None known

 Primary forest X Undisturbed in upper river sections

 Range of endangered or threatened animals X None known

 Area used by indigenous peoples X Up to gorge section

 Cultural heritage site X WW2 battlefield sites on ridges

 Wetland X

 Mangrove X

 Estuary X

C. Potential Environmental Impacts


Will the Project cause…
 short-term construction impacts such as soil erosion,
X Drilling and blasting required for head
deterioration of water and air quality, noise and
vibration from construction equipment? race canal corridor and intake
 disturbance of large areas due to material quarrying?
X No quarrying required.
 disposal of large quantities of construction spoils?
X Disposal of material from headrace
canal corridors which runs above steep
sided gorge
 clearing of large forested area for ancillary facilities and
X Modified forest and grasslands on
access road?
ridges
 impounding of a long river stretch?
X No dam or reservoir
 dryness (less than 50% of dry season mean flow) over
X None expected with other perennial
a long downstream river stretch?
flows entering river channel below
intake structure
 construction of permanent access road near or through
X Access to intake above gorge section
forests?
 creation of barriers for migratory land animals
X Not expected

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SCREENING QUESTIONS Yes No REMARKS


 loss of precious ecological values due to flooding of
X No flooding of lands due to incised river
agricultural/forest areas, and wild lands and wildlife
habitat; destruction of fish spawning/breeding and channel. No loss of wildlife habitat due
nursery grounds? to small scale activity.
 deterioration of downstream water quality due to anoxic
X No dam or reservoir
water from the reservoir and sediments due to soil
erosion?
 significant diversion of water from one basin to
X The water used in the project is
another?
returned to the same river system
 alternating dry and wet downstream conditions due to
X The water used in the project is
peaking operation of powerhouse?
returned to the same river system
 significant modification of annual flood cycle affecting
X Flood flows result in high short duration
downstream ecosystem, people’s sustenance and
livelihoods? peak discharges, and will not be
modified as there is no dam. Bed load
material will not be impacted
 loss or destruction of unique or aesthetically valuable
X Impact on waterfall and sink hole as
land or water forms?
tourist attractions
 proliferation of aquatic weeds in reservoir and
X No reservoir and no dam discharge
downstream impairing dam discharge, irrigation
systems, navigation and fisheries, and increasing water
loss through transpiration?
 scouring of riverbed below dam?
X No dam
 downstream erosion of recipient river in trans-basin
X No trans basin diversion
diversion?
 increased flooding risk of recipient river in trans-basin
X No trans basin diversion
diversion?
 decreased groundwater recharge of downstream
X No risk
areas?
 draining of downstream wetlands and riparian areas?
X No risk
 decline or change in fisheries below the dam due to
X No dam
reduced peak flows and floods, submersion of river
stretches and resultant destruction of fish breeding and
nursery grounds, and water quality changes?
 loss of migratory fish species due to barrier imposed by
X No dam
the dam?
 formation of sediment deposits at reservoir entrance,
X No reservoir
creating backwater effect and flooding and water
logging upstream?
 significant disruption of river sediment transport
X No reservoir. Sediment transport will not
downstream due to trapping in reservoir?
be impacted
 environmental risk due to potential toxicity of sediments
X No dam
trapped behind the dams?
 increased saltwater intrusion in estuary and low lands
X No risk
due to reduced river flows?
 significant induced seismicity due to large reservoir size
X No reservoir or dam
and potential environmental hazard from catastrophic
failure of the dam?
 cumulative effects due to its role as part of a cascade of
X No dams in river system
dams/ reservoirs?
 depletion of dissolved oxygen by large quantities of
X No reservoir or dam, run of river water
decaying plant material, fish mortality due to reduced
dissolved oxygen content in water, algal blooms used in project
causing successive and temporary eutrophication,
growth and proliferation of aquatic weeds?

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SCREENING QUESTIONS Yes No REMARKS


 risks and vulnerabilities related to occupational health
X Physical hazards related to drill and
and safety due to physical, chemical, biological, and
radiological hazards during project construction and blast of volcanic rock at intake structure
operation? and canal above gorge can be mitigated
with appropriate HSE plan. SIEA
committed to socially responsible
working conditions
 large population influx during project construction and
X SIEA committed to socially responsible
operation that causes increased burden on social
infrastructure and services (such as water supply and working conditions. Close to Honiara
sanitation systems)?
 creation of community slums following construction of
X No risk, close to Honiara
the hydropower plant and its facilities?
• social conflicts if workers from other regions or countries
X SIEA is committed to socially
are hired?
responsible working conditions
 uncontrolled human migration into the area, made
X No resettlement will occur. Close to
possible by access roads and transmission lines?
Honiara

 disproportionate impacts on the poor, women, children


X No negative impacts are expected.
or other vulnerable groups?
 community health and safety risks due to the transport,
X No negative impacts are expected.
storage, and use and/or disposal of materials likely to
create physical, chemical and biological hazards?
• risks to community safety due to both accidental and
X Potential for accidental falls into canal
natural hazards, especially where the structural
and fore bay as site is very close to
elements or components of the project (e.g.,dams) are
Honiara. River is a popular tourist site.
accessible to members of the affected community or
Community awareness program
where their failure could result in injury to the community
required. Land slips into gorge as result
throughout project construction, operation and
of canal failure
decommissioning?

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Contacts During Environmental/Social Field Mission

Date Honiara, Guadalcanal

7 Sept Mr Henry Pika Permanent Secretary, Energy, Mines and Rural


Electrification

Mr Mark France Manager, Tina River Project

Mr Norman Nichols General Manager, SIEA

Auki, Malaita

10 Sept Mr David Maudua Chief, Kwainoa village, Fiu River

Mr David Maudua Jnr Villager, Kwainoa village, Fiu River

Mr John Wali Villager, Kwainoa village, Fiu River

12 Sept Ms Clara Rikimani Desk Officer, Women’s Development Division

Mr Patrick Talaboe Interim Director, Malaita Chazan Authority

Mr Whitlam Saeni Culture and Values Exchange Centre

Taro, Choiseul Province

13 Sept Mr Alpha Kimata Deputy Premier, Choiseul Province

Ms Helen Nowak Desk Officer, Women’s Development Division

Mr Graham Qaqava Forest Officer, Department of Forestry

Mr Nathan Kiloe Works Officer, Department of Public Works

Mr Joel Dereveke Principal, Choiseul Bay High School

Lata, Temotu Province

20 Sept Mr Bruno Forau Acting Provincial Secretary, Chief Planning Officer

Mr Richard Teao Senior Works Officer, Department of Infrastructure

Mr Harry Mallock Senior Forest Officer, Department of Forestry

21 Sept Mr Edward Daiwo Chairman, Town and Country Planning Board, Provincial
Assembly Member Ward 2

Mr Albert Toata Senior Physical Planning Officer

23 Sept Mr Lionel Vaonelua Head teacher, Kati School

Mr John Metailyi Senior School Inspector, Lata

Pastor Sanders Bok Chairman, BOM, Graciosa Bay Community High School

Mr Daiton Mekai Board of Management, GB Community High School

Mr Dudley Kiobe Board of Management, GB Community High School

Mrs Roselyn Lemoba Principal. Mona Community High School

Mr Peter Menivi

Mrs Jennifer Menivi Teacher, Mona Community High School

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Ms Rosemary Metopa Mona Community High School

26 Sept Pala Village Community Mathias Wale, John Tauto, Susana Inarepa, Charles
Meeting (30) Menagle, Ida Inagu, Hugo Menateti, Titus Balo, John
Tauto, Veronica Ikap, Smith Meaio, Issack Meako,
Marriam Ihoka, Rose Inone, John Yade, Elsie Iwakania,
Albert Melabar, Allan Medaka, Rose Inava, Henry
Memuape, Wilfred Meapali, Mark Kapu, Mary Iguai,
Albert Melaba, James Lengi, Joel Mali, Dianna Ihahepa,
James Bose, Clera Inep, Elisabeth Ilo, Clera Inariki.

28 Sept Mr Philip Arofa Principal Education Officer

Nargiza Gherman Provincial Advisor – Temotu, UNDP Provincial


Government Strengthening Program

Buddley Ronnie Provincial Advisor – Temotu, UNDP Provincial


Government Strengthening Program

30 Sept Dr Jackson Rakeu Lata Hospital

Mr Augustine Bilve Director of Nursing, Lata Hospital

Ringgi, Western Province

2 Oct Mr Rocky Waete Imbu Rano Lodge, Vila River, Kolombangara


Mr Kenneth Etupio
Mr David Paenai
Mr Chite Silas
Mr Figert Roger KFPL, Manager, Forest Resources and Research

Mr Mason

Mase, New Georgia

3 Oct Mr Sale Tupitu Headman, Mase Village plus 45 community members

Honiara, Central Province

5 Oct Mr Kang Yun Jong Chief of Field Office, UNICEF Pacific – Solomon Islands

Mr Fakri Karim Local Capacity Development Specialist, UNDP PGSP

Mr Berni Galgo Provincial Advisor – Malaita, UNDP PGSP

Mr Raj Krishnashrestha Provincial Advisor – Choiseul, UNDP PGSP

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Annex 7: Social Analysis


This annex contains supporting information to the social and poverty analysis in section 13.

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Screening Questions for Resettlement Categorization


Probable involuntary resettlement effects Auki Taro Lata Ringgi Mase Honiara Comments
Will the project involve any physical √ √ √ √ √ √ Construction of feeder road, canal, small
construction work? power house, transmission lines
Does the project involve upgrading or X X X X X X No pre-existing physical works
rehabilitation of existing physical works?
Are any project effects likely to lead to loss of Possible X Removal or Some Possibly some Some use of No housing displacement, some
housing, other assets, resource use or displacement trimming of disturbance to interference river for local disturbance to other economic activities
incomes/livelihoods? of some some trees conservation with mineral tourism &
farming plots, along trans- and ecotourism prospecting hiking
removal of mission line area
some trees
Is land acquisition likely to be necessary? √ √ Along trans- No. Land under √ √ To formalise and maintain access to site
mssion line secure lease according to indigenous land traditions; no
only by KFPL exclusion of local people.
Is the site for land acquisition known? √ √ √ NA √ √ Detailed survey of project area in final
design phase
Is the ownership status and current usage of √ √ √ √ √ √ Defined traditional boundaries and
the land known? ownership
Will easements be utilized within an existing X X √ X X X Transmission lines along existing roads
right of way? where possible
Will there be loss of housing? X X X X X X For most projects, no settlement in vicinity
of project site
Will there be loss of agricultural plots? An area of X X X X X Only to a small extent in the Auki project
shifting plots
and no land
shortage;
disruption
minimal
Will there be losses of crops, trees and fixed Loss of some Loss of some Along trans- Loss of some Loss of some Loss of some Planned hydro-power plants are small and
assets? trees and some trees but in mssion line trees in a trees but in trees but in losses of trees will be restricted to feeder
crops little used area and road conservation little used area little used area road and canal construction and clearance
area for transmission lines.
Will there be losses of businesses or X X X Possibly X Possibly
enterprises?
Will there be losses of incomes or livelihoods? X X X Possibly X Possibly

Will people lose access to facilities, services X X X Possibly X Possibly Very little change to river flow. People are
or natural resources? more likely to gain access to services and
facilities

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Probable involuntary resettlement effects Auki Taro Lata Ringgi Mase Honiara Comments
Will land-use related changes affect any social Feeder road Area already Some loss of Established Area already Area used for .
or economic activities? and canal way logged, little food trees conservation logged, little some local
will improve local use. and ecotourism local use. tourism
access in the area
area
If involuntary resettlement effects are NA NA NA NA NA NA No involuntary resettlement effects
expected: expected
• Are local laws and regulations
compatible with ADB’s policy on
involuntary resettlement?
• Will coordination between Provincial Governments responsible for
government agencies be required to land negotiations
deal with land acquisition?
• Are sufficient skilled staff available NA NA NA NA NA NA No involuntary resettlement effects
in the executing agency for expected
resettlement planning and
implementation?
• Are training and capacity-building NA NA NA NA NA NA No involuntary resettlement effects
interventions required prior to expected
resettlement planning and
implementation?

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Initial Poverty and Social Analysis (IPSA) Report


RETA 7329: PROMOTING ACCESS TO RENEWABLE ENERGY IN THE PACIFIC:
Country/Project Title: SOLOMON ISLAND COMPONENT

Lending/financing

Modality Dept/Division: Energy

I. POVERTY ISSUES

A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy
1. Based on the country poverty assessment, the country partnership strategy, and the sector analysis describe how the
project would directly or indirectly contribute to poverty reduction and how it is linked to the poverty reduction strategy of the
partner country.

The principal purpose of the project is to extend electricity supply to provincial centres and their environs, and improve its
reliability and cost, but the project will provide wider benefits in the form of equitable and sustainable improvements to the well-
being of various groups of people. The project carries minimal risk of creating social costs for, or marginalizing, vulnerable
people, but instead has real potential to mitigate existing disadvantages.
The wider benefits of the project are in line with the intention and purpose of the national development plan, of building better
lives for all Solomon Islanders, in particular to improve access to income-generating opportunities, improve access to basic
services, and provide for an even distribution of the benefits of growth and the development of all provinces. 60
ADB’s Country Program Strategy (CPS) notes that the Solomon Island economy is based on primary commodities from agriculture, forestry,
and fishing, and alternative income-generating opportunities are scarce in rural areas. The CPS seeks to reduce poverty by promoting
equitable private-sector-led economic growth through improved transportation infrastructure and services and a stronger business enabling
environment. Development of hydropower resources to serve provincial centres and surrounding communities will assist the Strategy by
increasing income-generating opportunities, improving access to markets and basic services and improving living conditions, especially for
women.
Project activities and outcomes will contribute to progress on several MDGS, in particular 1, to reduce poverty; 2. to increase
primary school attendance; 3. to reduce infant mortality; and 4. to improve gender equity by increasing women’s access to
reproductive health, education and other opportunities.

B. Targeting Classification
1. Select the targeting classification of the project:
 General intervention  I ndividual or Household (TI -H);  Geographic (TI -G);  N on-income MD Gs (TI -M1, M 2, etc.)
2. E xplain the basis for the targeting classification:
The proposed project is classified in the energy sector and by subthemes as inclusive social development and sustainable
economic growth. The targeting classification is geographic, as the project focuses on developing renewable electricity systems
for populations in and around under-served provincial centres and addresses a significant constraint on development of these
areas. The project requires a more extensive Social Analysis (SA) report in the project design stage, with special attention to
poverty, gender, consultation, other social safeguard issues, involuntary resettlement and indigenous peoples.

C. Poverty Analysis
1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed?

2. What resources are allocated in the project preparatory technical assistance (PPT A)/due diligence?

3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor governance,
and pro-poor growth)?
The proposed project provides significant opportunities for pro-poor design, social inclusion subcomponents and pro-poor
growth. By developing a renewable energy source, it will provide more reliable and cost-effective power, extend these power
systems to under-served areas, including poor and disadvantaged households, meanwhile addressing other forms of
disadvantage such as poor access to markets and basic services and the poverty, gender inequalities and other issues that
extend from this poor access. Full realisation of this potential will not occur automatically, however. In order for it to happen, the
enabling environment for inclusive planning, gender equity, community development, small enterprise growth and the like will

60
Solomon Island Government, 2010. Framework for the National Strategic Plan for the Solomon Islands: Building Better Lives for
All Solomon Islanders.

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need to be nurtured through other supporting development programs, some of which are already being implemented in Solomon
Islands by provincial and national governments, NGOs and aid partners.
II. SOCIAL DEVELOPMENT ISSUES

A. Initial Social Analysis


Based on existing information:
a. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from the
project?
• .

b. What are the potential needs of beneficiaries in relation to the proposed project?
• Consumer education, so that people can use the electricity supply in efficient and safe ways.
• Community development, to maximise the potential for new livelihood development, especially in disadvantaged
communities and among disadvantaged groups, such as women and youth.
• Establishment of a legal agreement with landowners that recognises their contribution of resources to the project
as well as to the lower cost structure of hydro-electricity compared to diesel generated electricity. Rather than a
one-off payment (which usually goes only to senior men and on non-productive assets) the landowner
community’s share in the financial benefit of improved efficiency of production (yet to be calculated) could be
provided in perpetuity through a development trust fund type arrangement. The landowner agreement and the
proposed trust fund need to be formulated in a consultative and socially inclusive way between the landowners,
the government and SIEA.
c. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them?
The cost of electricity can inhibit its use, especially in poor households.
• Use of hydropower, instead of diesel generation, provides for lower cost and more reliable electricity supply.
These potential cost benefits will be passed on to SIEA in the first instance. SIEA will decide whether and how
they will be incorporated into a common national tariff or apply to a particular area or group of consumers.
• Consumer education will help people use electricity in efficient and safe ways, and the capacity of SIEA to provide
this will be strengthened.
• People expect that new economic opportunities will make electricity affordable, and are prepared to pay for
improved living conditions.
• The use of prepaid meters will help households to stay within their means.
New livelihood opportunities may not be evident or accessible, particularly to disadvantaged communities and groups.
• Many potential economic opportunities have been identified in provincial development plans, and by communities
and individuals. Present economic stagnation disadvantages the entire community.
• Community and small enterprise development programs to maximise the potential for new livelihood development
will be conducted through local NGOs, government agencies or finance institutions.
• Small-scale credit modalities will be explored, including through the GAD action plan.

B. Consultation and Participation
1. Indicate the potential initial stakeholders
• Landowners who will enter into a legal agreement with the SI Government and SIEA providing for use of their land
resources and a share of the potential cost benefits of hydropower generation, proposed here to be in perpetuity
through a development trust fund type arrangement.
• Households in areas in and around the provincial centres that will gain electricity supply.

2. What type of consultation and participation (C&P) is required during the PPT A or project processing (e.g., workshops,
community mobilization, involvement of nongovernment organizations [NGOs] and community-based organizations
[CBOs], etc.)?
• Formulation of legal agreement between landowners, the SI Government and SIEA.
• Proposed formulation of a development trust fund type arrangement with the landowner community, to be
conducted in a collaborative and socially inclusive manner.
• Community development or mobilization programs, involving local NGOs, government, or finance institutions.
• Community education programs on efficient and safe electricity use, involving SIEA.

3. What level of participation is envisaged for project design?


 Information sharing  Consultation  Collaborative decision making  Empowerment7

4. Will a C&P plan be prepared?  Yes  No Please explain.

C. Gender and Development


1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program?

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2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by
improving women’s access to and use of opportunities, services, resources, assets, and participation in decision making?9
 Yes  No Please explain. {If yes, a gender action plan should be prepared during PPT A/due diligence.}

5. Access to electricity supply brings particular benefits to women. It can improve family living conditions by providing better
lighting at night and better food shortage through refrigeration. It can also reduce the physical or time burden of some household
tasks, and create opportunities for small business and other forms of income-generation. While the cost of electricity can be a
constraint to household use, many people interviewed believed that the opportunities created by a reliable power supply could
balance out the costs involved. Despite its cost, electricity is a very desired good.
6. Difficulties of access to services and markets particularly disadvantage women.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality?
 Yes  No Please explain {If yes, actions/measures should be prepared during PPT A/due diligence.} The project is more likely to
reduce all forms of disadvantage and thereby reduce gender disparities in access to basic services and economic and social resources.
The project has potential to improve conditions for women, reduce the physical and time burdens of their household work and
improving living conditions, and reduce gender inequality by providing better access to health and education services and
increasing livelihood opportunities.
III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS11
Issue Nature of social issue Plan or other action
Significant/Limited/
required
No impact/ Not known

Involuntary resettlement No involuntary resettlement No impact  Full plan


involved, other than some
disturbance to garden plots in  Short plan
Fiu Valley, Malaita
 Resettlement framework
 No action
 Uncertain
Indigenous peoples Indigenous ownership of Significant.  Plan
access to and use of land Landowner agreement to be
resources negotiated  Other action16
 Indigenous peoples
framework
 No action
 Uncertain
Potential for wider economic Better access to markets  Plan
Labor
and social participation for GAD Plan to increase access
 Employment opportunities both men and women to new livelihood  Other action18

 Labor retrenchment opportunities  No action

 Core labor standards  Uncertain


Affordability Necessity to ensure that low Consumer education  Action
income households benefit activities to encourage
from new service efficient, safe use of  No action
elelctricity
 Uncertain

Other risks and/or Some risk of social Community and gender  Plan
disturbance by outsider development programs
vulnerabilities workers and new inflow of operating through existing  Other action
cash government and NGO
 HIV/AIDS  No action
programs
 Human trafficking  Uncertain

 Others (conflict, political


instability, etc.), please specify
IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT

1. Do the terms of reference for the PPT A (or other due diligence) include poverty, social, and gender analyses and the relevant
specialist/s?
 Yes  No If no, please explain why.

2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender analysis, and
C&P during the PPT A/due diligence?  Yes  No If no, please explain why.

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Involuntary Resettlement Impact Categorization Checklist

Probable Involuntary Resettlement Effects Not


Yes No Known
Remarks

Involuntary Acquisition of Land

x Land access and use agreements


1. Will there be land acquisition? will be negotiated with indigenous
landowners.

x Sites have been identified. Exact


2. Is the site for land acquisition known? areas will be known at the next
stage of project design.

x In regard to being either indigenous


owned or alienated land, ownership
status is well known. Discussions
held with landowner groups found
3. Is the ownership status and current usage of land to be support for the project. However, for
acquired known? most sites the genealogies from
which land ownership is claimed
are undocumented. Uncertainty
about this can complicate land-use
negotiations.

X Where possible, access roads and


transmission lines will follow existing
4. Will easement be utilized within an existing Right of Way roads, often remnants of logging
(ROW)? operations. However, these are not
necessarily legally recognised
ROW.

x Apart from Auki, the proposed sites


5. Will there be loss of shelter and residential land due to land
are in areas where there are no
acquisition? residents.

x Not for most sites. In Auki, there will


be some disturbance of trees and
displacement of gardens. The full
6. Will there be loss of agricultural and other productive assets
extent will be known at the next
due to land acquisition? design phase. In Lata, timber and
food trees will be cleared along the
transmission line route.

X Not for most sites. In Auki, there will


be removal of some timber and food
trees and displacement of gardens.
7. Will there be losses of crops, trees, and fixed assets due to
In Lata, timber and food trees need
land acquisition? to be cleared along the transmission
line route. The full extent will be
known at the next design phase.

X No. There may however be some


disruption during construction to a
8. Will there be loss of businesses or enterprises due to land
neighbouring ecotourism business
acquisition? on Ringgi, and to hiking trail along
Mataniko River.

X Not for most sites. For Auki and


9. Will there be loss of income sources and means of Lata, in respect of some timber and
livelihoods due to land acquisition? food trees and displacement of
gardens.

Involuntary restrictions on land use or on access to legally designated parks and protected areas

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x The Ringgi site is in a recognised


conservation area. There may be
10. Will people lose access to natural resources, communal some disruption during construction
facilities and services? to a neighbouring ecotourism
business, and also to a hiking trail
along Mataniko River.

11. If land use is changed, will it have an adverse impact on X No long-term land use change is
social and economic activities? anticipated.

X Residents will not be excluded from


12. Will access to land and resources owned communally or acquired areas for traditional
by the state be restricted? purposes such as hunting or
vegetation harvesting.

Information on Displaced Persons:

Any estimate of the likely number of persons that will be displaced by the Project? [ ] No [ X ] Yes
If yes, approximately how many? ________________None_____

Are any of them poor, female-heads of households, or vulnerable to poverty risks? [x] No [ ] Yes

Are any displaced persons from indigenous or ethnic minority groups? [x] No [ ] Yes

Note: Additional information on the project is provided in Section 13 of the report.

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INDIGENOUS PEOPLES IMPACT CATEGORIZATION


Date: _October, 2011________________

A. Instructions
(i) The project team completes and submits the form to the Environment and Safeguards Division (RSES) for endorsement by RSES
Director, and for approval by the Chief Compliance Officer (CCO).
(ii) The classification of a project is a continuing process. If there is a change in the project components or/and site that may result in
category change, the Sector Division submits a new form and requests for recategorization, and endorsement by RSES Director and
by the CCO. The old form is attached for reference.
(iii) The project team indicates if the project requires broad community support (BCS) of Indigenous Peoples communities. BCS is
required when project activities involve (a) commercial development of the cultural resources and knowledge of indigenous peoples,
(b) physical displacement from traditional or customary lands; and (c) commercial development of natural resources within
customary lands under use that would impact the livelihoods or the cultural, ceremonial, or spiritual use that define the identity and
community of indigenous peoples.
(iv) In addition, the project team may propose in the comments section that the project is highly complex and sensitive (HCS), for
approval by the CCO. HCS projects are a subset of category A projects that ADB deems to be highly risky or contentious or involve
serious and multidimensional and generally interrelated potential social and/or environmental impacts.

B. Project Data

Country/Project No./Project : RETA 7329: PROMOTING ACCESS TO RENEWABLE ENERGY IN THE PACIFIC:
Title SOLOMON ISLAND COMPONENT

Department/ Division :

Processing Stage : Pre-feasibility

Modality :

[ ] Project Loan [ ] Program Loan [ ] Financial Intermediary [ ] General Corporate Finance


[ ] Sector Loan [ ] MFF [ ] Emergency Assistance [ ] Grant
[ ] Other financing modalities:

C. Indigenous Peoples Category

[ X ] New [ ] Recategorization ― Previous Category [ ]

[ ] Category A [ ] Category B [ ] Category C [ ] Category FI

D. Project requires the broad community support of


[ X ] Yes [ ] No
affected Indigenous Peoples communities.

E. Comments

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Project Team Comments: RSES Comments:


The Solomon Islands population is almost entirely indigenous and most
land is traditionally owned. Landowners are therefore not minority
groups and their rights are acknowledged and respected in Solomon
Islands law.
Two proposed sites, at Lata (Temotu Province) and Ringgi
(Kolombangara Island) are on – or partly on - land that in the past was
alienated from indigenous ownership and is now under State and KFPL
leasehold, respectively. This tenure is known and not disputed.
For the other four sites (and for the transmission line route at Lata) land
access and use agreements need to be negotiated with indigenous
landowners. Principal responsibility for these negotiations lies with the
provincial governments.
At this stage of project preparation, all landowning groups have
expressed full support for the project. However, land-use negotiations
in Solomon Islands can be complex and difficult. Excessive demands
for financial compensation could make development of some sites
unfeasible, as may already be the case for the Mataniko River site.

F. Approval

Proposed by: Reviewed by:

Project Team Leader, {Department/Division} Social Safeguard Specialist, RSDD/RSES

Date: Date:

Endorsed by:

Social Development Specialist, {Department/Division} Director, RSES

Date: Date:

Endorsed by: Approved by:

 Highly Complex
Sensitive Project
and

Director, {Division} Chief Compliance Officer

Date: Date:

Indigenous Peoples Impact Screening Checklist

KEY CONCERNS NOT


YES NO Remarks
(Please provide elaborations KNOWN

on the Remarks column)

A. Indigenous Peoples Identification

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KEY CONCERNS NOT


YES NO Remarks
(Please provide elaborations KNOWN

on the Remarks column)

1. Are there socio-cultural groups present in or use the X The SI population is almost
project area who may be considered as "tribes" (hill entirely indigenous, and most
tribes, schedules tribes, tribal peoples), "minorities" land is traditionally owned.
Landowners are therefore not
(ethnic or national minorities), or "indigenous
minority groups.
communities" in the project area?

2. Are there national or local laws or policies as well as X The rights of indigenous
anthropological researches/studies that consider these landowners are acknowledged
groups present in or using the project area as belonging and respected in SI law, but
they are not considered to be
to "ethnic minorities", scheduled tribes, tribal peoples,
minority groups.
national minorities, or cultural communities?

X SI is a cultural diverse country,


in a Melanesian context.
Landownership is based on
3. Do such groups self-identify as being part of a distinct
genealogical descent which
social and cultural group? may include social identity, but
not as a distinct minority
group.

4. Do such groups maintain collective attachments to X In all parts of the country,


Solomon Islanders have a
distinct habitats or ancestral territories and/or to the strong attachment to their
natural resources in these habitats and territories? ancestral land.

5. Do such groups maintain cultural, economic, social, X Indigenous identity and land –
and political institutions distinct from the dominant society ownership is usual in SI, not
and culture? an exceptional situation

X Many languages are spoken in


SI, distinguished more by
6. Do such groups speak a distinct language or dialect? island or district than by
descent group, but distinct
dialects may exist.

7. Has such groups been historically, socially and X Indigenous landownership


economically marginalized, disempowered, excluded, does not denote minority
and/or discriminated against? status in SI

8. Are such groups represented as "Indigenous Peoples" X SI has a culturally diverse,


or as "ethnic minorities" or "scheduled tribes" or "tribal predominantly indigenous
populations" in any formal decision-making bodies at the population and this is reflected
in its system of government
national or local levels?

B. Identification of Potential Impacts

X SI has a predominantly
indigenous population.
Landowner groups at project
9. Will the project directly or indirectly benefit or target sites will benefit from project
Indigenous Peoples? outcomes and also from land
access/use agreements to be
negotiated through provincial
governments.

10. Will the project directly or indirectly affect Indigenous X


Peoples' traditional socio-cultural and belief practices?
(e.g. child-rearing, health, education, arts, and
governance)

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KEY CONCERNS NOT


YES NO Remarks
(Please provide elaborations KNOWN

on the Remarks column)

11. Will the project affect the livelihood systems of X By providing electricity, the
Indigenous Peoples? (e.g., food production system, project will potentially increase
natural resource management, crafts and trade, access to social and economic
opportunities
employment status)

X Although ancestral domain,


most project sites are in little
12. Will the project be in an area (land or territory) used areas, away from
occupied, owned, or used by Indigenous Peoples, and/or residences and gardens. Care
claimed as ancestral domain? will be taken not to disturb
Tabu sites (places of cultural
significance).

C. Identification of Special Requirements


Will the project activities include:

13. Commercial development of the cultural resources X


and knowledge of Indigenous Peoples?

X No displacement is involved,
14. Physical displacement from traditional or customary nor any future exclusion from
lands? hydropower sites and
transmission routes.

X The small hydropower plants


15. Commercial development of natural resources (such proposed will use (and
as minerals, hydrocarbons, forests, water, hunting or replace) river water as well as
small areas of land, but in
fishing grounds) within customary lands under use that
ways that at most would only
would impact the livelihoods or the cultural, ceremonial, minimally impact local
spiritual uses that define the identity and community of livelihoods. Landowners may
Indigenous Peoples? benefit from improved access
to markets and services.

16. Establishing legal recognition of rights to lands and X


territories that are traditionally owned or customarily
used, occupied or claimed by indigenous peoples ?

X Legal agreements to access


and use areas of indigenous-
owned land will be negotiated
17. Acquisition of lands that are traditionally owned or according to SI law and
practice, through provincial
customarily used, occupied or claimed by indigenous governments. This will be for
peoples? construction and maintenance
of the hydropower plants and
will not entail future exclusion
of landowners from the areas.

D. Anticipated project impacts on Indigenous Peoples

Project component/
Anticipated positive effect Anticipated negative effect
activity/ output

1. Legal agreements to access and use areas of Landowners get financial and Excessive demands for financial compensation
indigenous- owned land to be negotiated development benefits from their land could make projects unfeasible, as may already
according to SI law and practice. holding, optimally as an in-perpetuity be the case for the Mataniko River site.
arrangement that recognises the cost-

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saving created by hydropower generation, Capture of benefits by a small group of senior


and that invests in community assets. men could prevent wider distribution of benefits to
the landowning community.

2. Construction of the hydropower plants Paid employment for landowners and Some possible disruption to the community by
other people from local communities. construction activities, the presence of a small
group of expert workers, and a sudden inflow of
cash into the area.

3. Operation of the hydropower plants A small amount of paid employment for No negative effects anticipated
landowners or other community people to
monitor and maintain the intake, canals
and power-house.
The benefits of electrification for the
community and individual households.
Possibly improved access to services and
markets using access roads built during
the construction of the hydropower plant
or maintained along transmission routes.

Note: Additional information on the project and each proposed site is provided in Section 13 of the full report.

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Annex 8 Stakeholder Analysis

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