Study on Economic Partnership Projects. in Developing Countries in FY2007. Construction Project in Bandung, Republic of Indonesia SUMMARY.

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1 Study on Economic Partnership Projects in Developing Countries in FY200 Study on Integrated Intermediate Waste Treatment Facilities Construction Project in Bandung, Republic of Indonesia SUMMARY March 2008 KAJIMA CORPORATION YACHIYO ENGINEERING CO.,LTD.

2 EXECUTIVE SUMMARY. Project background and necessity Leuwigajah waste disposal site, which accepted,000m3 waste generated in Bandung City, Cimahi City, and Bandung Regency, have suffered the big landslide in December 2005 resulting victims. After the landslide at the Leuwigajah, the Sarimukti disposal site, which is on land owned by the West Java Province Forestry Bureau, was established. However the capacity of Sarimukti is only until 200, and social problems have been raised. Currently, following the objections for new landfill site plans, the West Java Province decided to rehabilitate collapsed Leuwigajah site. Not only rehabilitation of landfill, but also intermediate treatment of waste, which can reduce the volume of waste to be disposed to landfill, is also planned for the extension of life of landfill. This study covers the design and feasibility of the integrated intermediate waste treatment facilities by studying the combination among mechanical segregation, biological treatment(or composting), RDF(refuse derive fuel), methane fermentation and incineration/power generation(wte). Another point of this study is to study GHG(greenhouse gas) reduction and income from carbon credit sale using CDM scheme. 2. Summary of the various investigations necessary to determine the content of the project Rehabilitation of Leuwigajah site is composed of rehabilitation of waste disposal site and intermediate treatment facilities. West Java Province is in charge of rehabilitation and is planning to construct fence and retaining walls etc as a first phase. Details of this plan is described in Leuwigajah rehabilitation plan made by West Java Province. Concerning basic strategy in intermediate waste treatment, both of central government and local government is encouraging the reduction of waste by mainly composting. Bandung city and Bandung Regency are planning to implement WTE facilities locally. Considering these conditions, waste amount to be treated in the proposed project is set and combination of intermediate waste treatment facilities are studied from the view point of cost, waste reduction, GHG reduction, energy recovery, and applicability for landslide waste. As an income of the project, power sale and carbon credit are considered. 3. Outline of project 3. Location of project site The target waste comes from Bandung Regency, Bandung City, and Cimahi City. The project site is located in Leuwigajah in Cimahi City.

3 Figure. Location of project site 3.2 Combination of intermediate waste treatment facilities Delivered mixed waste is segregated and separated into organic matter (food, wood, etc) and others (plastics, etc). Four cases below were proposed as a combination of intermediate treatment of organic matter and others. Table. Proposed cases Organic matter Others Case(Current) Partially composted Direct disposal Case2 Biological treatment WTE Case3 Biological treatment RDF Case Methane fermentation WTE 3.3 Waste flow Following the interviews from West Java Province and so on, waste flow was analyzed in Figure2. Some portion of the waste generated in Bandung Regency is disposed in Babakan disposal site and other portion is planned to be incinerated locally. Some portion of the waste generated in Bandung city is planned to be incinerated locally. Other waste generated in Bandung Regency, Bandung City and Cimahi City is to be treated by proposed project.

4 Figure2. Waste flow 3. Optimum integration of waste treatment facilities Basic design of each facilities have carried out and construction cost and operation/maintenance cost are estimated. By comparing these costs and other important aspects such as waste volume reduction, reduction in greenhouse gas emission, energy recovery and possibility of dealing with the collapse waste, case 2 was selected as optimum integration of waste treatment facilities. Table2. Outline of selected integrated intermediate treatment facilities Case Case Case 2 Case 3 Case Organic matter Only a part of the Biological Biological process Methane market waste is process (compost) (compost) fermentation composted Others Direct disposal Incineration and power generation RDF Incineration and power generation Volume reduction Reduction in greenhouse gas emissions Energy recovery Possibility of dealing (only the plastics (only the

5 with the collapse waste portion, etc.) plastics portion, Construction cost Low Middle High High etc.) Operation and Low Middle Middle High management cost 3.5 Project cost and financial feasibility Financial feasibility analysis was conducted for case2. Assuming that exchange rate is 83Rp/JPN, construction cost (or initial cost) and operation/maintenance (or running cost) is estimated to be.2billion JPN and 0.billion JPN respectively. Two implementation scheme were considered. Scheme considers the application of CDM, while Scheme 2 doesn t consider CDM. Project Scheme Bandung Bandung City Cimahi City New Waste 82 t/day Collapse Waste Public Operator A Segregation Cloth/ Plastics WTE Organic matter/paper Final Disposal Site Public Operator B Aerobic Treatment Farmlands/Parks Project Scheme 2 Bandung Bandung City Cimahi City New Waste 82 t/day Collapse Waste Public Operator C Cloth/ Segregation Plastics Organic matter/paper WTE Aerobic Treatment Final Disposal Site Farmlands/Parks Figure5. Project Schemes The results of Financial and Economic analysis are summarized in the Table 3. In project scheme, FIRR is lower than the long-term interest rate of 8.62% and EIRR is under the opportunity cost of capital under preferential term of yen loan. In project scheme 2, only FIRR is lower than the long-term interest rate of 8.62%. Cash flow is always positive for any scheme and conditions. Therefore, it is deemed to be financially appropriate to implement the project by STEP condition. However, according to the results of sensitivity analysis, the financial appropriateness of the

6 project implementation will be ensured even under the preferential terms of yen loan in the event that the conditions are improved by the cost reduction and/or increase of revenues from the tipping fee, etc. Table3. Summary of Financial and Economic Analysis Project Scheme FIRR EIRR CF Project Scheme Public Operator A (Segregation/WTE Project) Preferential Terms STEP Public Operator B (Aerobic Treatment Project) Project Scheme 2 Segregation/WTE/Aerobic Treatment Project Preferential Terms STEP Proposed project schedule Project schedule is proposed as follows. Table. Proposed project schedule year month Loan Agreement (Mar. 200) Selection of Consultant Detail Design Prequalification (P/Q) Tender Tender Evaluation Construction Technology Transfer Feasibility in requesting Japanese yen loan and its implementation Leuwigajah rehabilitation is considered extremely urgent by both of central government and local government. And some budget is already allocated for this execution. Considering this situation, the possibility to prepare the necessary costs for construction of the integrated intermediate treatment facilities are expected to be provided by yen loan such as under STEP (Special Term for Economic Partnership) to implement the Rehabilitation Project promptly. Japan has advanced technology in intermediate waste treatment especially for WTE. Therefore, STEP can be applied

7 without difficulties. Indonesian government requests average. Japanese ODA loan yearly for past 0 years. These are mainly infrastructure related projects. However, social service related projects are increasing and waste management related projects can be considered to be of high priority. 5. Technical Preeminence of Japanese Companies () Segregation Japan has extensive experience of segregation of municipal solid waste and industrial waste at sources, and segregation and crushing of collected waste. Especially, the automation technology for segregation and crushing is advanced in Japan. These technology has been also applied to waste generated by disasters such as earthquake and flood. (2) Biological treatment Composting technology in Japan is developed in terms of coexistence between residents and composting facilities to use limited land effectively. Manual for design of composting facilities is prepared to standardize the design of the facility and quality of compost. By applying this manual, Japan has enough experiences and now-how. (3) WTE Incineration has been the main intermediate treatment method in Japan, therefore, Japanese incinerator has been highly developed. Japanese technology is also exported in other countries. Waste to Energy technology for high calorific waste such as plastics needs developed technology to control temperature and to monitor exhaust gases, in which Japanese technology has best competitiveness. 6. Concrete schedule for the project realization and risks for the project implementation Considering the urgency of this project, contract of loan agreement is scheduled in March 200. After the loan agreement, it is assumed that selection of consultant takes 6 months, preparation of tender documents takes year, execution of tender takes 3 month. Construction starts from 203 and technology transfer starts from 20. Two risks to prevent the implementation of the project are identified. One is the approval of rehabilitation of landfill by central government because proposed project cannot be implemented without the realization of landfill rehabilitation. The other is the registration to blue book. This project should be registered and prioritized to request ODA stressing the urgency and importance of this project.