VALIDATION REPORT REPORT NO. CDM.11.VAL.0195

Transcription

1 VALIDATION REPORT VIETNAM CARBON ASSETS LTD. NAM CHIM HYO POWER PROJECT REPORT NO. CDM.11.VAL.0195 KBS Certification Services Pvt. Ltd. Registered Office: , Om Shubham Tower, Neelam-Bata Road, N.I.T., Faridabad , Haryana India. Contact us at: Tel.: , , , Fax: Webpage: Page 1 of 78

2 Date of this issue: 07/04/2012 Organisational Unit: Climate Change Division, KBS Project Design Document KBS Ref. No.: CDM.11.VAL.0195 Client: Vietnam Carbon Assets Ltd. First : V1.1 dated 14/11/2011 Final : V2.2 dated 27/03/2012 Summary of validation: Vietnam Carbon Assets Ltd. has commissioned KBS to perform the validation of the proposed CDM project activity: Project Title: Nam Chim Hydro Power Project Methodology Applied: ACM0002, version Sectoral Scopes: 1 Validity of methodology/ies (for RfR): Latest version (EB66 Annex35) The scope of the validation is defined as an independent and objective review of the project design document, the project s baseline study and monitoring plan and other relevant documents. The information in these documents is reviewed against the latest version of CDM Validation and Verification Manual, Kyoto Protocol requirements and UNFCCC rules. The report is based on the assessment of the project design document undertaken through stakeholder consultations, application of standard auditing techniques including but not limited to desk review, follow up actions (e.g., on site visit, electronic (telephone or ) interviews) and also the review of the applicable approved methodological and relevant tools, guidances and CDM decisions. The review of the project design documentation and the subsequent follow-up interviews have provided. KBS with sufficient evidence to determine the project s fulfilment of all the stated criteria. In our opinion, the project meets all applicable UNFCCC requirements for the CDM. Will be recommended to the CDM Executive Board with a request for registration Is not recommended for registration Validation Status: Findings not closed Project type: Large scale Draft validation report Subject: CDM Validation Validation Team: Team Leader (TL): Abhishek Mahawar Validator & Technical Expert (TE): Dr. Shilpy Gupta Local Expert (LE): Nguyen Minh Hieu Financial Expert (FE): Akshita Nohria Technical Review Team: Manager Technical & Certification Name: Asim Kumar Jana (& TE) Date: 07/04/2012 Authorized by: Name: Ashok Kumar Gautam Date: 09/04/2012 Final validation report Document Distribution No Distribution (without permission from the Client) Limited Distribution Signature: Name: Kaushal Goyal, Managing Director Date: 09/04/2012 Revision Number: Date: Number of Pages: Unrestricted Distribution Page 2 of 78

3 BM CAR CDM CDM EB CER CL COP DNA DOE FAR FSR GHG GWh HCA IPCC IRR kw MoC MoP MW MWh OM PO PP PPA UNFCCC WACC Abbreviations Build Margin Corrective Action Request Clean Development Mechanism CDM Executive Board Certified Emission Reduction Clarification Request Conference of Parties Designated National Authority Designated Operational Entity Forward Action Request Feasibility Study Report Greenhouse gas(es) Giga Watt Hour Host Country Approval Intergovernmental Panel on Climate Change Internal Rate of Return Kilo Watt Modalities of Communication Meeting of Parties Mega Watt Mega Watt hour Operating Margin Project Design Document Purchase Order Project Proponent Power Purchase Agreement United Nations Framework Convention on Climate Change Validation Verification Manual Weighted Average Cost of Capital Page 3 of 78

4 Table of Content 1. Validation Opinion Introduction Objective Scope Methodology Review of CDM- and Additional Documentation Use of the Validation Protocol Findings Internal Quality Control Validation Findings Approval Participation Requirements Project Design Document Project Description Baseline and monitoring methodology Additionality Application of Monitoring Methodology and Monitoring Plan Sustainable development Local Stakeholder Comments Environmental Impacts Project design of small-scale CDM project activities Global Stakeholder Consultation Process Description of how and when the was made publicly available Compilation of all comments received Explanation of how comments have been taken into account References Annexes: Annex 1: Validation Protocol Annex 2: Detailed Findings Annex 3: Certificate of Competence Page 4 of 78

5 1. Validation Opinion KBS Certification Services Pvt. Ltd. has been contracted by Vietnam Carbon Assets Ltd. to perform a validation of the project: Project title: Nam Chim Hydro Power Project Host Party: Viet Nam The validation was performed in accordance with the UNFCCC criteria for the Clean Development Mechanism, latest version of Validation and Verification Manual and host country criteria, as well as criteria given to provide for consistent project operations, monitoring and reporting. The proposed CDM project activity will result in reductions of greenhouse gas (GHG) emissions that are real, measurable and give long-term benefits to the mitigation of climate change. In our opinion, the project meets all relevant UNFCCC, CDM criteria and all relevant host country criteria. The project correctly applies methodology ACM0002 version It is demonstrated that the project is not a likely baseline scenario. The emission reductions attributable to the project are hence additional to any that would occur in the absence of the project activity. The total emission reductions from the project are estimated to be 249,648 tco2e over 7 years of renewable crediting period during 01/07/2012 to 31/06/2019, averaging 35,664 tco2e annually. The emission reduction forecast has been checked and it is deemed likely that the stated amount is achieved given the underlying assumptions do not change. The project will hence be recommended by KBS for request for registration with the UNFCCC. Authorized Signatory Signature: Name: Kaushal Goyal Date: 09/04/2012 Page 5 of 78

6 2. Introduction 2.1 Objective Vietnam Carbon Assets Ltd. has commissioned KBS to perform the validation of the project: Nam Chim Hydro Power Project with regard to the relevant requirements for Clean Development Mechanism (CDM) project activities. The purpose of validation is to ensure a thorough, independent assessment of proposed CDM project activities submitted for registration as a proposed CDM project activity against the applicable CDM requirements. In particular, the project's baseline, the monitoring plan (MP) and the project s compliance with relevant UNFCCC and host country criteria are validated in order to confirm that the project design as documented is sound and reasonable and meets the stated requirements and identified criteria. The validation is seen as necessary to provide assurance to stakeholders of the quality of the project and its intended generation of certified emission reduction (CER). UNFCCC criteria refer to the Kyoto Protocol criteria and the CDM rules and modalities and related decisions by the COP/MOP and the CDM Executive Board. 2.2 Scope The scope of the validation is defined as an independent and objective review of the project design document, the project s baseline study and monitoring plan and other relevant documents. The information in these documents is reviewed against Kyoto Protocol requirements, UNFCCC rules and associated interpretations. KBS has employed a rules-based approach in the validation, focusing on the identification of significant gaps for project implementation and the generation of CERs. Page 6 of 78

7 3. Methodology 3.1 Review of CDM- and Additional Documentation The validation is performed primarily as a document review of the publicly available project design document () version 1.1 dated 14/11/2011 and the final version 2.2 dated 27/03/2012 (final version). The assessment is performed by a validation team using a validation protocol attached as Annex 1. The site visit was undertaken by Mr. Dinesh Mane (then Team Leader), Dr. Shilpy Gupta and Nguyen Minh Hieu details are mentioned below; Location: XimVang commune, Bac Yen district, Son La province, Viet Nam Dates: 09/01/2012 to 11/01/2012 Key points discussed: Name of person, interviewed Designation, Organization Project design Nguyen Nhu Hung Plant Director, Project related legal issues Song Lam Construction and Project & CDM development history Investment Company Limited Technical equipment Sustainable development issues Project design Project related legal issues Project & CDM development history Technical equipment Sustainable development issues Vu Huu Duc Director, Song Lam Construction and Investment Company Limited Project design Pham Van Trong Dam Operator, Song Lam Construction and Investment Company Limited Environmental impacts Hang A Cui Head of villagers, Local Stakeholder process Xim Vang Resettlement procedures and Environmental compliance Environmental impacts Local Stakeholder process Nguyin Vin Nam Vice head of villagers, Xim Vang Environmental impacts Local Stakeholder process Nguyen Van Nam Villagers, Xim Vang Additionality Crediting period Monitoring plan Dang Thi Hong Hanh Deputy Executive Director, VNEEC Page 7 of 78

8 Training history Management system Approval process by the host country Authenticity of data used for determination of grid electricity emission factor Training history Management system Approval process by the host country Authenticity of data used for determination of grid electricity emission factor Luu Thi Minh Nghia Le Anh Tung Sr. Project Manager, VNEEC Project Manager, VNEEC 3.2 Use of the Validation Protocol The validation protocol used for the assessment is designed in accordance with the latest version of Validation and Verification Manual. It serves the following purposes: it organises, details and clarifies the requirements the project is expected to meet; and it documents both how a particular requirement has been validated and the result of the validation (reporting). The validation protocol consists of several tables. The different columns in these tables are described below. Checklist Question Ref ID Means of Verification (MoV) The various requirements are linked to checklist questions the project should meet. Lists any references and sources used in the validation process. Full details are provided in the table at the bottom of the checklist. Explains how conformance with the checklist question is investigated. Examples of means of verification are document review () or interview (I). N/A means not applicable. Comment The section is used to elaborate and discuss the checklist question and/or the conformance to the question. It is further used to explain the conclusions reached. Draft and/or Final Conclusion The completed validation protocol for this project is attached as Annex 1to this report 3.3 Findings This is either acceptable based on evidence provided (Y), or a Corrective Action Request (CAR) due to noncompliance with the checklist question (See below). Clarification Request (CL) is used when the validation team has identified a need for further clarification. As an outcome of the validation process, the validation team can raise different types of findings A Clarification Request (CL) is raised if information is insufficient or not clear enough to determine whether the applicable CDM requirements have been met Where a non-conformance arises the validator shall raise a Corrective Action Request (CAR). A CAR is issued, where: Page 8 of 78

9 I. The project participants have made mistakes that will influence the ability of the project activity to achieve real, measurable additional emission reductions; II. The CDM requirements have not been met; III. There is a risk that emission reductions cannot be monitored or calculated. A Forward Action Request (FAR) is raised during validation to highlight issues related to project implementation that require review during the first verification of the project activity. FARs shall not relate to the CDM requirements for registration. Corrective Action Requests (CAR)and Clarification Requests are raised in the draft validation protocol and detailed in a separate form (Annex 2). In this form, the project participant is given the opportunity to close outstanding CARs and respond to CLs and FARs. 3.4 Internal Quality Control Following the completion of the assessment process and a recommendation by the assessment team, the validation opinion prepared by Team Leader is independently reviewed by internal Technical Reviewer. TR reviews if all the KBS procedures have been followed and all conclusions are justified in accordance with applicable standards, procedures, guidance and CDM decisions. The TR either is qualified for the technical area within the CDM sectoral scope applicable to project activity or is supported by qualified independent technical expert at this stage. The Technical Reviewer will either accept or reject the recommendation made by the assessment team. The findings can be raised at this stage and project participant must address them within agreed timeline. The opinion recommended by Technical Reviewer will be confirmed by Manager Technical & Certification and finally authorized and signed by the Managing Director on behalf of KBS as final validation opinion. Page 9 of 78

10 4. Validation Findings 4.1 Approval Discussion: The validation team received letter of approvals directly from the PP. The authenticity of the letter of approval issued by Viet Nam DNA have been cross-checked by referring web site on which the CDM projects hosted in Ministry of Natural resources and Environment of Viet Nam (=DNA of Viet Nam) is published. However, during site visit document review it is found that the name of all project participants as per LoA /1/ provided by Host party project participant is not included in the. In this regard CAR#01 is raised and closed after proper justification provided by PP (refer Annex 2 for further details). According to the, the project is a bilateral with Switzerland being identified as the Annex 1 Party. The letter of approval is issued by DNA of Switzerland i.e., Federal Office for the Environment FOEN, Climate Division (Annex 1 Party DNA) /1/. It has been cross-checked by referring web site The validation team can confirm that host LoA refers to the precise proposed project title as in the. The validation team can confirm that the project participants are listed in tabular form in section A.3 of the and this information is consistent with the contact details provided in Annex 1 of the. The letter of approval was also found to be unconditional with respect to para 45 (a) to (d) of. Hence, referenced letter(s) are in accordance with paragraphs of,v1.2. The below table summarizes the project participants and parties involved: Project participants Song Lam Construction and Vietnam Carbon Assets Ltd. Investment Company Limited Parties involved Viet Nam Switzerland Approval/Authorization LoA received Yes Yes Date of LoA 15/12/ /02/2012 LoA issued by DNA of Viet Nam: Ministry of Natural resources and Environment of Viet Nam DNA of Switzerland: Federal Office for the Environment FOEN, Climate Division Reference no. of letter 674/HTQT G Validation of authenticity Confirmed from host Party DNA website /55/ Confirmed from the Swiss DNA website /52/ Validity of LoA Valid Valid Participation Party is party to Kyoto Protocol Yes Yes Voluntary participation Yes Yes Project contribution to SD Yes Not mentioned (Not required) Validation of ODA The validation did not reveal any evidence that this project activity can be seen as a diversion of ODA. It is also confirmed during the site visit and letter provided by PP /9/ about no ODA diversion from Annex-1 party. The project is envisaged to be funded by equity capital to be brought in by the Project Participant and loan from local commercial bank. Confirmation of MoC Page 10 of 78

11 The project Modalities of Communication (MoC) /2/, signed on 13/02/2012, was received from the PP. As required in Procedures for Modalities of Communication between Project Participants and the Executive Board, the validation team has verified that the name of Mr. Nguyen Nhu Hung and Mr.Renat Heuberger are the authorised signatory for for relevant project participant. The validation team confirmed that the signatory and contact details on the MoC are authorized and credible. As per the procedures for obtaining the approval from DNA of Viet Nam, the PP of Viet Nam need to obtain statutory clearances from local /provincial/national authorities for this type of project activity and the same was verified by the validation team. Findings: CAR#01 (b,c and d), please refer Annex2 of this report, where same is discussed completely. Opinion: The validation team confirms following; a) The LoAs were received as referenced above; b) The LoAs were received from the PP directly; c) The authenticity of the referenced LoA has been confirmed from the website of respective DNA of the Party d) The provided LoAs are in accordance with paragraphs 45 to 48 of V1.2. e) The provided LoAs are unconditional. The Modalities of Communication (MoC) with the EB and UNFCCC secretariat has been issued and signed by authorized person on behalf of PPs. The signed MoC was found to be appropriate as it clearly defined the responsible party for communicating with the EB and UNFCCC regarding the issuance of CER of the proposed CDM project. 4.2 Participation Requirements Opinion: The validation team confirms following; a) The participation of project participations has been approved/authorized by the DNA of relevant Party b) The participation has been confirmed in the LoAs itself, which contains the name of the respective PP to which it is issued c) The authenticity of the LoAs is confirmed as described in section 4.1 above. d) There is no other entity listed in the (section A.3 or Annex 1) other than those approved in the LoAs e) The information is consistent in the project documentation (consistency within the, LoA, MoC) 4.3 Project Design Document Discussion: The applied the Project Design Document Form (CDM-), version 03 and is correctly completed in accordance with the applicable guidance document Guidelines for Completing the Project Design Document (CDM-) and the proposed new baseline and monitoring methodologies (CDM-NM), version 07. Findings: CAR#04, CAR#05 (a and b), please refer Annex2 of this report, where same is discussed completely. Page 11 of 78

12 Opinion: Project Design Document is found to be appropriate and in line with the relevant applicable requirements of UNFCCC. The validation team has validated the and confirms that it is in line with the requirements of para 55, 56 and 57 of the version Comparison among the first publication (by other DOE) of (07/09/ /10/2006), second publication (with KBS) of (24 Nov Dec 11) and the final (submitted with this request for registration). Key Parameters Operating Hours/Year Version 1 dated 15/06/2006 Version 1.1 dated 14/11/2011 Version 2.2 dated 27/03/ /09/2006 (with other DOE, now terminated) 24/11/2011 (with KBS) The final Values used Values used Validated Remarks, if any Validated from the FSR prepared by third party and approved by the local authorities PLF As above Gross GWh As above Generation Project Cost NA As above Billion VND Billion VND Tariff NA 599 VND/KWh 608 VND/kwh The highest tariff value accessible by the PP has been applied in the IRR calculation. O&M NA 2.62 Billion VND 2.62 Billion VND Validated from the FSR prepared by third party and approved by the local authorities Debt (%) NA 70% 70% Validated from the FSR prepared by third party and approved by the local authorities. It is regulated by the government in Decision 30/2006/QD-BCN. IRR 10.73% (Economical Internal Rate of Return) % (Project IRR) % (Project IRR) The corresponding calculation for EIRR of 10.73% were not available. Further, the variation in IRR between webhosted and final is due to change in tariff rate (from 599 VND/kWh to 608 VND/kWh) Page 12 of 78

13 Benchmark 12% (ADB) 13.87% (WACC) 13.87%. (WACC) The source for value used in the first web-hosted is not accessible by the project participants. In the final the WACC is calculated based on standard values that are duly validated by the assessment team as per EB62 Annex5. Grid Emission Factor g CO2e/kWh = tco2e/mwh tco2e/ MWh tco2e/ MWh The latest EF available at the time of webhosting (with KBS to commence the validation) and officially published by the Viet Nam DNA has been applied in the final. History of revision: Key revisions between the final (dated 27/03/2012) against the first version (dated 14/11/2011) published for the international stakeholder consultation Section no. Brief description (not exhaustive) of the changes A.1 In section A.2 of Version 2.2, PP has included local power purchase along with supply to national grid. A Name of the Host Party has been changed in version 2.1 B.1 Meth version has been revised to ( version 2.2) from ( version 1.1) Latest version of the Tool for demonstration of additionality (version 06) is modified in latest (version 2.2) from version 5.2 B.2 Applicability criteria of the methodology are revised as per the latest version of the methodology, version B.5 Section B.5 is revised as per the requirement of the revised version of the tools to additionality (version 06) Project IRR has been changed from 10.19% (version 1.1) to 10.38% (, version 2.2) Common practice analysis has been revised as per the latest version of the tool to additionality (version 06). Implementation timeline for the project activity is revised B.7.1 Parameter EGy,export is modified EG facility, y is updated B.8 Date of completion of the application of baseline study is changed from 16/03/2012 from 14/11/2011 E.1 &E.2 Details of stake holder consultation process is revised in version Project Description Discussion: Page 13 of 78

14 The proposed project activity involves the installation and operation of a new run-of-reservoir based hydropower plant on the Nam Chim river stream at XimVang commune, Bac Yen district, Son La province, Viet Nam. According to the version 2.2 dated 27/03/2012 /57/ the exact geographical coordinates of the reservoir dam at Latitude ( N) and Longitude ( E) and the power house at Latitude ( N) and Longitude ( E). These unique geographic coordinates of this greenfield plant were confirmed by validation team during site visit interview with PP, and with public map source. The project activity is commissioned on 09/04/2010 /39/ and the same is confirmed from commissioned certificate dated 14/04/2010 provided by Viet Nam Electricity North Power Company (a government company). The project, developed by Song Lam Construction and Investment Company Limited, consists of intake structure; the water conveyance system; the power house installed with two (2) units of 8 MW hydro turbines and associated generators; and electricity evacuation system, which have been verified to be consistent by validation team through review of approved FSR /30/, interview with the technical representative of the PP and purchase orders of the key equipment of the project activity /14/. The water intake structure would be located on the downstream portion of the Nam Chim stream and consist of a new reservoir dam with the function for storing water. The dam height is 4m from the foundation with 36m of dam width and it forms a reservoir with 0.18 km 2 surface area at full-reservoir level. The dam is designed for a water flow of 2.1 m 3 /s and water head of 454m. The project involves construction of a reservoir with an area of 18 ha (= m 2 ) and a power density of 88.9 W/m 2. The overall technical information of the project has been checked by the validation team to be consistent with the FSR /30/ and the. The total installed capacity of the project is 16 MW and the electricity generated from the project activity will be transferred to nearby sub-station through a 110 kv transmission line, which is involved in the engineering scope of the project. The electricity is subsequently supplied to local electricity grid which is interconnected with national grid of Viet Nam, i.e., EVN grid as per the power purchase agreement for evacuation of power to grid /38/. The agreement to purchase equipments related to power generation (hydro turbines, electrical generators, and auxiliary equipments) in between PP and Tata International Limited (equipment supplier) is signed on 11/09/2006 /14/. Moreover, the contract for construction of permanent civil structure for tunnel is signed on 01/03/2006 /33/ for the given project activity in between host PP (Song Lam Construction & Investment Company Limited) and Long Duong Construction and Trading Company Limited /33/. According to the definition of starting date in glossary of terms by reviewing above two contracts it is found that the earliest date on which PP has committed to expenditures related to the implementation or related to the construction of this given project activity is 01/03/2006 /33/. Hence, the selected date is justified as starting date and validation team confirms it is an earliest event towards the implementation of the project activity. The operation and maintenance of the project would be/has been done by PP itself. The proposed project has no probability for increasing its capacity during the operation as per the investment license No. 903/GBN.KH.XTDTI issued on 12 November 2007 by Son La Department of Investment and planning /19/ obtained based on approved FSR /30/. The proposed project activity has obtained all necessary local and national statutory clearances till date by virtue of obtaining the investment license /19/ and letter of approval from host country /1/. The Feasibility Study Report (FSR) dated June 2005 was prepared by The Vinaconex 36's Investment and Consultancy Joint Stock Company which has license to design hydropower plants in Viet Nam and approved by Son La Provincial People's Committee dated 06/01/2006 /3/. In the FSR, the project was designed for 2 sets of 8 MW unit capacity hydro turbines with aggregated annual power generation of 62.5 GWh. The annual utilization hours for power generation are 3,906 hours based on the hydrological data and the load factor works out as 44.59%. The estimation of power generation carried out by The Vinaconex 36's Investment and Consultancy Joint Stock Company, which is a third party and an approved engineering company, based on mathematical model taking into account statistical data of this river specific flow from hydrological department of Province Authority. According to the EB 48 Annex 11, Guidelines for the reporting and validation of plant load factors /3/, the validation team Page 14 of 78

15 considered that the plant load factor has been applied correctly as it is defined ex-ante in the according to a letter dated 06/01/2006 provided by PP to government (report prepared by Vinaconex 36's Investment and Consultancy Joint Stock Company) for approval of FSR /3/ i.e. implementation of project activity. The project is considered to be contributed to sustainable development, by utilization of renewable hydro resources in local area for the generation of electricity which would meet the growing power demand within Electricity of Viet Nam (EVN) grid. The implementation of the project activity will help in achieving sustainable development in social, environmental and economic aspects, which was also confirmed in the Letter of Approval from Viet Nam DNA /1/. The expected operational lifetime of the project activity is 30 years according to the FSR which is also in line with the Annex 1 of the Decision No 709/QD-NLDK dated 13 April 2004 of Ministry of Industry /16/. The net electricity supplied (to grid) from the project activity is expected to substitute the power supplied from the national grid operated by EVN which is composed of fossil fuel-fired power plants and renewable power plants. The renewable crediting period has been selected. The expected starting date of 1 st crediting period is 01/07/2012 or the date of registration, whichever occurs later. The annual GHG emission reduction of the project is thus estimated to be 35,664tCO2e per year of crediting period by considering the baseline emission factors of EVN and net electricity generated by the project activity. Opinion: In summary, according to, version 1.2 /50/, by means of review of design drawings and feasibility studies during interviews with the stakeholders, the validation team considers that the project description in is accurate and complete. The validation team confirms that description of the project activity in the sufficiently incorporates all relevant elements accurately and transparently in line with.v1.2 relevant to this section. 4.5 Baseline and monitoring methodology General requirement Discussion: The project applied ACM0002 Version Consolidated methodology for grid-connected electricity generation from renewable sources. Opinion: The selected and applied methodology is applicable to the project activity as described in further chapter viz., Same has been applied correctly as described therein Applicability of selected methodology to the project activity Discussion: The applicability criteria for the baseline methodology were assessed by the validation team by means of document review, interview and onsite observations. The means of validation for the applicability conditions are described below: Applicability criteria as per methodology ACM002, version This methodology is applicable to gridconnected renewable power generation project activities that (a) install a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (green field plant); (b) involve a capacity addition; (c) involve a retrofit of (an) existing plant(s); Means of Validation The project activity involves installation of a new grid connected renewable power plants at a site where no renewable power plant was operated prior to the implementation of the project activity. The information was confirmed during the site visit and document review of construction contract /33/ and purchase orders /15/ of key equipments. Page 15 of 78

16 or (d) involve a replacement of (an) existing plant(s). The project activity is the installation, capacity addition, retrofit or replacement of a power plant/unit of one of the following types: hydro power plant/unit (either with a run-of-river reservoir or an accumulation reservoir), wind power plant/unit, geothermal power plant/unit, solar power plant/unit, wave power plant/unit or tidal power plant/unit; In the case of capacity additions, retrofits or replacements (except for capacity addition projects for which the electricity generation of the existing power plant(s) or unit(s) is not In case of hydro power plants: One of the following conditions must apply: o o The project activity is implemented in an existing single The project activity is implemented in an existing single or multiple o The project activity results in new single or multiple reservoirs and the power density of each reservoir, as per the definitions given in the Project Emissions section, is greater than 4 W/m 2 after the implementation of the project activity; In case of hydro power plants using multiple reservoirs This methodology is not applicable to project activities that involve switching from fossil fuels to renewable energy sources at the site of the project activity, since in this case the baseline may be the continued use of fossil fuels at the site; This methodology is not applicable to the biomass fired power plants; This methodology is not applicable to hydro power plants that result in new reservoirs or in the increase in existing reservoirs where the power density of the power plant is less than 4 W/m2. The project activity is the installation of new hydropower plant as confirmed above. Therefore, this para is applicable in the context of the project activity. The project activity is the installation of new hydropower plant as confirmed above. Therefore, this para is not applicable in the context of the project activity. Not applicable Not applicable Applicable: The project activity constructed a new single reservoir. The power density of the project activity is 88.9 W/m 2, which is greater than 4 W/m 2. The same is verified during site visit interview and document review of FSR /12/ and Specifications of equipments /8/. Hence, project complies with one of the conditions. Not applicable as the project uses only new single reservoir and has power density as 88.9 W/m 2, which is greater than 4 W/m 2 The project activity is greenfield hydro power plant as described above therefore this para is not relevant. The project activity is greenfield hydro power plant as described above therefore this para is not relevant. The project activity constructed a new single reservoir. The power density of the project activity is 88.9 W/m 2, which is greater than 4 W/m 2. The same is verified during site visit interview and document review of FSR /12/ and Specifications of equipments /8/. The power density of this new hydroelectric power plant is 88.9 W/m 2 based on the validated values of the total rated capacity of the hydroelectric power plant i.e. 16 MW from approved FSR and the reservoir water surface area when the reservoir is full i.e., 180,000 m 2. Page 16 of 78

17 Findings: CAR#01(a) and CAR#03, please refer Annex2 of this report, where same is discussed completely. Opinion: As described above, the validation team confirms that the selected methodology (ACM0002 Version ) to the proposed CDM project activity is applicable and correctly applied. As confirmed during the site visit, there would be no provision of the any fossil fuel fired generator at the project location for power supply to the plant as the grid will be used as back-up or emergency purposes. Thus, the validation team confirms there are no greenhouse gas emissions occurring with in the proposed CDM project activity boundary as a result of the implementation of the proposed CDM project activity which are expected to contribute more than 1% of the overall expected average annual emissions reductions, which are not addressed by the applied methodology Project boundary Discussion: The spatial scope of the project boundary comprises the project site and all power plants connected physically to the grid, which is defined as EVN (Electricity of Viet Nam) on the basis of information announced by the EVN. There are no significant transmission constraints between the power plants of the EVN. The project boundary and GHG gases are selected transparently and in justified manner as presented below. GHGs involved Description Baseline emissions CO2 Included: Major emission source, which is emitted from the electricity generation by fossil fuel-fired power plants connected to EVN Project emissions CH4 (emissions of CH4 from the reservoir). Excluded: As the power density of the project is 88.9 W/m 2, greater than 10W/m 2 thus, emissions of CH4 from the water reservoir is considered as zero. Leakage N/A Considered zero as per applied methodology Findings: CL#07, please refer Annex2 of this report, where same is discussed completely. Opinion: The project activity is commissioned on 09/04/2010 as confirmed from the commission certificate. During the site visit, the project activity was seen operating and based on the information in the and observations made during the site the validation team confirms that the project boundary is clear and accurate in the context of the project activity and the selection (inclusion and exclusion) of GHGs have been justified transparently and correctly Baseline identification Discussion: The applied methodology ACM0002 Version in the context of the greenfield grid connected hydroelectric plant, which is the project activity, defines the baseline scenario as under; Page 17 of 78

18 Electricity delivered to the grid by the project activity would have otherwise been generated by the operation of gridconnected power plants and by the addition of new generation sources, as reflected in the combined margin (CM) calculations described in the, Tool to calculate the emission factor for an electricity system. As described in the sections B.4, B.6.1 and Annex 3 of, Viet Nam National Grid (EVN) has been identified as the relevant grid to which the project activity ultimately despatches electricity and correctly so as confirmed during site visit and PPA. The emission factor i.e., combined margin, as required by the applied methodology, has been determined by the government agency and endorsed by host Party DNA as confirmed from the Further, the identified baseline is consistent with the outcome of section B.5 of the, where continuation of current situation has been established as the realistic and credible baseline scenario in the absence of the proposed CDM project activity. The weighted average of the operating margin and the build margin emission factor for EVN grid of Viet Nam has thus been determined to be tco2e/mwh (fixed ex-ante), using a OM:BM weight of 50:50 as recommended in the Tool to calculated the emission factor for an electricity system. In addition to this, in accordance to Annex 3 of EB 22, there are no relevant national or sectoral policies and circumstances, which have impact in the identification of the baseline scenario. The same is rightly explained in section B.5 of the for this type of project activities. Thus, the baseline determination is accepted and complies with paragraphs 81 and 82 of version 1.2. Findings: CAR#09, please refer Annex2 of this report, where same is discussed completely. Opinion: The validation team can confirm that a) All the assumptions and data used by the project participants are listed in the, including their references and sources (section B.4, B.6.1 and Annex 3); b) All documentation used is relevant for establishing the baseline scenario and correctly quoted and interpreted in the ; (section B.4, B.5, B.6.1 and Annex 3) c) Assumptions and data used in the identification of the baseline scenario are justified appropriately, supported by evidence and can be deemed reasonable; (section B.4, B.6.1 and Annex 3) d) Relevant national and/or sectoral policies and circumstances are considered and listed in the ; (No contravening regulations were found existing which could impair the selection of identified baseline scenario) e) The approved baseline methodology has been correctly applied to identify the most reasonable baseline scenario and the identified baseline scenario reasonably represents what would occur in the absence of the proposed CDM project activity. (section B.5) The criteria defined in the validation protocol (Annex 1 of this report) and information provided therein along with the review of referenced information with the relevant sources the validation team confirms that the steps undertaken to confirm the identified baseline scenario are reasonably included. The identified baseline scenario is consistent with the applied methodology and similar project activities that are registered with UNFCCC Algorithms and/or formulae used to determine emission reductions Discussion: The emission reductions (ERy) by the project activity during the crediting period is the difference between the baseline emissions (BEy), project emissions (PEy), which is expressed as follows: ER y BE y PE y The applied methodology indicates that there are no leakages to be considered therefore the information in the in this regard is consistent and acceptable. Page 18 of 78

19 Project Emissions (PE): In accordance with the applied methodology, if the power density of the project activity (PD) is greater than 10 W/m 2 : PE HP, y 0 The power density of the project activity (PD) is calculated as follows: Cap PD A PJ PJ Cap A BL BL Where: PD = Power density of the project activity (W/m 2 ) CapPJ = Installed capacity of the hydro power plant after the implementation of the project activity (W). (16 MW is used, installed capacity of the project activity) CapBL = Installed capacity of the hydro power plant before the implementation of the project activity (W). (For new hydro power plants, this value is zero) APJ = Area of the single or multiple reservoirs measured in the surface of the water, after the implementation of the project activity, when the reservoir is full (m 2 ), (180,000 m 2 ) ABL = Area of the single or multiple reservoirs measured in the surface of the water, before the implementation of the project activity, when the reservoir is full (m 2 ). (For new reservoirs, this value is zero) The proposed project activity involves the construction of a new hydropower plant with capacity (CapPJ) of 16 MW and a new reservoir with surface (APJ) of 180,000 m 2 /, thus ABL= 0 and CapBL= 0. The power density of the project activity is derived as follows: PD= (16 x10 6 0) W / (18 x10 4 0) m 2 = W/m 2 = 88.9 W/m 2 Considering the value of PD is greater than 10 W/m 2, therefore, the project emission is zero, which is in accordance with the applied methodology. Therefore, the monitoring of total electricity generation TEGy was excluded from the monitoring section, whereas, CapPJ and APJ will be monitored during crediting period as per the requirements of methodology. Baseline Emissions (BE): The baseline emissions are calculated as under; BE y EG PJ,y EF grid,cm,y Where, BEy EGPJ,y EFgrid,CM,y = Baseline emissions in year y (tco2) = Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh) = Combined margin CO2 emission factor for grid connected power generation in year y calculated using the latest version of the Tool to calculate the emission factor for an electricity system (tco2/mwh) EGPJ,y and EGfacility,y, in the proposed CDM project activity are considered equal in accordance with equation 7 of applied methodology for greenfield projects. Therefore, the final derived equation from above from equations is as per the methodology. BEy = EG facility, y * EFgrid,CM,y Page 19 of 78

20 The applied values are for EGfacility,y and EFgrid,CM,y are as under; EGfacility,y = 61,875 MWh EFgrid,CM,y = tco2e/mwh Parameters Index Value Unit/Remarks Installed Capacity A 16 MW Operation hours B Hours/year PLF C= A*B/(365 days/y*24 hours/day) % Auxiliary/Parasitic load D 1 % EGfacility,y (calculated) A*B*(100%-D) 61,875 MWh/year The input parameter for the determination of EGfacility,y has been validated from the FSR and complies with the requirement of EB48 Annex11. The value of emission factor of grid, i.e., EFgrid,CM,y has been determined based on the Tool to calculate the emission factor for an electricity system ver and using 50% weight for OM and BM as appropriate in the context of the project activity. It is confirmed from the relevant website // that the data applied to calculate is latest at the time of publication of the (commencement of validation with the DOE (KBS)). Parameters Value Unit/Remarks EFOM,y tco2e/mwh Based on year 2006, 2007 and 2008 data EFBM,y tco2e/mwh Based on year 2008 data Weight applied 50 % 50% is applied for EFOM,y and EFBM,y EFgrid,CM,y tco2e/mwh Consistent with public source // The stepwise approach for calculating the simple OM and BM in line with Tool to calculate the emission factor for an electricity system Version /54/ is detailed in the section B.6.1 and Annex 3 of the with reproducible spreadsheets. Therefore, the emissions reductions due to the project activity are estimated ex-ante to be 35,664 tco2e per year in the using the input values validated above. Findings: CL#02 (b), please refer Annex2 of this report, where same is discussed completely. Opinion: The validation team confirms that a) All assumptions and data used by the project participants are listed in the, including their references and sources; b) All documentation used by project participants as the basis for assumptions and source of data is correctly quoted and interpreted in the ; c) All values used in the are considered reasonable in the context of the proposed CDM project activity; d) The baseline methodology has been applied correctly to calculate project emissions, baseline emissions, leakage and emission reductions; e) All estimates of the baseline emissions can be replicated using the data and parameter values provided in the and corresponding spreadsheets. Page 20 of 78

21 The validation team confirms that it has verified, as referenced above, the data and parameters used in the equations, including references to any other data sources used. 4.6 Additionality Prior consideration of the clean development mechanism Discussion: The start date of the project activity in the is 01/03/2006 being the date on which contract for construction of permanent civil structure for tunnel is signed for the given project activity between host PP and Long Duong Construction and Trading Company Limited. The validation team also observed that the project participant had not committed to expenditures related to the implementation or construction of the project activity prior to 01/03/2006 /33/. The next key agreement is the purchase of equipments related to power generation (hydro turbines, electrical generators, and auxiliary equipments) signed between PP and Tata International Limited (equipment supplier) on 11/09/2006 /14/ which is after the start date mentioned above. Therefore validation team confirms that the start date is in conformity with Glossary of CDM Terms /54/ as it is earliest event pertaining to commitment of expenditure towards the implementation of the proposed CDM project activity. The was web-hosted for global stakeholders comments from 24/11/2011 to 23/12/2011, which is subsequent to the start date of the proposed project activity. Since, the start date of the project activity is prior to the publication of for GSC and the start date of the project activity is before August 02, 2008, as per Annex 13 of EB 62, PP was required to demonstrate: a) Awareness of the CDM prior to the project activity start date and that the benefits of the CDM were a decisive factor in the decision to proceed with the project; and b) Continuing and real actions were taken to secure CDM status for the project in parallel with its implementation. Awareness of the CDM prior to the project activity start date and that the benefits of the CDM were a decisive factor in the decision to proceed with the project; The CDM awareness of the PP is confirmed from the ERPA signed with the first buyer i.e., Asia Carbon Viet Nam dated 11/10/2005, submission of official letter dated 05/11/2005 to DNA of Viet Nam by the PP to obtain LoA and submission of official letter 14/11/2005 to DNA of Viet Nam by Son La People s Committee to obtain LoA. As these documents are prior to the start date of the project activity, the requirement of CDM awareness prior to serious CDM consideration is found meeting and satisfactory. The investment decision to proceed with the CDM project was taken on 09/02/2006 /32/ based on the finalized and approved FSR presented on 06/01/2006 /29/. The verified document in this regards is the Board Resolution that was explicit in mentioning that the project is not financially viable without the CDM benefits. The Board Resolution was found authentic based on local expertise and was sufficient to confirm the serious CDM consideration. A brief chronology of the events that occurred prior to the investment decision till the recent publication of the for the proposed CDM project activity is included below; CDM Trail Date References/Purpose Signing the ERPA with the first Buyer (ACVN {Asia Carbon Viet Nam}) Submission the official letter to DNA Viet Nam by the project owner to obtain LoA 11/10/2005 /26/ CDM awareness 05/11/2005 /27/ CDM awareness Submission the official letter to DNA Viet Nam by Son La 14/11/2005 /28/ CDM awareness Page 21 of 78

22 People s Committee to obtain LoA Approval on FSR by the Son La s Department of Industry (Input values for IRR) Board Resolution (Investment Decision) Signing the first contract for the construction of tunnel (Start Date) Certifying Project Idea Note (PIN) of the project under CDM by the Ministry of Natural Resources and Environment Signing the CDM development contract with the first CDM consultant (RCEE {energy and environment joint stọck company}) 06/01/2006 /29/ 09/02/2006 /32/ Serious CDM consideration 01/03/2006 /33/ Implementation of PA 05/05/2006 /34/ Real and continuing actions 10/08/2006 /35/ Real and continuing actions Starting the first validation process i.e. uploading the for 07/09/2006 /56/ Real and GSC 1 continuing actions Issuing the LoA 15/12/2006 /1/ Communication from PP to the first CDM consultant to demonstrate the progress, while the project was still under validation Reporting the CDM implementation status to the DNA 05/12/2007 As above 21/10/2008 Communication from PP to the first CDM consultant to 25/06/2009 terminate the contract Reporting the CDM implementation status to the DNA 09/12/2008 Notifying the withdraw of one project participant approved in the LoA to the DNA 18/09/2007 The project was under CDM validation in this period 23/09/2009 Communication from PP to invite new consultant 23/12/2009 Terminating the first validation contract with DOE 2 03/04/2010 Real and continuing actions Signing of PPA 08/04/2010 Implementation of PA Commercial Operation (Implementation of PA) 09/04/2010 Complete implementation of PA Signing the new ERPA with the second Buyer and new CDM consultant) 15/07/2010 /40/ Reporting the CDM implementation status to the DNA 15/10/2010 Communication to DNA Contract with KBS (DOE) for current validation 07/11/2011 Real and continuing actions Starting the second (current) validation process i.e. uploading the for GSC 3 24/11/2011 /56/ Continuing and real actions were taken to secure CDM status for the project in parallel with its implementation Page 22 of 78