FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFCAL USE ONLY PROJECT APPRASAL DOCUMENT OF THE NDONESA: BEKAS LANDFLL GAS RECOVERY PROJECT FOR A Report No: D NETHERLANDS CLEAN DEVELOPMENT MECHANSM FACLTY EMSSONS REDUCTON PURCHASE AGREEMENT N THE AMOUNT OF APPROXMATELY US$3.5 MLLON WTH PT GKOKO KOGYO NDONESA (GKOKO) February 12,2008 Rural Development, Natural Resources and Environment Sector Unit Sustainable Development Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. ts contents may not otherwise be disclosed without World Bank authorization.

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3 CURRENCY EQUVALENTS Exchange Rate Effective February 12,2008 Currency Unit = ndonesia Rupiah US$1 = DR 9, FSCAL YEAR January 1 - December 3 1 ABBREVATONS AND ACRONYMS AAA BAPEDAL BAU BOO BP Btu C CDM CERs co2 CH4 CO DAK DAU DNA DOE DPRD EAP EB ENVCF ERPA ERs GHGs EA EMP GO1 HAP H2 Ha CR DR RR S0 Kg Analytical and Advisory Activities Badan Pengendalian Dampak L ngkungan Business as usual Build Own and Operate Bank Policy British thermal unit Celsius Clean Development Mechanism Certified Emission Reductions Carbon dioxide Methane Carbon Monoxide Dana Alokasi Khusus Dana Alokasi Umum Designated National Authority Designated Operating Entity Dewan Perwakilan Rakyat Daerah East Asia and Pacific Region Executive Board Environment Department - Carbon Finance Emissions Reduction Purchase Agreement Emission reductions Greenhouse gases Environmental Assessment Environment Management Plan Government of ndonesia Hazardous air pollutants Hydrogen Hectare mplementation Completion Report ndonesian Rupiah nternal rate of return nternational Standards Organization Kilogram

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5 Km KUDP kw LFG LO1 LUCF m3 MOA MOU MSWM Mg NCDMF NGO NPV NOx Nm3 O&M OP PCF PDD PT DR SWM RT RW tc02e 1 TPA UK EPA 1 E C C USEPA vow Kilometer Kalimantan Urban Development Program Kilowatt Landfill gas Letter of ntent Land use change and forestry Cubic meter Memorandum of Agreement Memorandum of Understanding Municipal Solid Waste Management Milligram The Netherlands Clean Development Facility Non-governmental organization Net present value Nitrogen Oxides Normal Cubic Meter Operating and maintenance Operational Policy Prototype Carbon Fund Project Design Document Perusahaan Terbatas ndonesian Rupiah Solid waste management Rukun Tetangga (Neighborhood Unit) Rukun Warga (Community Unit) Tons of C02 equivalent Tempat Pembuangan Akhir United Kingdom Environmental Protection Agency Unit Pelaksanan Teknis Dinas United Nations Framework Conventions on Climate Change United States Environmental Protection Agency Volatile organic waste Vice President: Country Director: Sector Director: Sector Manager: Sector Manager: Task Team Leader: James W. Adams, EAPVP Joachim von Amsberg, EACF Christian Delvoie, EASSD Rahul Raturi, EASRE Sonia Hammam, EASS James Orehrnie Monday, EASRE

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7 NDONESA Bekasi Landfill Gas Recovery Project TABLE OF CONTENTS A. STRATEGC CONTEXT AND RATONALE Country and Sector ssues Rationale for World Bank nvolvement Higher Level Objectives to which the Project Contributes B. PROJECT DESCRPTON Lending nstrument Project Background Development Objective and Key ndicators Project Components Alternatives Considered and Reasons for Rejection C. MPLEMENTATON nstitutional and mplementation Arrangements Monitoring and Evaluation of Outcomes and Results Sustainabillty Critical Risks and Possible Controversial Aspects D. APPRASAL SUMMARY Financial Analysis Fiduciary Aspects Technical Analysis Environmental Analysis Social Analysis Safeguard Policies Policy Exceptions and Readiness Annex 1 : Country and Sector Background Annex 3: Detailed Project Description Annex 5: Financial Management and Fiduciary ssues Annex 6: Summary of Memorandum of Agreement between the Project Sponsor and the City of Bekasi Annex 7: Safeguards ssues Annex 8: Country at a Glance Annex 9: Documents in the Project File Annex 10: Project Preparation and Supervision Annex 1 : Map Map # BRD

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9 NDONESA BEKAS LANDFLL GAS RECOVERY PROJECT PROJECT APPRASAL DOCUMENT EAST ASA AND PACFC EASRE Date: February 12,2008 Country Director: Joachim von Amsberg Sector ManagerDirector: Rahul Raturil Christian Delvoie Team Leader: James Orehrnie Monday Sectors: Solid Waste Management Themes: Climate Change Project D: PO99679 Environmental screening category: B Safeguard screening category: B Lending nstrument: NA. Carbon Fund Project Financing Data [ ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ X ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): NA Proposed terms: n negotiated prices designated in Euros per ton for Certified Emission Reductions (CERs), paid annually. Financing Plan (US$m) Source Local Foreign Total Borrower NCDMF 3,500,000 Total: 3,500,000 3,500,000 3,500,000 Borrower: NA. The Bank, as trustee for the Netherlands Clean Development Mechanism Facility, will sign the purchase agreement with PT. Gikoko Kogyo ndonesia Responsible Agency: N/A Estimated disbursements (Bank FY/US$m) FY da 4nnual da Zumulative da Project implementation period: 7 years Expected effectiveness date: February 28, 2008 Expected closing date: December 31, 2015 n/a da da da da da da da da

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11 ( Does the project require any exceptions from Bank policies? [ ]Yes [X No Have these been approved by Bank management? NA Does the project include any critical risks rated "substantial" or "high"? [ ]Yes [X No fl Project development objective The development objective is to collect and flare methane produced fi-om solid waste disposed in the City of Bekasi's TPA Sumur Batu landfill and thus reduce GHG emissions. This objective will be facilitated through a Carbon Finance transaction between the World Bank and the project developer. The key performance indicators will include : a) the annual volume of methane collected and flared; and a Project description: The project will reduce emissions of methane gas by installation of a capture and flaring facility at the TPA Surnur Batu. Which safeguard policies are triggered, if any? Environmental Assessment Policy (OPBP 4.01) Significant, non-standard conditions, if any, for: Board presentation: NA. Loanlcredit effectiveness: NA. Covenants applicable to project implementation: 1. Registration of the Project with the CDM Executive Board. 2. Annual certification of ERs, including implementation of the Environment Management Plan, and Community Development Plan.

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13 A. STRATEGC CONTEXT AND RATONALE 1. Country and Sector ssues 1. Since the 1997 crisis, ndonesia has experienced strong economic growth that is both robust and stable. Economic growth has been more that 5 percent since 2004 and was expected to rise to around 6.5 percent by the end of As the economy grows, investment to GDP ratio has also grown, from 19 percent in 2004 to 24 percent in 2006 and much of this growth has occurred in urban areas where both increasing population and rising incomes have put additional pressure on already fragile ecosystems. For instance, pollution from urbanization, motorization, and industrialization have contributed to significant deterioration of air quality; poor solid and hazardous waste management has degraded not only air, but land and water quality; and all of these factors continue to have a negative effect on human health. 2. Despite ndonesia's strong economic performance, several regions and sectors in ndonesia are lagging behind, creating pockets of worsening poverty. Today, close to 49 percent of ndonesians live on between $1-$2/day on the lower rungs of the socio-economic ladder and are thus highly vulnerable to shocks. 3. n many municipalities in ndonesia, revenues for solid waste management (SWM) have not kept pace with increasing quantities of waste that have resulted from population and economic growth. As a result, most landfills in ndonesia follow the practice of controlled open dumping which leads to inadequate waste disposal and many of the growing negative environmental impacts in urban areas. For example, much of the improperly disposed urban solid waste finds its way into drainage channels and contributes to flooding and sustains breeding areas for disease vectors. Furthermore, problems persist at relatively wellmaintained landfill sites such as poor leachate management and uncontrolled emissions of methane (CH4), a greenhouse gas (GHG) that is generated through the anaerobic degradation of organic matter in landfills and dump sites. Methane has twenty one times the global warming potential (GWP) of C02, which means it is twenty one times more efficient at trapping heat within the earth's atmosphere than an equivalent ton of C According to the Fourth Assessment Report of the ntergovernmental Panel on Climate Change (PCC) in 2007,' warming of the climate system is "unequivocal" and ndonesia is at the centre of the global climate change debate. The country ranks 15 among the highest emitters of GHGs from energy use in the world and when emissions from land use, land use change, and forestry (LULUCF) are included; ndonesia becomes the third largest GHG emitter in the world.2 5. The impacts of projected changes in the world's climate are expected to be far-reaching and most pronounced for developing countries. These impacts may threaten many of ndonesia's "Climate Change 2007: The Physical Science Basis, Summary for Policymakers," Working Group Contribution to the ntergovernmental Panel on Climate Change, Fourth Assessment Report, February "ndonesia and Climate Change: Working Paper on Current Status and Policies." / lPEACEClimateChange.pdf.

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15 development gains of the last several decades. For example, the country's thousands of islands face the risks associated with sea level rise. n addition, the low-lying coastal regions of these islands are home to half of ndonesia's population and some of its most productive agricultural areas. ndonesia is also home to some of the world's richest biodiversity and a significant share of the planet's remaining primary rainforests, all of which are threatened by global climate change. 6. As part of the country's growing response to climate change, ndonesia signed the Kyoto Protocol of the United Nations Framework Conventions on Climate Change (UNFCCC) in 1997 and ratified it in 2004 through Law No. 17J2004. The objective of the Kyoto Protocol is the stabilization of GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.3 The Kyoto Protocol entered into force on February 16, 2005 and established GHG emission-reduction targets for Annex (developed) countries. Overall, the Kyoto Protocol states that emissions of six GHGs must be reduced 5.2 percent below their 1990 levels, on average, between 2008 and Non- Annex (developing) countries, such as ndonesia, have no quantitative commitment under the Kyoto Protocol. n addition to domestic actions, the Kyoto Protocol allows countries to meet their commitments through "flexible mechanisms" including the Clean Development Mechanism (CDM) which provides for the crediting of emission offsets resulting from projects in non-annex countries such as ndonesia. Once credited, the offsets are called Certified Emission Reductions (CERs) which can be sold at a price to governments or other entities with obligations under the Kyoto Protocol. 7. As a non-annex Party to the Kyoto Protocol, ndonesia can participate in the CDM and has strong interest in meaningful participation in the market for CERs including credits produced from the SWM sector. The financial incentives from market mechanisms such as the CDM offer ndonesia an opportunity to improve SWM activities while also mitigating global climate change. For example, higher volumes of CERs are dependent on maximizing the amount of methane collected and destroyed, which in turn is dependent on improved solid waste collection and disposal practices that also reduce air, land, and water pollution in ndonesia's urban areas. 8. Most recently, in December 2007, ndonesia hosted the 1 3 Conference ~ ~ of Parties (COP) to the UNFCCC on the island of Bali. The Bali meetings set a clear agenda for key issues that will be negotiated up to 2009 including further action on ways to reduce GHGs and how to scale-up the use of climate-fhendly technologies in developing countries. The success of COP 13 was essential for providing a "roadmap" for concluding negotiations in 2009 to ensure a seamless transition for a new climate deal to enter into force by 2013 once the first phase of the Kyoto Protocol expires at the end of This proposed carbon finance operation (CFO) will facilitate the purchase of CERs that result from the construction of a landfill gas (LFG) flaring facility that will capture and destroy Article 2. The United Nations Framework Convention on Climate Change. ht~:!~unfccc.intlresource/docs,'con~~kp/kpen~,html

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17 methane from the TPA Sumur Batu Landfill in the City of Bekasi, West Java, ndonesia. The LFG flaring activities will demonstrate the use of a technology that takes into consideration ndonesia's tropical environment and other local factors as well as create a tradable commodity in the form of GHG emission reduction credits which are a financial incentive to improve waste management practices as well as mitigate emissions that contribute to climate change. The collection and subsequent combustion of methane through flaring will result in emission reductions that will be quantifiable and can be sold in the emerging carbon trading market. The successful implementation of this project will result in not only the generation of a revenue stream through the sale of CER credits, but also help finance sustainable municipal solid waste management (MSWM) activities at the project site and serve as example that can be replicated at other landfills in ndonesia's rapidly growing urban areas. 2. Rationale for World Bank nvolvement 10. The World Bank's overall mission of reducing poverty and promoting longer-term sustainable development is now inextricably linked to the effects of climate change and efforts to manage these effects. The potential impacts of climate change jeopardize many of the development gains of recent decades. Moreover, billions of dollars in additional investments are required to mitigate and adapt to the impacts of climate change. 11. For decades, the World Bank has been supporting client countries to address their environmental challenges and has been at the forefront of activities to reduce global atmospheric GHGs and mitigate the effects of climate change. These activities are spread across a wide spectrum of interventions including projects in the energy, urban, transport, and forestry sectors, as well as Analytical and Advisory Activities (AAA) such as the East Asia and Pacific Region (EAP) Environment Monitor Series, the annual State of the Carbon Market Report, and development of the new nvestment Framework for Clean Energy and Development. Client countries also benefit from global environmental programs administered by the World Bank such as the Global Environment Facility (GEF) and carbon revenues through the Carbon Finance program. 12. Beginning with the establishment of the Prototype Carbon Fund (PCF) in 1999 as a pilot program to combat climate change through public private partnerships, the World Bank's Carbon Finance program has developed a number of carbon funds to support a diverse portfolio of projects that reduce GHGs emissions. These Carbon Funds support the objectives of the second pillar of the World Bank's nvestment Framework for Clean Energy and Development by providing incentives to promote low-carbon economies in client countries. 13. n 2002, the World Bank announced an agreement with the Government of The Netherlands to establish The Netherlands Clean Development Mechanism Facility (NCDMF) to purchase emission reduction credits from projects in the following categories: (i) renewable energy technology, such as geothermal, wind, solar, and small-scale hydro-power; (ii) clean, sustainably grown biomass; (iii) energy efficiency improvement; (iv) fossil fuel switch and methane recovery; and (v) sequestration. Since then, the NCDMF has agreed to purchase CERs from the LFG flaring activities in several ndonesian cities and several other sectors in

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19 the country. The World Bank has also signed Letters of ntent (LOS) with ndonesia-based project developers that are developing projects for geothermal energy production and methane recovery at landfills. For ndonesia, these agreements have provided valuable experience in both knowledge and technical transfer that are strengthening the country's capacity to participate in the emerging global carbon market. 14. The World Bank has been a pioneer in the carbon market helping to develop policy, regulatory, fiscal, and financial instruments across sectors and countries to generate incentives to reduce GHGs while promoting sustainable development and offering a learning-by-doing opportunity to its stakeholders. The World Bank's involvement helps to reduce the risks associated with such financial transactions in developing countries as well as overcoming the barriers to the transfer of new technologies that reduce GHG emissions. For example, Carbon Finance revenues have proved to be a valuable incentive for improving waste management practices and reducing landfill methane emissions. As more projects that reduce GHGs demonstrate results, and the costs of technologes decline, these activities are likely to be mainstreamed into more World Bank operations. 15. Discussions among the Parties to the LJNFCCC on a long-term framework for the post-kyoto 2012 period have begun, and continued in Bali in December However, negotiations are not expected to conclude before at the earliest, followed by a ratification process. Hence there is a period of uncertainty regarding the future international climate regime and whether incentives to reduce emissions from deforestation will be included. 16. n line with the catalytic function played by the World Bank in the development of the carbon market thus far, and with a view toward developing and testing new approaches that can help address these important constraints, two carbon finance instruments were approved by the World Bank in September 2007, namely: the Carbon Partnership Facility (CPF) and the Forest Carbon Partnership Facility (FCPF). Both Facilities aim to assist climate change mitigation, with a particular focus on the post-2012 period. Both will include a program preparation fund to provide technical assistance, as well as a carbon fund to purchase carbon credits derived from GHG emission-reduction investments and client country activities. Both facilities are being developed as part of the second pillar of the World Bank's "nvestment Framework for Clean Energy and Development (cef),"~ which seeks to help lower future emission trajectories and promote lower-carbon economic growth in the developing world and transition economies. Efforts to launch and capitalize the two new funds are already underway. 17. Also, this project is fully consistent with the World Bank's mandate to spur the development of the CDM market as well as with Pillar 2: mproving Services for the Poor, of the World Bank's ndonesia Country Assistance Strategy ( ). The Project Developer is providing funds from a portion of the CER revenue for improved service provision in the waste sector and social benefits for the communities living near the landfill site. Therefore, 4 See "An nvestment Framework for Clean Energy and Development: A Progress Report (CEF)," August , SecM ; and its follow-up action plan, "Clean Energy for Development nvestment Framework: The World Bank Group Action Plan," March 6,2007, SecM [DNSecM , FCSecM , MGN SecM

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21 this CDM project will enhance the sustainability of effective SWM and result in benefits for the local community. 18. The World Bank has undertaken a pioneering role in developing the CDM market in ndonesia, including capacity building workshops and the first Emissions Reduction Purchase Agreement (ERPA) signed in EAP with ndonesia-based cement producer, NDOCEMENT in With the prior experience of developing other Carbon Finance projects in the SWM sector including the ndonesia Pontianak Landfill Gas Recovery Project (P104482) in 2007, the World Bank is well positioned to facilitate the Carbon Finance transaction for the purchase of CERs from the Bekasi Landfill Gas Recovery Project. 3. Higher Level Objectives to which the Project Contributes 19. The development objective is to collect and flare methane produced from solid waste disposed in the City of Bekasi's TPA Sumur Batu landfill and thus reduce GHG emissions. This objective will be facilitated through a Carbon Finance transaction between the World Bank and the project developer. n addition, a percentage of the project developer's revenues from the CERs will be shared with the city to help improve solid waste collection and disposal within the municipality resulting in various public health benefits. Moreover, implementation of this CFO can also act as a catalyst for the development of similar CDM projects in the municipal solid waste sector, benefiting not only reductions of global GHG emissions, but improvements to solid waste collection and disposal throughout ndonesia. B. PROJECT DESCRPTON 1. Lending nstrument 20. The World Bank is not financing the LFG collection and flaring systems that will result in emission reductions. The World Bank will purchase the CER credits resulting from the project on behalf of the NCDMF from the project developer, a private enterprise that is selffinancing the project and will be the owner of the CERs. The NCDMF will purchase approximately 250,000 tons of C02 equivalent (tc02e) of CERs from 2008 to ERPA payments will be made periodically subject to verification by an independent Designated Operating Entity (DOE) accredited by the CDM Executive Board (EB) that was established under the Kyoto Protocol. The NCDMF will coord.inate both the verification and certification of emission reductions generated periodically by the project developer. DOE has two functions: 1) to validate and subsequently request registration of a proposed CDM project activity; and 2) to verify emission reduction of a registered CDM project, to certify it as appropriate and to request the CDB board to issue CERs.

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23 2. Project Background The City of Bekasi is situated within the ndonesian province of West Java, sharing its administrative boundaries with the special province of DK Jakarta to the west, Bogor Regency (Kabupaten) to the south, and Bekasi Regency to the north and east. A map of the project site is in Annex 11. The City of Bekasi established the TPA Sumur Batu landfill in 2003 on an allocation of 10 hectares of land bordering the northeast boundary of TPA Bantar Gebang (DK Jakarta's landfill) and has a design capacity of approximately 2 million m3. The city, like many others in ndonesia, suffers fiom an inability to cope with waste generation and disposal. The City of Bekasi currently uses a fleet of 48 dump trucks, 15 armrolls, and 1 pickup truck to collect MSW and transport it to TPA Surnur Batu. Municipal solid waste (MSW) generation is estimated at around 7,227 m3/day of which only 1,829 m3/day is collected and disposed of at the landfill. Therefore, the ability to provide an adequate collection system is restricted due to the limited daily haulage capacity of the city's truck fleet. The City of Bekasi's intent in undertaking this CDM project is to generate a much needed revenue stream to improve MSW management. 22. n May 2006, the City of Bekasi signed an Lo1 with the World Bank, as trustee of the NCDMF to sell CERs from this CDM project to participants in the NCDMF. As the City of Bekasi lacks the capacity to build and operate the LFG flaring facility on its own, it has identified a project developer to build, own, operate, and transfer (BOOT) the LFG flaring facility. The City of Bekasi will continue to own and operate the landfill and maintain waste collection and disposal services, but the project developer will own the LFG collection and flaring facilities and the CERs resulting from the flaring of methane. Project Developer 23. The project developer, PT Gikoko Kogyo ndonesia (Gikoko) is an engineering company that designs, manufacturers, and installs power plants for industrial pollution control, waste management, and energy recovery systems in ndonesia. The company was established over 40 years ago in ndonesia and has been manufacturing equipment at its two nternational Standards Organization (SO) 9001 certified plants in metropolitan Jakarta since ts clients have included multinational automotive, chemical, food, and consumer product manufacturers as well as public utility companies in ndonesia. Gikoko has participated in several World Bank sponsored CDM capacity building workshops. The company's commitment to CDM is hrther underscored by its development of the first LFG flaring CDM project in ndonesia, the Pontianak Landfill Gas Recovery Project (P104482) for which an ERPA was signed in June 2007 as well as an umbrella Lo1 the company signed with the World Bank to develop a series of CDM projects that will deliver 2 million tc02e in ndonesia. 24. The World Bank is also involved in a similar CFO in the ndonesian city of Makassar and the city has indicated to the World Bank that they have also selected Gikoko to develop their project. The CERs from these three projects, namely Pontianak, Makassar, and Bekasi will contribute to the overall total in the umbrella Lo1 that the World Bank has signed with Gikoko.

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25 Approvals by Relevant Authorities 25. The Lo1 for the Bekasi LFG project was signed between the World Bank and the City of Bekasi on May 3, 2006 and first amended on July 15, 2006 to accommodate the city's request for the World Bank to pre-finance the cost of the feasibility study, and amended a second time on October 4, 2007 to extend the validity period of the Lo1 to accommodate the completion of the tender and award process for the selection of the Gikoko as the project developer. The City of Bekasi and the project developer signed a Memorandum of Agreement (MoA) on November 27, 2007, transferring the ownership rights of the CERs from the City of Bekasi to Gikoko. The MoA also describes a revenue sharing agreement between the two parties and the rights and responsibilities of each party. Since the City of Bekasi has transferred ownership rights of the CERs to Gikoko, the ERPA will be between Gikoko and the World Bank. 26. On January 4, 2008, Gikoko and the City of Bekasi submitted the project to ndonesia's Designated National Authority (DNA)~ for CDM for review and approval. On January 3rd, 2008, the World Bank submitted the Project Design Document (PDD) to the validators. The validators are currently scheduled to carryout their field visits in mid February This project meets all the criteria for all the required approvals; therefore, registration of the project with the UNFCCC Executive Board is expected by June The ERPA between the World Bank and Gikoko is expected to be signed before the Letter of Approval (LoA) is issued by the DNA and before the project is registered with the UNFCCC EB. 3. Development Objective and Key ndicators 27. The development objective is to reduce methane emissions from solid waste disposed in the TPA Sumur Batu landfill, Bekasi, West Java, ndonesia, through a carbon finance transaction between the World Bank-managed NCDMF and the project developer, Gikoko. The key indicators will be: (a) the annual volume of methane collected (m3); (b) the annual volume of methane destroyed by flaring (m3); and (c) the CER credits created and traded annually (tc02e). 28. n addition to the global benefits of methane reductions through LFG collection and flaring, the agreement between the project developer and the municipality will provide hnds from the CER revenues to improve landfill management and waste collection, as well as social benefits for the surrounding communities and waste pickers who depend on the landfill for their livelihoods. DNA - Designated National Authority, a body appointed by a CDM host country to oversee CDM implementation within its jurisdiction. n ndonesia the DNA is located in the Ministry of Environment (KLH).

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27 4. Project Components 29. This CFO consists of two distinct project activities: a) Component A: the construction and operation of LFG collection and flaring equipment that will result in CERs; and b) Component B: a Carbon Finance transaction that will facilitate the purchase of the CERs. Component A: The LFG Project 30. The first activity will consist of LFG extraction and flaring facilities that will include the following components: (i) a collection system consisting of horizontal and vertical wells and collection pipes that will be installed in the area containing waste that will be expanded over time as additional areas of the landfill are filled; (ii) LFG pumping equipment including a pipeline and blowers; (iii) LFG treatment and flare systems which will remove moisture and combust the gas; and (iv) monitoring and control systems. The design of the LFG collection and flaring processes are provided in Figure These activities will be accomplished through a public-private sector partnership for investment in MSW management and will be one of the first such agreements in ndonesia. While some previous public-private collaborations in this sector in ndonesia have resulted in mixed outcomes, this CDM activity will demonstrate the potential for removing commercial barriers that have restricted private sector involvement and success in the sector by providing a revenue stream from the sale of CERs from LFG flaring. 32. As part of the BOOT agreement between Gikoko and the City of Bekasi, the two parties signed an MoA that includes a revenue sharing agreement and is based on the experience of another CDM project in ndonesia, the Pontianak Landfill Gas Recovery Project. Article 6 of the MoA states that 10 percent of after tax CER revenues will be transferred in cash to the City of Bekasi in return for a 5 percent annual increase in waste collection rates. An additional 7 percent will be set aside and managed jointly by Gikoko, The City of Bekasi, and the local community, to finance a community development plan, which will provide socio-economic benefits to the community of waste pickers and those communities living around the landfill. Component B : Carbon Finance Transaction 33. The World Bank-managed NCDMF will finance the purchase of CER credits resulting from the LFG flaring component. The design of the landfill gas component was significantly influenced by the attempt to optimize the amount of CERs to be delivered and purchased through this transaction. 34. The purchase will be a performance-based contract under which payments are triggered by successful verification of the reduction of methane emissions by an independent and accredited DOE under the rules of the Kyoto Protocol. The quantity of CERs to be

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29 contracted, the length of time over which the purchase will be made, and the price paid will be agreed between the World Bank and the project developer during ERPA negotiations. Additionally, as part of its responsibilities, the NCDNF will ensure registration of the project with the CDM Executive Board as well as the other activities involved with the purchase of the CERs that result from the LFG flaring project. Figure 1: Schematic Diagram of LFG Collection and Flaring Process :rp Am0l.nt of electnc1ty andlor , other energy for project Small scale electncity generated for project activlty, r LFG combustedin power plant - Quantity of electnc~ty 1 generated ; LFG captured, r L POsQ'Plant, Operation j time 1 Methane j LFG flared content 1 Rum Combustor * Note Measurement tem 5. Lessons Learned and Reflected in the Project Design 35. This was the first LFG activity in Lndonesia that the World Bank agreed to support as a Carbon Finance transaction using the CDM of the Kyoto Protocol. At that time, there was no other LFG flaring projects to be successfully built and operated in ndonesia using this technology. Due to these reasons, uncertainties about the amount of methane that could be generated from a landfill in ndonesia persisted. To help alleviate these concerns, a pump test was conducted to determine gas composition rates at the Sumur Batu landfill. The pump test closely followed the standard pump test methodology, US EPA Method 2E - Determination of Landfill Gas Production Flow Rate. The gas composition was measured in each of the considered wells between November 9-11, The test showed that with improved leachate management (through lowering the level of leachate in the cell); the concentration of

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31 methane could reach up to 55 percent of the volume of the gas measured. The other gases were mainly, C02, CO, and Since the pump tests were carried out at Sumur Batu, the World Bank has signed an ERPA with Gikoko for a similar LFG project in Pontianak, West Kalimantan, ndonesia, where the LFG equipment was installed and has been operational in two cells since June Results from the Pontianak project are also informing the design of this project in terms of methane generation rates and potential CER amounts. CERs from the Pontianak site can be claimed following project registration with the CDM EB of the UNFCCC, which is expected to occur by February This CDM project will provide a strong driver for improved SWM through improved collection of the waste generated in the city. Recent estimates suggest that only about 25 percent of waste generated in the city is collected and disposed of in the landfill. The City of Bekasi, who will continue to be responsible for collection of the city's waste, will have a strong incentive to improve on waste collection as their revenue from the project will grow with increased methane generation rates, a process which ultimately depends on an increase in the raw material, i.e., solid waste. The City of Bekasi has therefore agreed in the MoA to a 5 percent yearly increase in the waste collection rates. This will have additional positive environmental public health outcomes in Bekasi. 38. Sustainability of management improvements depends largely on the leadership and professionalism shown by local government representatives. The World Bank brought about 15 cities together (including Bekasi, Makassar, and Pontianak) for sustainable SWM training in Bali, ndonesia in mid-june 2007, just after the ERPA signing ceremony for the Pontianak LFG Project. The training was led by the World Bank's Solid Waste Management Advisor, the Deal Manager for the Carbon Finance SWM projects in ndonesia, the Task Team Leader for this project, and other technical specialists. Courses were also delivered by the Ministry of Public Works, which recently approved a policy to upgrade all landfills in ndonesia to sanitary landfills. 39. For small landfill sites such as this one, electricity production for off-site supply such as to local communities in addition to flaring is to be avoided, as low gas recovery rates may make this difficult and lead to disquiet among expectant communities. Therefore, there are no plans in this project for off-site supply of electricity. Any decision to generate electricity from this project would only be implemented after the project is operational and there is confirmation that it is cost effective to produce on-site electricity. 40. The Community Development Plan (CDP), which will be developed in close consultations with the beneficiaries, will be finalized before registration of the CDM project. The City of Bekasi and Gikoko have agreed that the allocation of 7 percent of the after tax revenue to finance the CDP will be executed through a fund jointly managed by Bekasi, Gikoko, and the beneficiaries. Modalities for managing this fund will be finalized at the same time as the CDP is finalized.

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33 6. Alternatives Considered and Reasons for Rejection 41. Alternatives to the proposed project that were considered and rejected include: a. Alternative 1: Maintaining the current business as usual (BAU) landfill operational and management practices of controlled open dumping, minimal cell capping on closure, and passive LFG venting. b. Alternative 2:A project to improve landfill management with LFG capture and flaring, but not as a CDM project. c. Alternative 3: LFG collection and utilization for power generation. 42. There are no mandatory laws, regulations, or national standards that require municipal governments in ndonesia to collect and flare methane or to use it for any other purpose. Therefore, Alternatives 2 and 3 are additional to the baseline - Alternative 1. As Alternative 2 has no revenue stream, implementing this alternative would likely divert scarce local government resources away from other waste management activities and therefore is not a viable a1 ternative. 43. Alternative 3 requires a much higher capital investment, technology, expertise, and yearly operating and maintenance costs than Alternatives 1 and 2. This would also divert local government hnds and include significant risk due to the lack of local expertise. The project feasibility study evaluated the potential of Alternative 3 and concluded that it was not commercially viable and did not meet the key requirement for the City of Bekasi: to provide a revenue stream for financing MSW improvements. The assessment in the feasibility study used the current "buy-back" rate for ndonesia's electricity utility, Perusahaan Listrik Negara (PLN) to determine the commercial viability of Alternative 3. The feasibility study determined that at the current "buy-back" rate from a CDM activity for TPA Sumur Batu that involves the utilization of LFG for power generation was not commercially viable. Also, the feasibility study concluded that Alternative 3 would also require significantly more quantities of methane to be generated than what is annually available. 44. Therefore, from the above analysis of likely alternatives to the proposed project, Alternative 1, the BAU scenario, is the only realistic alternative to the project. Notwithstanding this, with regards to Alternative 1, while controlled dumping is the least cost option, it does not meet national environmental regulatory requirements. GHGs are not usually as high in such dumping conditions as in hlly anaerobic sanitary landfill conditions, but other impacts caused by fires, uncontrolled leachate, unstable slopes, and open access of all wastes to disease vectors are significant. n this option, there might be some potential for a modest amount of residual gas capture for flaring after closure of a given area and proper sealing, but probably not enough to justify a CDM project.

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35 C. MPLEMENTATON 1. nstitutional and mplementation Arrangements 45. This CDM project will be implemented under a 15-year BOOT commercial agreement between the project developer, Gikoko and the Municipal Government of the City of Bekasi. According to the MoA between the two parties, the BOOT may be extended beyond the initial 15 years with a new MoA if both parties agree to do so. Under the terms of the BOOT agreement, the city government will continue to own and operate the landfill; manage waste collection and disposal of new waste in active disposal cells; and be responsible for other issues such as leachate control, storm water drainage, and security of the municipal landfill. Gikoko will be responsible for closing waste disposal cells once full and installing, operating, and owning the LFG extraction and flaring facilities that will produce the CERs from the closed cells. The City of Bekasi has transferred the ownership rights of the CER credits from the flaring activities to Gikoko, and as of November 27, 2007, the company holds the ownership rights to the CERs. As per the terms of the MoA between Gikoko and the Bekasi, Gikoko will transfer 10 percent of the after tax CER revenues to Bekasi as its share of the revenue. n return, Bekasi has agreed to increase the waste collection rates by 5 percent annually. Gikoko will set aside an additional 7 percent of the after tax revenue to find the CDP for the nearby communities. The CDP will be jointly managed by the Gikoko, the City of Bekasi, and the local beneficiaries. 46. On March 15th, 2008, the City of Bekasi is planning to celebrate a local anniversary, and to this end, PT Gikoko has agreed to start construction of the LFG facility to ensure it is operational on at least one cell at the landfill. As at the end of January 2008, PT Gikoko had started construction on site and is manufacturing the flaring equipment at their factory. 7. The fully operational LFG collection and flaring project and subsequent CERs will be the basis for an ERPA to be signed between the project developer, Gikoko and the World Bank, the latter serving as the trustee for the NCDMF. The NCDMF will purchase CER credits resulting from the flaring of the methane collected from the landfill through a performancebased contract under which payments are triggered by successful verification of the reduction of methane emissions by an independent, accredited DOE under the rules of the Kyoto Protocol. The quantity of CERs to be contracted, the length of time over which the purchase will be made, and the price to be paid has been pre-negotiated and agreed between the World Bank and Gikoko. t is expected that once all legal clearances of the negotiated ERPA have been received and after the EAP Vice President has approved the project, the ERPA will be signed. 48. The ERPA and Monitoring Plan will also define other delivery conditions for CERs to be purchased by the NCDMF, as well as monitoring and verification systems and methods. Verification and certification of CERs generated annually by the CDM project will be coordinated by the NCDMF, which will ultimately purchase the CERs. Gikoko will be responsible for periodically monitoring emissions and other relevant parameters, and organizing auditing of the project during implementation.

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37 2. Monitoring and Evaluation of Outcomes and Results 49. Outcomes of the CDM project, including the amount and quality of LFG recovered and flared, will be monitored and evaluated. Once the project is validated by the DOE and registered with the CDM Executive Board as a CDM project, the CER credits created and traded annually will be monitored, verified, and certified so that the project developer can sell the CER credits to the NCDMF. The NCDMF will retain the services of a fully independent DOE accredited by the CDM Executive Board to verify the CERs and create a verification report to be submitted to the CDM Executive Board for CER certification. The verifier will determine whether the project complies with the design and implementation specifications and meets the requirements listed in the Monitoring Plan. Data requirements for the Monitoring Plan have been clearly articulated in the Project Design Document (PDD) submitted to CDM Executive Board. 50. The World Bank will also monitor the implementation of the Environmental Management Plan (EMP) and the CDP for compliance, through half yearly visits to the project site and through review of the Gikoko's periodic progress reports, during the lifetime of the ERPA. 3. Sustainability 5 1. The population of the City of Bekasi is approximately 2 million and estimates for growth of both population and waste production (in absolute terms as well as per capita) will result in more potential methane to be recovered at the landfill site. Financing is the major barrier the City of Bekasi faces for improving the environmental and health impacts of landfill disposal as well as improving the current collection and disposal practices. The proposed project has been designed to overcome ths through a Private Public Partnership whereby the private sector provides the financial means and expertise to improve SWM within the municipality and overcome other significant bamers to sustainability. 52. From the economic point of view, the project developer and the city have an incentive to improve both collection and disposal as the generation of more methane at the landfill will result in additional CER revenues. nvestment into increasing the availability of the primary resource (organic waste) has been built into an agreement with the City of Bekasi in which 10 percent of CER revenues will be allocated and transferred as cash to the City of Bekasi and in return the City has agreed to a 5 percent annual increase waste collection rates. 53. From an engineering perspective, the project design is sound as it incorporates proven technology that has been implemented around the world. The specific project design has taken into account the local conditions at the project site which is in a tropical environment. Final design plans were developed with technical support (design, manufacturing, installation, and commissioning assistance) from a Canadian firm that specializes in LFG systems. The LFG system will be manufactured locally in Gikoko's facility, which will cut costs significantly. This technology has been installed at the Pontianak LFG Project site, on the TPA Batu Layang landfill.

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39 The project is looking at this project as a business opportunity to expand future operations as a manufacturer and supplier of MSW components including LFG systems. Gikoko7s commitment to and ownership of the project is well established as the company's goal is to successfully implement this project in order to expand its business line and investments with larger LFG projects in ndonesia. Gikoko has an umbrella Lo1 with the World Bank to deliver up to 2 million tonnes of CERs, has already signed an ERPA for the Pontianak LFG project, is expected to sign the ERPA for this project and for the Makassar LFG project in February 2008, and has submitted a number of other PNS that are being considered by the World Bank's Carbon Finance Unit. 4. Critical Risks and Possible Controversial Aspects 55. A number of risks have been identified for the project, all of which are deemed manageable. Risks and potential mitigation measures 56. nstitutional andfinancial risks. Financing is the major barrier the City of Bekasi faced in mitigating GHG emission from its landfill as well as improving the environmental and health impacts associated with operating the landfill. The proposed CDM project has been designed to overcome this through a private-public partnership with the project developer, Gikoko, whereby the private sector provides the financial and technical means and expertise to capture and flare the methane from the landfill while simultaneously supporting through the CER revenue agreement, the City of Bekasi's continued and expanded landfill operational commitments. 57. The required investment for the LFG collection and flaring systems is relatively modest and the return on investment is significant so the financial risk is low. For this project, Gikoko will incur an aggregate capital investment of about US$900,000 upon implementation and further investments over the next few years to operate and expand LFG operations to newly closed cells will bring total cost to approximately US$3.5 million. The project developer plans to finance the investment entirely from proceeds of the advance payment received from execution of the ERPA for the Pontianak LFG Project. The financial risk assessment undertaken by the World Bank as part of its due diligence review Gikoko confirms that Gikoko could not adequately finance this project without the advanced payment proceeds to be received under the Pontianak LFG project. 58. Financial analysis for this project indicates an internal rate of return (RR) of 32 percent on the investment over a 7 year life, at an assumed methane collection efficiency of 50 percent. At a conservative estimate of 30 percent collection efficiency, the RR drops to around 15 percent. The project developer considers this as an adequate return on their investment. The proposed investment generates no financial benefit without the CDM related income from the sale of CERs.

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41 59. Technology risk. The LFG extraction and flaring facility is based on a mature and proven technology which is widely used in many developed countries. However, in ndonesia these technologies are largely unknown. The project developer is a well established company that has been operating in ndonesia for four decades designing, manufacturing, and installing environmental management systems. The project developer is developing this project with techcal support from a Canadian firm that specializes in LFG systems. Gikoko has already installed the same technology at the TPA Batu Layang landfill, in Pontianak, where it is fully operational. 60. However, there is very little information in general about LFG generation in ndonesia and therefore, some uncertainty regarding the potential emission reduction revenues. Local environmental conditions suggest that the high organic content in landfills in ndonesia should produce large amounts of LFG, especially in the early years after disposal. The Bekasi landfill has been receiving waste since 2003, and has a high organic content of approximately percent. These conditions should also enhance the degradation of the most recalcitrant organics over 10 to 15 years. On the other hand, high internal temperatures, high rainfall, and corresponding high internal leachate levels in the landfill may limit methane generation. Leachate can be overcome through better cell design, management, and closure. The effect of internal core temperatures above 60 degrees C is not currently known. The average yearly emission reductions are estimated to be 91,943 tc02e with a total 643,602 tc02e expected through from Landfills in tropical climates typically have high leachate levels that reduce LFG extraction rates if traditional vertical well collection systems are used. Due to the existing conditions, this project will employ both the traditional vertical well collection system and a horizontal well system. n addition, cells at the Bekasi landfill will be covered with a synthetic blanket as well as a drainage layer and then a vegetative layer. This will limit rainfall infiltration therefore reducing leachate output and improving LFG capture ensuring that all of the waste material in the cell will be in an anaerobic environment. Cells will have to be monitored to ensure that they do not dry out as this will have an impact on degradation and methane generation. Stability of cover as well as rainfall run-off and drainage will be taken into consideration in the project design. The design of this system will employ dropouts within the collection systems to reduce the effects of excessive leachate on the extraction system. Horizontal collection piping will be progressively installed during the filling of new cells and designed to ensure protection from damage during filling operations. This system will increase LFG capture during the period of filling, reduce the impact of high leachate levels, and provide improved leachate drainage within the cells. Gikoko and the City of Bekasi will work closely together to ensure that the collection system is not damaged during the disposal of new waste.

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43 Table 1: Risks and Mitigation Measures Risk Country and sectoral risk The company might not have enough financial and institutional capacity to implement the project. Project preparation might be delayed due to the delays of necessary approvals. LFGflaring technology might fail due to the lack oftechnical capacity of the company. Risk rating M N M Mitigation Measures Government will review and approve the project through the DNA, before registration of the CDM project with the CDM Executive Board. Ministry of Public Works is providing financial support to the City of Bekasi for improvements in landfill management. Gikoko, the project developer has already acquired and developed the technology which is in operation at the Pontianak landfill. Gikoko has enhanced its management and technical capacity by recruiting additional staff and is working with a reputable Canadian firm that provided them with the technology to execute this project. Gikoko have has retained the services of the Canadian firm to provide engineering services for the design of the LFG system for the Bekasi landfill, for operations and maintenance support, and health and safety training. The firm has experience with more than a hundred flare and gas utilization projects in North America and East Asia. Additionally, a team of six technicians will man the operations on site and security will be provided by a team of 4 trained security personnel. With regards financial capacity, the World Bank has agreed to provide Gikoko with a substantial advance payment secured on an irrevocable Letter of Credit, from the Pontianak ERPA to help finance ths project. With the advance payment, Gikoko is in a position to finance Approval and registration of the CDM project locally by the DNA and CDM Executive Board respectively is being pursued and is a necessary pre-requisite before the CERs can be issued and purchased. However, this is not a pre-requisite for ERPA sigrung. This is the second time a LFG project as a CDM project has been undertaken in ndonesia and both are being developed by Gikoko. Gikoko has purchased the technology from a company that had used it in similar ecological climatic conditions internationally and will continue to advise. Gikoko. Gikoko has also recruited additional international technical consultants to ensure

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45 Electricity generation from LFG might be overestimated so that expected cost savings for landfill operations might not be achieved. This project might cause local environmental and social problems due to inadequate environmental measures and land acquisition/resettlement practices. Overall risk rating M M M Gikoko may divert a portion of the methane gas for power generation for on-site use only, but only once adequate quantities of methane are available for flaring to meet its terms under the ERPA. As revenue will only be due to Gikoko from CERs from the flaring operation, no credits will be acceptable for offsets due to power - generation. Environmental and social issues will be managed through the agreed upon EMP and CDP. The implementation will be monitored semi-annually by the World Bank during supervision of the project. n addition, the CDP Fund which is being capitalized from 7 percent of after tax CER revenues will be jointly managed by the City of Bekasi, Gikoko and the beneficiaries of the CDP. The project through its ERPA provisions, financial management, environment and social due diligence work, and mitigation measures provides an acceptable risk management plan. Risk Ratings: H (High), S (Substantial), M (Modest), N (Negligible or low risk) D. APPRASAL SUMMARY 1. Financial Analysis 62. The commercial viability of a CDM methane collection and flaring project is dependent on CER revenue as it is the only revenue stream to cover the project costs. Such projects are also heavily reliant upon the techniques employed for improving the collection efficiency. Efforts to increase this efficiency also contribute to improving local environmental impacts as well as increasing the project's contribution to reducing the potential effects of climate change. The use of substandard means of capping of ndonesia landfill cells (nonenvironmental closure) is a major impediment to the efficient collection of methane gas. Substandard capping allows the ingress of rainfall which increases leachate levels (especially if drainage is substandard also) restricting methane gas extraction under vacuum. Therefore, to increase efficiencies in capturing the methane gas to ensure increased revenues, appropriate closure and capping of the cell is required which in turn requires a significant investment. 63. The feasibility study for developing landfill gas flaring at the Bekasi landfill analyzed the cost and benefits of three LFG collection efficiency rates, 30 percent, 50 percent, and 70 percent. The analysis for the feasibility study assumed the following collection efficiencies and investment scenarios: 30 percent assumed minimal investment; 300mm capping layer poorly compacted.

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47 50 percent assumed investment into standard landfill capping techniques, lmeter of compacted soil. 70 percent assumed investment into entombment of cells using a synthetic capping blanket, drainage layer, and vegetative layer. 64. The analysis found that greater investments in landfill improvements could substantially improve the potential emission reductions. The project sponsor has decided to make the necessary investments to achieve a 50 percent efficiency rate which ensure sufficient methane collection while not taking on the additional financial risk associated with a larger investment to attain a 70 percent collection efficiency. Subsequent analysis (after the completion of the feasibility study), which reflects Gikoko's planned design and revised estimates of emission reductions based on the methodology used for the PDD, concluded that a 50 percent methane collection efficiency will result in a project RR of 32 percent. A summary of the financial analysis is in Table 2 and a more detailed description can be found in Annex 5. Table 2: Summary of Financial Analysis Costs nitial Capital nvestment Amount ($US) $901,983 Frequency on implementation ExpansiodExtension of LFG collection system over 7 year life of project Operation & Maintenance costs (7 year project cycle) $965,100 $1,724,200 1 Total 1 $3,591, Project Revenue ( CERs Revenue based on a 7 year ERPA (@ $ tonne C02e) tcoze 643,602 On closure of cells Total of life of project $US $7,723,230, Financial $US ndicators Total Equity $1,867,083 RR NPV Proiect 32.12% Asset 28.63% Discount Rate $US 10.00%,, $1,185, % $779, % $587,320 WACC (asset) $2,52 1,711 -

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49 2. Fiduciary Aspects A fiduciary assessment carried out for this proposed arrangement included a due diligence on the project developer and an assessment of their financial capacity. The assessment has noted that Gikoko is registered as a 100 percent foreign-owned limited liability company in ndonesia and has the required legal registrations to be in business in ndonesia. t is capitalized at Rupiah 7.7 billion, equivalent to US$ 850,000 including cumulative capital reserves of about Rupiah billion (equivalent to US$ 390,000). 66. The financial assessment concluded that fiduciary risks may arise from the project developer's weak financial management capacity and also from significant debt exposure. Some risk mitigation measures are suggested, including requiring the project developer to furnish audited financial statements annually to the World Bank during the tenure of the ERPA. Further, it is recommended that the project developer furnish annually to the City of Bekasi and the World Bank, an independent audited accountability statement confirming and summarizing the project developer's compliance with its obligations with respect to the City of Bekasi (cash transfer of 10 percent after tax revenue )and the provision for their financing of the Community Development Plan (7 percent of after tax revenues). 3. Technical Analysis Table 3: Technical ssues/risks and Mitigation Measures ssues and Risks Poor cell capping and closure due to poor construction, resulting in methane loss outside of the collection system and penetration of rain water resulting in uncontrollable leachate drainage. nefficient LFG collection system, poorly installed, resulting in methane loss in the pipe, leachate flooding the collection system, and air intrusion. Mitigation Measures Proper closure and capping of cells is essential for this project. Gikoko will employ the most appropriate techniques suitable for the local conditions on the ground. This will include use/combination of low permeability mineral layers to a minimum depth of lm and flexible membrane of ample thickness and durability. Gikoko has acquired the technology taking into account these risks and will mitigate these risks through different measures. The collection systems would be able to drain leachate out of it.

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51 Gas leakage from rotary joints. nefficient combustion of methane in the flaring process. Maintenance period or emergency failure of LFG unit. Patented sealing technology (design, seal material, and gas pressurized sealing technique) is adopted. Gikoko has acquired the flaring system to be used from a reputable and experienced Canadian arm of American technical consultants with experience working in landfills in South America and Asia Pacific and has supervised initial scoping surveys, checked on implementation of the LFG collection system, and shall supervise training for operation and maintenance upon completion of the works. The flaring system is designed to achieve efficiency required by the United Kingdom Environment Protection Agency (UKEPA) standards and to satisfy the UNFCCC EB 28 methodology which will be monitored. This system is already in use at the Pontianak site. Gikoko has devised their operations and maintenance plan. Lack of operational knowledge of this new technology. The supplier of the technology will provide warranty and training for the management and operation of the LFG flaring unit. Gikoko has an agreement with their supplier of the technology to: - Train key Gikoko staff on operation and maintenance of the LFG flaring unit. - Technical Guidelines, Operation Manual, and Emergency Response Plan; - On-site technical guidance for operation. Practical on-site expereicne is being obtained at the Pontianak Site.

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53 4. Environmental Analysis 67. The project is classified as a Category B. An Environmental Assessment (EA) was conducted for the LFG collection and flaring system and an EMP was established. t is expected that the adverse environmental impacts such as air pollution due to the installation and operation of LFG collection and flaring facilities are not significant and can be well managed by planned mitigation measures. An environmental due diligence report for the project was disclosed locally on December 13'~, 2007 and in the World Bank's nfoshop on November 26, Under the terms of the MoA between the City of Bekasi and the project developer, the city will continue to be responsible for the collection of waste and operation of the landfill while the project devloper will be responsible for planning, designing, installing, and operating the LFG collection and flaring system. n addition to the global benefits through the combustion of methane, the project will bring in significant positive local environmental consequences because: (a) capturing methane at the levels estimated in the feasibility study will require improved management of leachate and capping for closed cells; (b) waste collection rates are expected to increase due to the investment of CER revenues in capacity improvements. 69. The landfill site is equipped with heavy machines for waste placement as well as leachate collection ditcheslpipes and treatment ponds. Closed cells are covered with soil, and slope protection measures are provided. The City of Bekasi has confirmed that there have been no cases of waste collapses in the past. The Environmental Department of the City of Bekasi is continuously monitoring leachate quality at leachate collection ditches and ponds. 70. Although the Sumur Batu landfill site is located adjacent to the much larger TPA Bantar Gebang landfill that is accepting domestic solid wastes from the City of Jakarta, rain water and leachate flows from both the landfills are mutually separated by drainage and access roads so that the project boundary for this project is hydrologically independent of the drainage systems of the TPA Bantar Gebang landfill. That being the case, the environmental due diligence for this project does not focus on the environmental impacts of Bantar Gebang landfill. 71. The Project Developer, Gikoko, is now involved in another World Bank Carbon Finance project for landfill methane gas capture and flaring in Pontianak, ndonesia and has shown its capability to meet the World Bank's Safeguards Policies during that project's preparation and implementation. Gikoko has 40 years of experience in environmental engineering in ndonesia, and has a CDM team including three environmental staff fully engaged in the CDM business.

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55 5. Social Analysis 72. There are approximately 1,450 scavengers working at the Surnur Batu landfill and they come from different ethnic backgrounds including Sunda and Java. They are not classified as indigenous groups since they are migrants from other regions that are working in the informal sector and not dependent on natural resources. A total of 179 scavengers have built their temporary shelters close to cells 1, 3, and 4. Based on the local Standard Operating Procedures, such buildings are prohibited from being constructed within the landfill area as they may interrupt landfill operational activities and endanger the safety of the inhabitants. 73. n 2004, conflicts arose between the scavengers and the landfill management resulting in the scavengers damaging some property at the landfill site. To avoid further conflicts, the City of Bekasi has allowed the scavengers and their shelters to remain on the condition that they not interrupt and damage the facilities belonging to the City of Bekasi's, technical implementing unit, UPTD. Currently, only 5 UPTD staff manage the landfill making it difficult to supervise the 1,450 scavengers. Neither the UPTD employees nor the scavengers are equipped with proper protection equipment such as helmets, gloves, and masks. 74. Among the scavengers there is a group of children working with their parents. These children take part in scavenging and sorting activities as well as washing goods. The majority (69 percent) are more than 20 years old while the rest (31 percent) are 9 to 20 years old. Most of the children in the Sumur Batu area have dropped out of school. Although some children are enrolled in school, they also work in the landfill after school hours. 75. However, in 2006, a voluntary program was started by the nfaq Foundation to assist the children with informal education activities. There are two types of education offered through the program - Kejar Paket A (equivalency program for primary school) and Kejar Paket B (equivalency program for junior secondary school). Currently, there are 40 students enrolled in Paket A and 15 students in Paket B and classes are held two days a week. The foundation provides school equipment and teacher transportation fees, but the sustainability of the program is uncertain since the foundation does not receive any budgetary support from the central government or local education department. 76. The basic infrastructure around the landfill, such as water, sanitation, and drainage systems are in poor condition. As a result, the shallow wells used for water have been contaminated with leachate. The two main illnesses most prevalent in communities living and working on Sumur Batu and nearby Bantar Gebang are acute respiratory infections (AR) known locally as SPA, reported in one-third of locals and diarrhea, reported in 26 percent of the local population. The City of Bekasi provides two community medical centers; Puskesmas in the Bantar Gebang subdistrict, which is 2 km from the Sumur Batu landfill, and Puskemas Plus at the Bantar Gebang landfill. Puskesmas, which provides first aid, is open only one day per week but is free of charge. Upgrading of public sanitation, water supply, and health services could help improve the environmental quality of the settlements near the Sumur Batu landfill and the City of Bekasi is now considering how to mobilize financial resources to make such improvements.

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57 77. The existing Sumur Batu landfill covers 10 hectares and estimated to be able to continue accepting residential organic waste from the City of Bekasi until There are two options that can be considered after The first is to expand the area of the landfill and the second is to conduct mining to free up space in cells 1 and 2. The latter option would not require additional land acquisition since the area surrounding the landfill area is vacant land without any buildings and is not used for agriculture. 78. A Social Due Diligence report was disclosed locally on December 13,2007 and in the World Bank nfoshop on November 26, Safeguard Policies 79. Table 4 lists the applicable safeguard policies. See Annex 6 for more details. Table 4: Safeguard Policies Applicable? Safeguard policy: [X Environmental Assessment (OPBP 4.01) [ 1 Natural Habitats (OPBP 4.04) [ 1 Pest Management (OPBP 4.09) [ 1 nvoluntary Resettlement (OPBP 4.12) [ 1 ndigenous Peoples (OPBP 4.10) [ 1 Forests (OPBP 4.36) [ 1 Safety of Dams (OPBP 4.37) [ 1 Cultural Property (OPJBP 4.1 1) [ 1 Projects in Disputed Areas (OPBP 7.60) [ 1 Projects on nternational Waterways (OPBP 7.50) Note: 7. Policy Exceptions and Readiness 80. No policy exceptions are being requested.

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59 Annex 1: Country and Sector Background Recent developments at both the national and international levels have provided ndonesia with opportunities to address both climate change and improvements to local solid waste collection and disposal. With a population of 203 million (2000 Census), ndonesia is the fourth most populous country in the world after China, ndia, and the United States. Despite its large size and geographic and cultural diversity, ndonesia maintained a highly centralized political, administrative, and fiscal system until The centralized system weakened links between local demands and decisions on local public services, undermined local accountability, and led to ad hoc allocations of fiscal resources across regions. The decentralization of 2001 addressed these shortcomings and allowed citizens and local decision-makers in provinces and local jurisdictions to address these problems. Yet, throughout ndonesia, there continues to be a number of problems associated with public service delivery in sectors such as SWM including technical, financial, environmental, social, and institutional aspects that have not been overcome or resolved. 2. On the global front, ndonesia, recognizing that climate change may have a profound effect on the many islands of the archipelago, signed the Kyoto Protocol of the UNFCCC in 1997 and ratified it in 2004 through Law No The objective of the Kyoto Protocol is the stabilization of GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.7 As a non-annex signatory of the Kyoto Protocol, ndonesia can participate in the CDM which allows companies or entities in Non-Annex countries to develop projects leading to reductions of GHG emissions, verify and certify these emission reductions, and transfer the CERs to Annex entities or governments that have commitments to reduce GHG emissions under the Kyoto Protocol. The CDM offers a market-based incentive to address many of the challenges facing SWM in ndonesia by generating revenue from the capture and destruction of uncontrolled emissions of methane generated through the degradation of organic matter in landfills and dump sites. 3. This Annex provides an overview of the changes in local governance in ndonesia, the implications of decentralization for addressing SWM, the characteristics of solid waste and its management in the country, and the sector's contributions to GHG emissions. The effects of decentralization on SWM 4. The Regional Governance Law ( ) and the Fiscal Balance Law ( ) heralded a fundamental change in the way ndonesia is governed and managed. Law devolved most functions of government, to ndonesia's regions, while Law provided the resources to finance the devolved tasks by assigning revenue sources and broad expenditure functions to the regions. n 2004, the Government of ndonesia issued Law ( ) and Law ( ) to revise Law ( ) and Law ( ) respectively. The Law ( ) strengthened the coordination roles of the provincial governments, while Law ( ) 7 Article 2. The United Nations Framework Convention on Climate Change.

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61 changed various regional financing mechanisms, in particular Dana Alokasi Umum (DAU) (block grants of general allocation funds) and Dana Alokusi Khusus (DAK) (special purpose grants) as well as the regional governments' borrowing through bond issue. With these changes, local governments-kutas (municipalities) and kabupatens (districts), are now controlled by elected local councils known as Dewan Perwakilan Rakyat Daerah (DPRDs) and their Walikotas (heads of municipalities) and Bupatis (heads of districts) are elected by direct vote. Local governments also deliver most public services, including solid waste management and are accountable for their performance. DAU and DAK became the principal mechanisms for fiscal transfers to local governments, ending central control over local financial decision-making. Subject to certain rules and conditions, local governments have also been accorded the power to tax. Greater transparency and public participation in key local government decision-making are now mandated by law. The goals of transferring power and responsibilities to the regions were to bolster local democratic institutions and foster a new culture of governance with greater efficiency, accountability, and transparency. However, the hasty preparation and implementation of decentralization has led to a number of challenges to the efficient functioning of local governments.8 6. n theory, decentralization has given the local governments a degree of functional autonomy. n practice, however, most kotas and kubupatens remain heavily dependent on the center for operating revenues. On the fiscal side, the equalization formula does not adequately consider the expenditure needs for minimal service provision. Disconnects continue to exist between local government revenue and expenditure functions, leading to a situation where many local governments have more expenditure responsibilities than revenue resources, For example, while SWM coverage is relatively high, if uneven, most final disposal sites are inadequate in number and quality and revenues for collection and disposal have not kept pace with increasing demands for these services. 7. Prior to decentralization, responsibilities for SWM were scattered across several departments and ministries including the Ministry of Public Works, Ministry of Home Affairs, Ministry of Health, Agency for Technology Assessment and Development, BAPEDAL, and the Sub- Directorate for Solid Waste Management. This structure resulted in overlapping responsibilities and weak implementation and enforcement of solid waste laws and regulations. With decentralization, local governments have acquired more responsibilities in planning and implementing SWM programs within their locality. 8. Laws and regulations have been developed to properly and efficiently manage solid waste services in ndonesia. With decentralization, municipalities and rural kabupaten are entitled to plan and manage environmental services, including SWM. While in the long term decentralization is expected to bring about improvements in the quality of services offered, many goals have yet be achieved. 8 Project Appraisal Document, ndonesia Urban Sector Development Reform Project, May p 4.

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63 Solid waste collection and disposal 9. Enforcement of existing laws is generally weak due to a lack of political will, inadequate coordination among various agencies, low technical capability for proving violations, limited access to information, and lack of adequate funding. Accepted sanitary landfill practices are not being followed consistently at landfills in ndonesia. For example, soil cover may be applied once every three months. A lack of financial resources, properly trained and skilled staff, and lack of political support from the local government also contribute to SWM problems in the country. Even though there are some regulations concerning the amounts to be paid by various waste generating sources, the fees actually collected are very low. To improve compliance, the national and local governments are trying to complement existing command-and-control regulations with market-based instruments and public-private partnerships..o. Since the late 1990s, solid waste generation has increased significantly in ndonesia as the economic situation in the country improves. While data is limited for the country as a whole, the 2003 ndonesia Environment Monitor reported that per capita generation of solid waste in major cities in ndonesia ranged between 0.66 to 0.90 kg per capita per day. Solid waste collection is decentralized and varies across regions, depending on economic prosperity, degree of urbanization, and cultural practices. 11. Local governments have the primary responsibility for garbage collection. While most municipalities carry out these activities themselves, some rely on contractors while residents are personally responsible in other cases. t is estimated that 50 percent of waste is officially collected throughout the country. Larger cities tend to have higher collection rates (up to 75 percent), but poorer areas of the cities and many rural areas are generally underserved or not served at all. Approximately 85 percent of small cities and 53 percent of medium-sized cities officially dispose of their waste in open dumps. There are several cases of small cities that do not have any official dumpsites. As a result, both waste workers and residents use illegal dumpsites as there are often no legal alternatives. General characteristics of ndonesian municipal solid waste 12. While the composition of waste varies from site to site due to factors such as location, weather, and living standards in individual cities, most waste in ndonesia is considered high in organic content. n addition, the country's tropical environment and poor disposal practices result in a number of negative environmental impacts including leachate and landfill gas. 13. Waste characteristics: Up to 75 percent of ndonesia's municipal waste is biodegradable and includes large amounts of kitchen and market waste. These types of waste are high in moisture and organic content, but low in calorific value so estimates of landfill gas production and collection should take these factors into consideration. The more economically developed cities such as Jakarta and Surabaya display similar composition of MSW as industrialized countries including a higher percentage of paper and plastics and a decrease in the putrescible matter component of solid waste.

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65 14. One positive impact derived from the current SWM systems in ndonesia is the high level of recycling of the non-organic waste. Although the methods employed by waste pickers for sorting and separation of MSW are considered inappropriate for SWM systems as defined by developed countries, these existing methods provide an income stream to the thousands people involved in this unofficial sector and ensure a far greater amount of MSW is recycled. One of the added benefits of recycling is a higher overall organic content of the landfills. 15. Leachate: Uncontrolled discharges of the liquid formed in solid waste dumps or landfills, commonly referred to as leachate, contaminate groundwater and contribute to the proliferation of disease-carrying pests and pathogens. ndonesia's tropical climate results in high amounts of rainfall and as water percolates through the solid waste in landfills, it absorbs chemicals and micro-organisms present in the decomposing materials creating high levels of leachate. When properly managed, leachate is captured in a collection system and pumped to a treatment plant where it undergoes treatment prior to discharge. However, most landfill sites in ndonesia do not have such treatment facilities. 16. Landfill gas: Another by-product of waste disposal sites is LFG which is produced during the decomposition of organic matter such as food waste, garden waste, and paper products. LFG is typically 50 percent methane, while the rest is comprised of mainly C02 and small traces of volatile organic waste (VOW), hazardous air pollutants (HAP), and odorous compounds. The composition of waste affects the amount, quality, and rate of LFG production. Landfill conditions such as moisture content, cell depth, cover, and compaction are also factors in LFG production. 17. The production of LFG begins as soon as waste is deposited in dumps and landfills and in ndonesia tends to produce gas quickly (completing LFG production within five to 10 years) due to high organic waste material such as food which decomposes rapidly, and results in lower quality gas, e.g., lower Btu content. Landfill gas production generally peaks about a year after the deposit of waste and then gradually declines, over the next years. n ndonesia, the country's monsoon climate and high annual rainfall contribute to high moisture levels. As a result, waterlogged landfills may not attain optimum temperatures because the bacteria do not generate sufficient heat to raise the temperature of the excess water. 18. LFG in ndonesia can be reduced by using proven technologies applied in other countries. For example, active gas collection systems can remove LFG with a vacuum pump from the landfill or the surrounding soils. Projects in wet tropical environments such as ndonesia often employ both the traditional vertical well collection systems and horizontal well systems. These systems may provide migration control or recover methane for use as energy or flaring. The cost-effectiveness of generating electricity from landfill gas is limited by the price of electricity which can vary depending on local power costs and generating capacity. n the case of ndonesia, the current price from the national electricity utility is not sufficient to make investments in such generating facilities economically viable.

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67 Contributions to Global GHG Emissions 19. ndonesia is one of the three largest emitters of GHGs in the world largely due to the significant release of C02 from deforestation which is estimated by the PCC to release about 2,563 million tc02e. Yearly emissions from energy, agriculture, and waste account for a smaller amount of total GHG emissions, approximately 451 million tc02e. While nondeforestation contributions are relatively small in absolute and per capita terms, emissions from these sources are growing rapidly. n the waste sector the main contributions of GHGs are from methane and nitrous oxide and estimates for 2000 ranged from million tcoze, ranking ndonesia as the sixth largest emitter in the waste sector (USEPA 2006). Estimates for the future indicate that emissions from the waste sector will grow considerably. 20. As there are no traditional incentives to reduce these emissions at ndonesian landfills, the CDM offers the first such opportunity to do so by offering a revenue stream from CERs. For CDM projects to be successful, improvements to existing landfills must be made to maximize LFG collection thus providing another benefit. n addition, with more government decisionmaking devolved to local governments, many more municipal governments may explore such CDM opportunities that improve SWM and the environment.

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69 Annex 2: Participating Entities in the CDM Project cycle9 1. n addition to the World Bank project cycle for developing CDM projects, the creation of CERs must also follow specified procedures under the LTNFCCC CDM Project Cycle which are outlined in their website ( The UNFCCC CDM Project Cycle requires the involvement of a number of different entities. The following outlines the names and functions of the various entities participating in this cycle. 2. Conference of PartiesMeeting of Parties (COPMOP) - This body has authority over, and provides guidance to, the CDM. The COPMOP makes the final decision on all recommendations made by the Executive Board regarding DOEs and accreditation standards. The COPMOP is also responsible for reviewing the annual reports of the Executive Board, and the regional distribution of both DOEs and CDM projects. n addition, the COPMOP assists in the arrangement of CDM funds. 3. Executive Board - The CDM Executive Board supervises the CDM and reports directly to the Conference of Parties to the UNFCCC /the Meeting of Parties to the Kyoto Protocol (COPMOP). The Executive Board is comprised of 10 members from Parties to the Kyoto Protocol, as follows: one member from each of the five United Nations regional groups, two other members from the Parties included in Annex, two other members from the Parties not included in Annex, and one representative of the small island developing states. 4. The Executive Board is responsible for: Making recommendations to the COPMOP on amendments as well as on further modalities and procedures for the CDM; Approving new methodologies related to baselines, monitoring plans, and project boundaries; Reviewing simplified procedures and definitions of small-scale projects and reporting to the COPMOP; Accrediting and suspending operational entities; Reviewing accreditation procedures; Making publicly available proposed CDM activities and all procedures for developing a CDM project; Developing and maintaining a CDM project registry; Reviewing project validation and verification reports; and ssuing verified CERs. The text m this annex is adapted fiom two publications: ESMAP's publication "Handbook for the Preparation of Landfill Gas to Energy Projects in Latin America and the Caribbean," April RenderedJPDF,'33264Ohandbook.~df And UNDP's "Clean Development Mechanism: A User's Guide," l~ttp:~/w~v~v.undp.org/energy/docs/cdmchapter2.pdf

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71 5. Project Participants - Private and/or public entities interested in participating in the CDM process are obligated to ensure that the project is consistent with the submitted documentation. They are responsible for choosing an accredited DOE to validate and verify their project activity as part of the CDM project cycle. At the registration of the project, a Project Participant will sign a document indicating the methods of communication to be used with the Executive Board and the allocation of CERs. 6. Designated Operational Entity (DOE) - These entities are accountable to the COP/MOP through the Executive Board and must comply with the procedures set out by the Executive Board. They are selected by the Project Participant, certified by the Executive Board, and are responsible for validating proposed CDM project activities and verifying and certifying anthropogenic GHG emission reductions. They are responsible for disclosing any possible conflict of interest arising from a CDM project, as well as maintaining a record of each project for which they have carried out validation, verification, and certification. 7. Applicant Entity- This entity is permitted to submit a new methodology for review by the Executive Board. This is permitted assuming that a CDM assessment team has been assigned by the Executive Board to the Applicant Entity, and that the Applicant Entity maintains documentation of the new methodology submitted to the Executive Board. 8. Designated National Authority (DNA) - The Marrakech Accords state that in order to participate in the CDM, a country needs to be a Party (signed and ratified) to the Kyoto Protocol. CDM host countries also have to specify a domestic institutional body - a designated national authority or DNA -for approving CDM projects. The host country - via the DNA- must approve each CDM project and ensure that it conforms to their sustainable development criteria. 9. CDM Secretariat - The Secretariat is responsible for providing technical and secretarial services to the Executive Board, as well as other CDM sub-committees. This includes the dissemination of information submitted to the Executive Board, such as the PDD and the approved methodology descriptions, through the CDM website and keeping a record of these documents throughout the project life. They also identify promising projects, provide advice, and promote projects to outside investors.

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73 Annex 3: Detailed Project Description Background 1. The City of Bekasi had a population of approximately 2 million in 2007 and a population growth rate of more than 4 percent per year. MSW generation is estimated at around 7,7,227 m3/day of which only 1,829 m3/day is collected and disposed in the city's landfill. This low level of collection service has major detrimental impacts on the environment and health within the city These include local air pollution from the burning of waste in the streets, ideal breeding conditions for disease vectors, constant flooding from waste blocking drainage and waterways, and emissions of GHGs and other toxic gases. 2. n mid-2003 Bekasi established its new final disposal site, TPA Sumur Batu. This landfill is currently allocated 10-hectare of land located on the northeast boundary of TPA Bantar Gebang, comprising of 6 individual cells with a design volume of approximately 2.5 million m3. Since commencing to receive MSW in 2003 the landfill has received approximately 541,113 tonnes of organic MSW to the end of Currently disposal into 2 cells has been completed and these have been closed using a claying capping layer and passive LFG venting pipes were installed for safety reasons. Based on population growth estimates and improvements in collection the landfill should be capable of handling waste during the remaining 2 1 years of its designed lifetime. 3. The sustainability of landfill management has been recognized as a problem with previous projects in ndonesia. These issues will be addressed through a public-private partnership and the introduction of a market mechanism (the CDM) that will provide a financial incentive to improve SWM services. This CDM project will be implemented under a BOOT commercial agreement between the project developer, Gikoko, and the City of Bekasi that will cover the LFG collection and flaring systems as well as the required budgetary requirements for landfill management and waste collection improvements. This private sector approach to investment in municipal solid waste management will be one of first for ndonesia, demonstrating the potential for removing commercial barriers that have restricted private sector investment into sustainable waste management in ndonesian cities and the associated environmental and social improvements. 4. ndonesian design guidelineslo and standards1 for landfill construction and operation require only basic gas venting to be installed but there is no enforcement of even this basic requirement. Environmental regulations are equally limited in their guidelines for reducing the environmental impacts of methane production and emissions from landfills. Without strengthened policies, regulation requirements, and financial capacity the current practice of "controlled open dumping" with little regard to methane gas generation and emissions from landfills will be continued by local governments. mplementation of this proposed CDM 'O Department Peke jaan Umum, Speszjikasi area penimbunan sampah dengan system lahan urug terkendali di TPA Sampah, Pt S C '' Badan Standardisasi Nasional (BSN), Tata cara teknik operasionalpengelolaan sampah perkotaan, SN , and Tata carapemilihart lokasi tempatpembuangan akhir sampah, SN

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75 project will therefore substantially reduce anthropogenic emissions through the installation of the proposed LFG collection system and the destruction of the methane content of the LFG. The organic content in municipal waste disposed in landfills produces methane gas as a biproduct of anaerobic decomposition, a process that will continue for many decades until all available organic content is degraded. The organic waste disposed of during the expected remaining operational lifetime of the landfill will generate and emit methane gas as the available organic carbon resources are degraded. Calculations using the First Order Decay Model, forecast potential emissions during the proposed 21-year project period ( ) at approximately x 10 m methane, minus that which is oxidized (10 percent) 6 3 within the landfill leaving potential atmospheric emission of x 10 m methane. This is equivalent to approximately 3,774,894 tonne C02equivalent. Project Participants 6. The project developer, Gikoko, under a BOOT agreement with the Municipality of Bekasi, will construct and operate an LFG collection and flaring facility that will produce the CER credits. Gikoko is responsible for all financing, construction, and management of the LFG components. The World Bank-managed NCDMF will purchase of CER credits that result from the flaring activities from the project sponsor. Table 5 lists the parties involved in this Carbon Finance Transaction. Table 5: Carbon Finance Transaction - Parties nvolved Name of Party involved ('host' indicates a host Party) ndonesia (host) The Netherlands Private andtor public entity(ies) project participants (as applicable) PT Gikoko Kogyo ndonesia The Municipal Government of the City of Bekasi, West Java, ndonesia. nternational Bank for Reconstruction and Development ("BRD") acting as the trustee of the Netherlands Clean Development Mechanism Facility ("NCDMF") Project Components 7. This CDM project consists of two distinct activities: (i) Component A: the construction and operation of LFG collection and flaring equipment that will result in the CERs to be purchased; and (ii) Component B: a carbon finance transaction that will facilitate the purchase of CERs.

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77 Component A: LFG Collection and Flaring 8. The installation of a landfill gas collection and flaring system will result in a reduction in methane which constitutes approximately 50 percent of LFG. Methane has a global warming potential 21 times that of C02 and combusting it will generate revenue through the sale of CERs. To achieve the objective of creating CERs, the project will employ a proven technology and engineering approach to LFG extraction and flaring with the potential to add an additional small-scale electricity generation component. These systems have been established on many landfills around the world and this will be the second such operation in ndonesia following the development in 2007 of similar LFG collection and flaring activities in Pontianak, West Kalimantan, ndonesia. The basic operating principle is the application of a vacuum in the waste mass to extract the gas. The main components of the collection system to be installed are as follows: Collection System: The project will employ a horizontal LFG collection piping system. The design of this system will employ dropouts within the collection systems to reduce the impacts of excessive leachate and condensation on the extraction system. Horizontal collection piping will be progressively installed during the filling of new cells and designed to ensure protection from damage during filling operations. This system will increase LFG capture during the period of filling, reduce the impact of high leachate levels, and provide improved leachate drainage within the cells. These LFG extraction wells will be connected to a manifold pipe that will carry the LFG to the blower facility. Condensation which forms in the collection system pipe work will be controlled by self-draining condensate traps and manholes fitted with pumps where necessary. Landfill Cell Closure: The "entombed cell" technique will be used for cell closure to improve LFG efficiency and leachate discharge and reduce rainfall infiltration. This form of closure is recommended for all landfills in western countries so as to limit methane gas emissions and improve gas collection efficiency. The cells will be capped with a synthetic liner which is then covered with a 300rnm vegetation layer. As a result, infiltration of rainfall is minimal which reduces leachate levels in the cells and maximizes the LFG capture due to the liner prohibiting LFG surface emissions. As this technique reduces internal moisture content of the cells, moisture content levels of the cells will be monitored and a leachate recycling system will be employed. Leachate Management System: To maintain low levels of leachate, a leachate management system will be installed to improve LFG recovery efficiency. This system will include the recycling of leachate within the landfill. LFG pumping equipment: A pipeline manifold system and single-stage centrifugal blowers will be installed. A pipeline will convey the LFG from the well system to the LFG treatment unit. LFG treatment unit: The treatment units will consist of condensate and flare systems. A knockout vessel will be used to remove gas condensate. The project will utilize an

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79 enclosed flare system (also known as ground flare), in which an insulation system will reduce heat losses and enable operation at higher temperatures. An enclosed flare, which meets the United Kingdom Environmental Protection Agency (UK EPA) "Guidance on Landfill Gas ~1arin~"'~or similar standards, will be installed to bum the LFG in a controlled environment so as to maximize the destruction of methane and other harmful constituents before discharging them safely to the atmosphere. Monitoring and control systems: The facility's monitoring and control systems will be linked by telemetry to an off-site supervisory control and data acquisition monitoring location which will allow for real time performance monitoring, systems control, error logging, analysis, and reporting. n addition, monitoring points and valves will be installed at each wellhead to allow for manual measurements and "tuning" of individual wells to ensure optimum performance of the collection system. LFG Generator, 120 kw output capacity: n the future, the project may utilize a small percentage of the collected LFG for the generation of electricity required to meet the needs of the facility. During implementation, studies will be undertaken to evaluate the potential for such electricity generation. There are no plans to provide electricity to the grid or anywhere outside the boundary of the CDM project. 9. An active LFG collection system consists of the mechanical blower described above to a system of gas extraction wells or collection trenches. A pressure gradient is created in the wells or trenches, thereby forcing the removal of gas fiom the landfill. The gas is then piped to a flare. The effectiveness of an active LFG collection system depends greatly on the design and operation of the system, and on the methane generation capability of the landfill waste. An effective collection system should be designed and configured so as to: handle the maximum LFG generation rate; effectively collect LFG fiom all areas of the landfill; and provide the capability to monitor and adjust the operation of individual extraction wells and trenches. 10. Air intrusion is a major concern in the design of the active LFG collection system as air intrusion may naturally permeate through the landfill cover and into the refuse. Drainage points must also be incorporated within the connector pipe work to ensure drainage of leachate and condensate. This pipe work must be laid on a gradient so as to ensure drainage and scouring of the pipes The collection pipe is designed using horizontal trenches in order to maximize the capturing of landfill gas in the initial two closed cells and will be applied continuously to other cells - after closure - in order to maximize the utilization of the equipment. 12 Environmental Agency, Guidance on LandJill Gas Flaring,-Environmental Agency & SEPA, Bristol, UK, November 2002, SBN:

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81 Component B: Carbon Finance Transaction 12. The World Bank-managed NCDMF will finance the purchase of CER credits resulting from the flaring of the gas. The purchase will be a performance-based contract under which payments are triggered by successful verification of the reduction of methane emissions by an independent, accredited international entity, DOE, under the rules of the Kyoto Protocol. The quantity of CERs to be contracted, the length of time over which the purchase will be made, and the price paid will be agreed between the World Bank and the project sponsor during ERPA negotiations. Estimated emission reductions during the crediting period 13. The volume of methane captured and flared from Bekasi's municipal solid waste landfill, TPA Sumur Batu is dependant upon the efficiency and effectiveness of a leachate and LFG management design. The project has been designed to achieve a 50 percent efficiency of methane collection. Methane gas composition of 50 percent is typically given for LFG concentrations as per the default given in the PCC (1996). This default figure was used to estimate emission reductions for the project due to the complex nature of anaerobic decomposition within landfills. The average yearly emission reductions are estimated to be 91,943 tc02e. Table 6 shows the yearly emission reductions of 643,602 that are expected through Table 6: Estimated Project Emission Reductions Project Years Methane Reduction (tco2e / year) Total estimated reductions (tonnes of C02e) Total number of crediting years Annual average over the crediting period of estimated reductions (tonnes of C02e) 68,393 79,752 91, , , , , ,943

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83 BOOT Agreement for the LFG Collection and Flaring Facility 14. The operation of the LFG flaring project will require both financial and technical resources. The project sponsor and the City of Bekasi have addressed the lack of public funds available for landfill management, including methane abatement as part of a 15 year BOOT commercial agreement where the project sponsor owns the LFG collection and flaring systems to be installed at the project site. As such, the project sponsor will own the emission reductions that result from the flaring of methane. Figure 2 illustrates the roles and responsibilities of the parties involved in this project. The local government will continue to own the landfill and be responsible for waste collection and disposal. Figure 2: LFG Collection and Flaring Project Business Plan Certified Emission Methane Reduction (CER) Offset C0, ~ i ~, d ~ nterest ~ d Social. Economic 0AM Cost Development

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85 Annex 4: mplementation Arrangements 1. Monitoring and reporting will be undertaken by a yet to be identified independent consultant contracted for maintenance and testing of the monitoring equipment as well as undertaking the ongoing monitoring of the project. Monitoring points and control systems of the facility will be linked by telemetry to an off-site SCADA monitoring location which will allow for real time performance monitoring, systems control, error logging, analysis and reporting. n addition, monitoring points and valves will be installed at each wellhead to allow for manual measurements and "tuning" of individual wells to ensure optimum performance of the collection system. 2. S :2003 standards will be applied. The definition of S :2003 specifies generic requirements and provides guidance for the management of measurement processes and metrological confirmation of measuring equipment used to support and demonstrate compliance with metrological requirements. t specifies quality management requirements of a measurement management system that can be used by an organization performing measurements as part of the overall management system, and to ensure metrological requirements are met.

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87 Annex 5: Financial Management and Fiduciary ssues Summary A: Project Developer 1. A fiduciary assessment carried out for this proposed arrangement included a due diligence on the project developer, Gikoko and an assessment of their financial capacity. The assessment has noted that Gikoko is registered as a foreign investment limited liability company in the country and has the required legal registrations to be in business in ndonesia. t is capitalized at Rupiah 7.7 billion, equivalent to US$ 850,000, including cumulative capital reserves of about Rupiah 3.5 billion. Audited financial statements of the sponsor company for the years 2001 to 2006 have been reviewed as well as an un-audited financial statement for the first 9 months of 2007 ended September 30, The audit reports for the years 2004 and 2005 have a qualified audit opinion, due to the absence of supporting details for the valuation of the year-end inventory, consisting substantially of work in progress. Audited Financial Statements for year ended December 3 1, 2006 were not available at the time of project appraisal. 3. t was noted that significant amounts are due to and from an affiliated company, including financial accommodation received from its shareholders for raw materials and unsecured loans provided to its shareholders. 4. Fiduciary risks may arise from the weak financial management capacity of the sponsor. Some risk mitigation measures are suggested, including the obligation to furnish audited financial statements annually to the World Bank. Further, it is recommended that the Project Developer furnish to the local government of Bekasi and the World Bank annually an audited statement confirming and summarizing the compliance with its obligations with respect to the cash transfer of 10 percent of after tax revenues to the City of Bekasi and the provision for financing of the Community Development Plan with 7 percent of after tax revenues. 5. The 2007 un-audited financial statement indicated the following: nvestment in the Pontianak LFG Project (P104482) amounted to DR 7,853,908,471 and was financed through current liabilities amounting to DR 20,956,754,815. The company showed a gross loss of DR 6,736,585,652 and loss before income tax of DR 9,102,652,019. The liquidity ratios indicated that current assets of the company was only 47.6 percent of the current liabilities. The debt ratio indicated that 95 percent of the assets are financed through liabilities.

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89 Shareholders of the Project Sponsor Company 6. The Company is owned by foreign investors, as follows: Name of foreign ( Percentage of investor Giko Corp., Japan ownership 20% 1 Gie Hing Co., Ltd, 20% 1 B: City of Bekasi 7. According to the MOA between the City of Bekasi and Gikok, the City of Bekasi is to receive 10 percent of after tax revenue as a cah transfer into the City's treasury. C: Community Risk 8. Gikoko is obliged to provide 7 percent of total net after tax CERs revenue as per the MOA to fund the Community Development Plan (CDP). This 7 percent will be provided annually based on the division between the total amount and ERPA validity term. 9. Accountability reports should be produced annually and made accessible to the public. Specific guidelines should be prepared to ensure that the fund is managed transparently and properly. D: Operational Risk 10. Financial audit reports should be produced annually and submitted to the city government and to the World Bank The purchase of CER credits will be a performance-based contract under which payments are triggered by successful verification of the reduction of methane emissions by an independent, accredited international entity, the DOE under the rules of the Kyoto Protocol. E: Commercial Risks 12. The commercial viability of a CDM LFG collection and flaring project is heavily reliant upon the techniques employed for improving the collection efficiency. The use of substandard means of capping of ndonesia landfill cells is a major impediment to efficient collection of LFG. Appropriate cell closure and capping is an investment into collection efficiency and hence return on investment. 13. Poor financial viability would generate commercial risks. A technical and financial feasibility study of this operation has been completed by the project developer and found that a 50 percent methane collection efficiency will result in a project RR of 32 percent.

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91 Annex 6: Summary of Memorandum of Agreement between the Project Sponsor and the City of Bekasi. Over the past ten years in ndonesia, waste collection has decreased significantly in proportion to the amount of waste produced. This is largely attributable to the limited funds, the number of appropriate collection vehicles, absence of transfer points, and the lack of enforcement of and compliance with rules and regulations. As the City of Bekasi lacks the financial resources to build and operate the LFG flaring facility on its own, it has identified a project developer under a BOOT agreement to develop the LFG flaring facility. The City of Bekasi and the project developer, Gikoko signed a Memorandum of Agreement (MoA) on November 27, 2007, giving Gikoko the right to implement the LFG collection and flaring activities at the Sumur Batu landfill and transferred the ownership rights of the CERs from the city to Gikoko. 2. The MoA identifies the rights and responsibilities of both parties including the right of Gikoko to manage non-active cells that will be handed over for the collection of gas and the responsibility, provide all necessary financing for the project implementation, and ensure the registration of the CDM project with the DNA and the EB as well as provide transparent monitoring of data and revenues from the project. The city will assist Gikoko in attaining all necessary registrations and permissions to implement the LFG project. The city will also provide a suitable area for the flaring activities. 3. Although the MoA assigns the CER rights to Gikoko, the company has agreed to allocate 10 percent of after tax CER revenues to the city. Article 6 of the MoA details the city's right to the 10 percent of after-tax revenue and also explains the city's responsibility to increase waste volumes that enter the landfill at a rate of 5 percent per year. This will ensure that collection services increase at the same rate as population growth, estimated at 4.27 percent per year and the delivery of organic waste that will result in increased volumes of LFG that will be flared. 4. The project sponsor and the City of Bekasi have also agreed to invest an additional 7 percent of after-tax CER revenues to implement the community development plan (CDP) that will bring direct benefits to the communities in the vicinity of TPA Sumur Batu. The MoA states that both parties and the beneficiaries will collaborate on the design of the community development program which will be developed in early 2008.

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93 Annex 7: Safeguards ssues PART : ENVRONMENT Scope 1. To ensure compliance with environmental safeguards policies, an environmental assessment was conducted for the LFG collection and flaring system and an EMP was developed. n addition, an environmental due diligence review was conducted to examine if there were any significant environmental issues with respect to the existing landfill management and operation on which the CDM activity is based. LFG Collection and Flaring System 2. Key environmental issues. The main environmental issues associated with the project include air pollution and safety issues caused by LFG combustion in the operation phase, as well as dust, noise, and workers' safety in the construction phase. Possible environmental, health, and safety risks associated with LFG flaring in the operation phase are summarized below along with the applicable national and international (UK) emission standards for LFG flaring. ssion standards 1 Nitrogen Oxides (NO,) Health risk Methane (CH4) Health & safety risks (fire & 1,000 mg/ ~ m (' 150 mg/nm3 No Standard 1 10 mg/nm3 1 fire * ndonesia National Emission Standards for Miscellaneous ndustries (K~D-13/MENLH/3/1995),. ** United Kingdom Emission Standards for Enclosed Landfill Gas Flares 3. Environmental Management Plan. The EMP for the project is summarized below. The project developer has the ultimate responsibility in implementing the EMP, with close cooperation with the landfill operator, the City of Bekasi. Construction Phase tem Air and Noise Key Mitigation Measures - Periodic maintenance of vehicles and Enti i 1 - Water spraying 2-3 times a day Project sponsor and ( - Planting of proper plants for barrier Bekasi City Odor and - Cell cover with soil every 1-3 days vector Water - Landfill compaction to prevent water infiltration ~ e r m e a b ltarpaulin e or geotextile 1 Safety workers 1 constriction

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95 Operation Phase tem Air and Odor - Water Fire, explosion and asphyxia Key Mitigation Measures - Employment of enclosed and low emission flaring system - nstallation of odor detector m m e n t - Preparation of fire fighting appliances - Proper room ventilation - Placement of danger caution marking - Provision of safety gears to operators mplementation Timing and Entity During operation phase, Project sponsor and Bekasi City 4. Environmental Monitoring Plan. The environmental monitoring plan has been developed for the construction and operation phases. n accordance with the monitoring plan, the project sponsor will conduct periodic environmental monitoring for air quality and noise, odor, surface and ground water, and public health. Public Consultation and nformation Disclosure. Several rounds of consultation with local communities (including scavengers), local government officials, and local NGOs was undertaken in September and December 2006, and July Participants raised concerns on fire and air pollution from the LFG flaring facility, as well as existing problems such as odor, waste scattering, and flies. The public expect that this project will provide an opportunity to mitigate such problems and improve their livelihoods. The environmental report was disclosed locally on December 13'~~ 2007 and in the World Bank's nfoshop on November 26, Existing Landfill Site and Operation. The landfill started its operation in 2003 and has received 250,000 tons of waste since then. This landfill covers 10 hectares of land, comprises of 6 individual cells with a design capacity of approximately 2 million m3. The landfill receives waste from the City of Bekasi, mainly organic wastes from residential areas. No hazardous wastes are allowed to be disposed in the landfill. Recyclables in unloaded waste are collected and sold by scavengers, then the rest is pushed to a cell and compacted with heavy machinery. Leachate collected with closed pipes and open ditches is treated at a series of leachate treatment ponds. The landfill site is located immediately adjacent to the much larger Bantar Gebang landfill where municipal solid waste from Jakarta City is disposed. City officials confirmed that rain water and leachate flows from the both landfills were mutually separated by drainage and access roads so that the landfill was hydrologically independent from the drainage systems of the Bantar Gebang landfill. 7. Key Environmental ssues. The most significant environmental problems associated with the existing landfill are leachate, offensive odor, and flies. To mitigate such problems, landfill operations including the location of waste unloading and placement practices have been changed. However, further measures are required to satisfactorily address these issues. Monitoring results indicate that ground water quality at surrounding community wells are within acceptable levels although violations of ph, H2S, Mn and E. coli standards were seen at groundwater monitoring points in the Sumur Batu area. No indication of health impacts on

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97 from the villager's groundwater supply were found. There have been no cases of landslides collapse of waste at the site. 8. Recommended Mitigation Measures. Given the necessity of improved landfill management, the Environmental Due Diligence Report recommended priority measures for the City including: Rehabilitation and new construction of leachate collection and treatment facilities, and their proper operation and maintenance. Employment of heavy machines for waste placement and compaction, and their proper operation and maintenance. Equipment for a waste sorting facility. Provision of fencing for safety and waste containment. 9. No concrete financing plan for such improvement has been identified so far, but it is also recommended for the City to explore and mobilize funds such as a subsidy from the central government, a portion of CER revenues, and the City's own existing funding sources. PART 11: SOCAL 10. Key social issues. There are 3 main issues related to social safeguards: (i) land acquisition; (ii) indigenous people; and (iii) social development plan. A Social Due Diligence report was disclosed locally on December 13th, 2007 and in the World Bank nfoshop on November 26, The existing landfill area of 10 hectares is owned by the City of Bekasi. This site has the capacity to accept waste from the city, mainly organic wastes from residential areas, until After 2016 there are two options the City of Bekasi could choose to provide for waste disposal. The first is to expand the area of the landfill and second is to conduct mining to free up space in cells 1 and 2. The latter option would not require additional land acquisition. The area surrounding the landfill area is empty land without any buildings and is not used for agriculture. Land acquisition for expansion of the landfill is not likely to face any problems as there is no risk for relocation or resettlement. 12. The communities living and working in or around the landfill are the ethnic groups of Sunda, Java, and Sumatra. They are not the original inhabitants but are migrants from other districtslregions or islands. The location of the scavengers is presented in Table 7.

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99 Table 7: Location and General Characteristics of Scavengers at Sumur Batu Landfill Location RTOlRW 01 RT02/RW01 RTOlRW03 RT03/RW03 RT 04lRW 05 Cell % Cell 1 TOTAL Number of population ,371 Adult Number of scavengers Children HH Ethnic Sundanese Sundanese, Sumatra- Palembang Sundanese, Sumatra- Lampung Sundanese Javanese, Sundanese, Maduranese Sundanese Sundanese 13. The Sundanese are the dominant ethnic group at the landfill site. There are two groups of scavengers: individual scavengers who do not work under the coordination of secondary collectors and scavengers who are working under the coordination of secondary collectors. The first group is free to decide their own work schedules and also the type of items to be collected. The second group works based on the secondary collector's determination such as time of work and type of items. This group receives services such as food and drink during working hours and medical expenses from the secondary collector. There are three shifts for the scavengers, the first is 6:00 am-12:oo pm, second is 12:OO pm -4:OO pm, and third is 4:OO- 10:OO pm. The types of waste collected include (i) plastics and plastic bags, (ii) glass or bottles, and (iii) steel and nails. An average individual scavenger can earn between DR million per month (gross), while the scavenger under the secondary collector earns around DR 400,000 per-month. Goods accumulated by the secondary collectors are packed according to type and delivered to primary collectors. The entire process is presented in Figure 3.

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101 Figure 3: Process for Collecting and Sorting Non-organic Waste within Sumur Batu Landfill + 1 Landfill sumur Batu Waste Source Non Household Market, industrial etc + cl> Gas Flaring Scavenger at the city) 20-30% of non organics Secondary Collectors at Landfill in Sumur Batu & Bantargebang Other Cities or Bekasi City Source: Field study (2007) and studyfrom an independent consultant for Bantar Gebang landfill, Among the scavengers are groups of children working with their parents. The children take part in scavenging or sorting activities or washing the collected goods. The majority of them (69 percent) are more than 20 years old, the remainder (31 percent) are 9 years to 20 years old. Most of the children in the Sumur Batu area have dropped out of school. Although some children are enrolled in school, they also work in the landfill after school hours. 15. However, in 2006 a voluntary program was started by the nfaq Foundation to assist the children with informal education activities. There are two types of education offered thorugh the program, Kejar Paket A (equivalency program for primary school) and Kejar Paket B (equivalency program for junior secondary school). Currently, there are 40 students for Paket A and 15 students for Paket B and classes are held two days a week. The foundation provides school equipment and teacher transportation fees, but the sustainability of the program is uncertain since the foundation does not receive any budgetary support from the central government or local education department. A similar program, funded by a Swedish

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103 organization began operating near the landfill in 1995, but closed due to a lack of funding in The basic infrastructure around the landfill, such as water and sanitation and drainage systems are in poor condition. As a result, the shallow wells used for water have been contaminated with leachate. Two main illness in communities living and working on Sumur Batu and nearby Bantar Gebang are upper breathing system infection known as SPA (reported in one-third of locals) and diarrhea (reported in 26 percent of the local population). The City of Bekasi provides two community medical centers, the first is Puskesmas in the Bantar Gebang subdistrict, which is 2 km from the Sumur Batu landfill, and Puskemas Plus at the Bantar Gebang landfill. Puskesmas provides first aid is open only once in a week, but it is free of charge. Upgrading of public sanitation, water supply, and health service could help improve the quality of environment for the settlements near the Sumur Batu landfill and the City of Bekasi is now considering how to mobilize financial resources to make such improvements. 17. The community development plan will be developed in the First year of implementation of the project in close consultation and active participation of the beneficiaries. Based on the cfindings from the consultations and the World Bank's social due diligence review during project preparation, the activities the plan is likely to cover are summarized below. Program Continuation of the Paket A and B mplementation on timingesource budgetpand the institution Empowering the people to send their children to school 1 Providing school facilities and equipments mproving health service at Puskesmas: free immunization, Providing public sanitation and water tap mproving drainage system in the neighborhoods area of Sumur Batu Depends on the agreement between the project sponsor and the City of Bekasi Training on waste recycling: Shelter for waste collection Providing standard protection equipment for 1 UPTD staffs 1 Provide facilitators for implementation of social development plan

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105 Annex 8: Country at a Glance ndo~iesia at a glalice East Lorn- POMRPadSOCtAL Asub mdk lndonesa P d c lnmme 2006 Wuxm nla~ffdoru: 930 'KX ' 1 pw capna lmas mehod US, '420 'M3 203' % {Adds m#~d, US3 MmJ X Am* mual gmmh. 20a0-06 Wuam P! 13 o Q 0 i -Jbcrkrr;e'X~ 1 Q Most recent esbrmtc (Ucn year amw ) %wetly w dpcpddm b&w ndhadpwm~~llnel 18 JlbapopulabonnCdW ' dk expedacy at b* i)aas, t!8 71 7' WnlWrcy(pR 1 WOkMh5, 28 2e 3' Chdmarwk~tcn (9idcMPenrnderSJ 28 '5 13 hess ro a ~-rpmed water rurce.x dpqzdaqcml ' dsracv % dpophm age 7%) 90 il 62 fmss plmry endhen. % afsdrmr-q pzpktml '1; 1'4 113 Ma* '18 1'5 117 Female '15 1'3 114 KEY ECOWOUC ~~ and LONG-TERM TRENDS M06 Awl:7 Zvrent amhm baarmfcp ntecew payn~'gdp Taal debvgcp Taal d& semdexpcm vaue d deragdp Jreswn v a d ~ deu1exca!s - f --'P'h, Z+" 7.9 i 7 p~? ca~x 81 '? Eccm ofgcods and suvices STRUCTURE d thp EC- Y3Ee: 20DB &fa a-e pelimn;rry eslimatff. Thr~unspcdudft~~rthe~Devdqmems~ &abase. ' The oi-ds shcw far key n d i 0 ihe carmryiin boc: wmpared * 3s noomegm.c average. f dab are T nirg re dianond ill be incorrpk.

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107 PRCES a d GOMRHMENT FlWAllCE m A mj ~ p n c e s 5.a 2 D rrdi? GDP Milts P '6 Z 13.6 m> Export snd mport levw (US$ mlll 1 13 X> U> X> : X> 13 X> lk U1 UZ U, c. CD m HEQ?~ wvon BALANCE d PAYMENTS Re- balance Net inxme Net anrent mmfe~ 'h cmnt account bsrma, to GDP 1%) u 3 Memo: Resmes -c:;ding PC (US rdhs! Ccnver*on rale DEC. W S $ EXTERNAL DEBT and RESOURCE ROWS :us milm; ToW cebt cucrtandrrg and disbusec ERD DA ToW cebt sem DA Ccrrposit an d m -ce Rocrs W a l grants W a l d i n %a& d t a 5 Fmkn direcl i-nenl inel Maus\?krk o wily :net Hbmi CY C1 C3 CS C* C C6 Cwnpwlmn of2005 mbt (ust all = +;s2.4 s - BuC ca 4 8.'32 a 3 '.331 a. 5 ~ : 7,eT D: 9 ije :@ E r151i 2 - J F E-s - =rt.stc atta ;- YF G - Znr(.&rrn The Worc aank &cup. Ths We was mymd by owmy alt sw, fig- nay dilrw fmn co*er Yiorc 9mk pi$l~shed dsa. 9t28'07

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109 Annex 9: Documents in the Project File 1. Notary deed No. 109 dated 23 January PT Giko ndonesia Manufacturing Corporation. 2. Notary deed No. 6 dated 7 May 1998 (Changes of article of association). 3. Notary deed No. 7 dated 24 April 2001 (Changes of shareholders composition). 4. Limited mporter dentification Number (APT - Angka Pengenal mportir Terbatas). 5. Tax dentification Number. 6. Limited Company Registration. 7. Company Domicile Letter. 8. Permanent Business License. 9. Approval of Foreign nvestment Extension. 10. Audit reports for the year 2001,2002,2003,2004 and The company's financial statement for the year Detail Work n Process for the year Detail Account Payable for the year Environment Due Diligence Report and Environmental Management Plan. 15. Social Due Diligence Report. 16. Stakeholders Meeting Report.

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111 Annex 10: Project Preparation and Supervision Name Title Unit James Orehmie Monday Senior Environmental Engineer (Task EASRE Team Leader) Ahmed Mohamed Khaled Mostafa Technical Specialist (Deal Manager) ENVCF Josef Lloyd Leitmann Lasse Ringius Lead Environment Specialist (Environment Coordinator, ndonesia) Senior Environmental Specialist/Team Leader (CDM Operations) EASRE ENVCF Hiroshi Ono Senior Environmental Specialist EASRE Novira Asra Financial Management Specialist EAPCO Xueman Wang Senior Counsel (Project Lawyer) LEGCF Urban Specialist Sulistiowati Niannogolan (Social Specialist - Safeguards) EASSO Haddy Jatou Sey Social Development Specialist (Community Development) ENVCF na Pranto William Nicholas Bowden Retno Anna Widiana Benedicta Sembodo Sukanya Venkataraman Sandra Cointreau Sanjay Srivastava Consultant (Technical Specialist) Consultant (Technical Specialist) Team Assistant Program Assistant Program Assistant Solid Waste Management Advisor (Peer Reviewer) Senior Environmental Specialist (Peer Reviewer) EASRE EASRE EACF EACF EASRE FEU SASES Zarina Azizova Research Analyst (Peer Reviewer) ENCVF

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113 Map # ZBRD Annex 11: Map