CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS

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1 page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information

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

3 page 3 SECTION A. General description of small-scale project activity A.1 Title of the small-scale project activity: Fuel Switch for Power Generation from Heavy Fuel Oil (HFO) Based Engines to Natural Gas (NG) Based Engines at Batamindo Industrial Park (BIP), Batam, Indonesia. Version: 01 Completion date: 05 February 2008 A.2. Description of the small-scale project activity: PT. Batamindo Investment Cakrawala (BIC) owns and operates the 328 ha of Batamindo Industrial Park (BIP) including the power plant located inside BIP since The power plant consists of 16x6 MW of Heavy Fuel Oil (HFO) based engine (type Wärtsilä 18V32) and had been switched to the fuel of natural gas in a stepwise starting in Then, the BIC operates further 3x6 MW of Natural Gas (NG) based engines and 1x20 MW of Light Fuel Oil (LFO) based gas turbine in a stand-by mode. The plant evacuates power to the captive consumers (industries, commercial buildings and individual residential houses) located at Batamindo Industrial Park and meets its captive needs also. Purpose of the project activity In the call of climate change mitigation, as a synergic part of company s environmental responsibility to mitigate the air pollution from the combustion of HFO fuel, BIC power house intends to switch the fuel consumption of 16x6 MW diesel generators from HFO to NG. With the project activity, 16x6 MW of existing engines type Wärtsilä 18V32 will be converted to be 18V32DF (dual fuel) gas engines. The new engine components, auxiliaries, control and automation, installation and start up equipments will be installed in order to let the engines to be powered by NG. All the converted gas engines will primarily run on dry NG and use LFO for ignition and start-up and shut-down operation. NG will be supplied by PT. Perusahan Gas Negara (PGN) or Stateowned Gas Company to the Project Activity Power Plant (PAPP). BIC power house has gas supply

4 page 4 agreement in place until 2008 which will be further renewed. NG will be tapped from Batam Panaran Gas Pipe, which transports gas mainly to Singapore. How the proposed project activity reduces greenhouse gas emissions It is expected the project will generate in around of GWh/y and it will reduce 44,957 tco 2 /y until In addition, the PAPP brings environmental benefits by reduction of GHG emission, mainly CO 2, and other pollution occurring to due to usage of high carbon intense fossil fuels of HFO. Contribution of the Project activity to sustainable development Contributes to reduce greenhouse gas emissions produced by BIC Power Plant because NG is less carbon intensive than HFO; Reduce the air pollutant due to the utilization of NG; Minimize the risk of accident and soil/water contamination since the NG will distribute by pipelines and no storage tanks; Creates direct and indirect new employment during conversion and operation of the PAPP; Encourages other large facilities in the local community, irrespective of sector, to adopt fuel switch on less carbon intensive fuel to reduce GHG emissions; Technology transfer for operation and maintenance of the new system; Supporting the Government of Indonesia program on diversification of energy sources; A.3. Project participants: Name of Party involved ((host) indicates a host Party) Private and/or public entity (ies) Project participants (*) (as applicable) Kindly indicate if the Party involved wishes to be considered as Project participant (Yes/No) Republic of Indonesia PT. Batamindo Investment Cakrawala No Republic of Indonesia PT Asia Carbon Indonesia Yes

5 page 5 A.4. Technical description of the small-scale project activity: A.4.1. Location of the small-scale project activity: A Host Party(ies): Indonesia A Region/State/Province etc.: South East Asia/Indonesia/Kepulauan Riau A City/Town/Community etc: Batam A Details of physical location, including information allowing the unique identification of this small-scale project activity : PAPP is located inside the Batamindo Industrial Park (BIP), in Muka Kuning, Central Batam, Batam Island, Indonesia. Batam Island is located at approximately 20 km South-East of Singapore. Figure 1. The PAPP Location Batam Island

6 page 6 BIC PAPP A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: As per the scope of the Project Activity enlisted in the list of sectoral scopes, project activity is categorized in Scope Number 01 Energy Industries (renewable/non-renewable sources). The project activity consists of the retrofitting 16 (twelve) units of the existing HFO based diesel engines type Wärtsilä 18V32 to dual fuel fired engines type Wärtsilä 18V32DF. In the dual fuel system, the gas will be ignited with a very small amount of LFO (in the total amount of 3,289 m 3 /y) as a pilot injection and in start-up and start-down process. Therefore no spark plugs are needed on the gas engine as it is required by the previous technology. The system will hold the normal HFO fuel injection system in order to run the engine with HFO as a back-up fuel. The project activity does not include the construction of external natural gas pipeline. However, revamping of field instrumentation (some of the existing accessories will be eliminated) will be done. On the other hand, new auxiliaries, control and automation, installation and start up for natural gas compressing system will be installed to supply the natural gas fuel. The conversion of the engine covers the following: New set of Dual Fuel engine conversion parts New set of gas system Modification of compressed air system New set of instrumentation and control panel system

7 page 7 A.4.3 Estimated amount of emission reductions over the chosen crediting period: Year Annual estimation of emission reduction tonnes CO2 e , , , , , , , , , ,916 Total estimated reductions (tonnes CO2) 449,573 Total Number of crediting years 10 years Annual Average over the crediting period of estimated reductions (tonnes of CO2) A.4.4. Public funding of the small-scale project activity: No public funding is involved in the proposed project activity. A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: The project proponent confirms that the proposed project activity is not a debundled component of a larger project activity. The project proponent further confirms that there are no other small-scale CDM projects to be registered within 1 km of the project boundary of the proposed activity. SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: Reference : Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project Activities, AMS III.B./Version 12 Switching Fossil Fuels.

8 page 8 B.2 Justification of the choice of the project category: The justification of the choice of the project category is as follows : NO CRITERIA UNDER AMS III.B. PROJECT STATUS 1 2 The category comprises fossil fuel switching in existing industrial, residential, commercial, institutional or electricity generation applications The primary aim of the project activity is reducing emission through fuel switching and not as a part of a project activity focused primary on energy efficiency 3 The emission reductions is less than or equal to 60 kt CO 2 equivalent annually The project is fuel switch from HFO to NG for electricity generation in the existing Batamindo Industrial Park, Batam. The PAPP is a company s environmental responsibility on air pollution mitigation and not as a part of energy efficiency project. The emission reduction from the PAPP is estimated of 44,957 tco 2 /y In conclusion, AMS III.B. is eligible for the PAPP. B.3. Description of the project boundary: The boundary of the project is illustrated in Figure 2. The spatial extent of the project boundary encompasses the power house location. This includes the all HFO engines which are converted to dual fired system and the power substation. The local grid and distribution system to industrial, commercial unit, residence, public service and others are outside the project boundary. Figure 2. Project Boundary

9 page 9 The emission included in the baseline and project are as follows and is described in the Table 1. below and the summary is as followed: The baseline emissions cover the CO 2 emission from combustion of HFO that would have been used in the absence of project activity. The CH 4 and N 2 O emissions are not included. The project activity emissions cover the CO 2 from combustion of NG and LFO. The CH 4 and N 2 O emissions are not included. Baseline Table 1: Emission sources included in or excluded from the project boundary SOURCE Emission due to the combustion of HFO for electricity production in the PAPP GAS INCLUDED Justification / (Yes/No)? Explanation CO 2 Yes Main emission source CH 4 No Minor source N 2 O No Minor source Project Activity Emissions due to the combustion of NG for electricity production in the PAPP Emissions due to the combustion of LFO for the ignition of electricity production and start-up and shut-down the engine in the PAPP CO 2 Yes Main emission source CH 4 No Minor source N 2 O No Minor Source CO 2 Yes Main emission source CH 4 No Minor source N 2 O No Minor Source B.4. Description of baseline and its development: Referring to the AMS III.B./version 12, the emission baseline is the current emission of the facility expressed as emissions per unit of output (e.g., kg CO 2 /kwh). Emission coefficients for the fuel used by the generating unit before and after the fuel switch are also needed. IPCC default values for emission for emission coefficients may be used. The emission reduction of the project is generated due to the fuel switching from the high carbon intensive fossil fuel, HFO to the lower carbon intensive fossil fuel, NG. In the absence of the PAPP, the BIC will continue to utilize of HFO as the fuel for 16x6 MW of engines. As the result,

10 page 10 the baseline emission of this project is the power generation of PAPP multiplied by a baseline emission factor, EF BL,plant,y, (measured in tco 2 /MWh) and calculated in a transparent and conservative manner, such as adopting three years data of electricity generation and HFO consumption prior the utilization of NG. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activity: Emission reductions from the project: The PAPP will generate electricity through the utilization of natural gas instead of HFO. The electricity generation will be distributed to the captive customers in BIP. The PAPP will reduce the emission per unit of electricity generation due to the lower carbon intensive in NG compared to HFO. The annual emission reduction is estimated around 44,957 tco 2. Justification for additionality of the project UNFCCC s simplified modalities seek the establishment of the additionality of the small-scale project activity as described in Attachment A of Appendix B, which lists various barriers, out of which at least one barrier due to which the project would not have occurred shall be identified. Confirmation as to why the proposed project is additional is offered under the following categories of barriers: (a) investment barrier (b) barrier due to prevailing practice, and (c) technology barriers. a. Investment Barrier Four alternative scenarios are available to BIC for generating electricity at BIP : 1. Continuing using HFO as fuel for electricity generation 2. Electricity generation by fuel switching from HFO to Coal; 3. Electricity generation by fuel switching from HFO to NG without CDM revenue 4. Electricity generation by fuel switching from HFO to NG with CDM revenue The financial analysis conducted prior the project implementation, with some parameters related to the four scenarios have been taken during this period as follows : Period applied for financial analysis is 10 and 15 years; For continuity of HFO scenario : - The HFO is S$ /kWh in 2005; - The annual growth of HFO price is 10%; For coal scenario :

11 page 11 - The capital cost for coal power plant is US$ 1,100,000/MW; - The coal cost is US$ 0.026/kWh and maintenance cost is US$ /kWh; - The annual growth of coal price is 10%; - The installation of coal power plant takes 3 years; For NG scenario : - The capital cost for converting 16x6 MW of engine from HFO to NG is US$ 40,920,292; - The discount rate of capital cost is 7.5%; - The converted 16x6 MW of engine from HFO to NG will be done in 3 years; - The NG price is US$ /kWh ( ) and US$ /kWh ( ); - The CER price is S$ 12/tCO 2 ; General : - The annual rate of growth in other production cost is 5%; - The annual rate of growth in maintenance cost is 5%; - Final tax rate is 10% on gross revenue; - The exchange rate of US$ in terms of Sing$ is ; Table 2. Financial Analysis (US$) NO ALTERNATIVE SCENARIOS INVESTMENT NPV (10 years) NPV (15 years) 1. Continuity of HFO - 24,191,313 21,131, HFO to Coal 112,600,000 10,241,241 44,982, HFO to NG (without CDM revenue) 25,104,474 19,262,627 20,655, HFO to NG (with CDM revenue) 25,104,474 20,627,870 22,524,805 The installation of coal power plant needs the huge amount of capital investment in the total of US$ 112,600,000,-. Although the NPV in 15 years has promised the highest amount from other scenarios, this scenario can not be chosen due to the limited BIC budget to cover the capital investment of coal power plant. The calculation has shown also that scenario of the conversion engine from HFO to NG without CDM could not compete with the scenario of the continuity of HFO. Therefore, it is not economically attractive for BIC to switch the fuel from HFO to other fuel type. When the scenario of the conversion engine from HFO to NG has adopted the CDM revenue, the NPV of this scenario in 15 years is better in the total amount of US$1,393,334 from the scenario of the continuity of

12 page 12 HFO. Although there is a possibility of other barriers to fuel switching from HFO to NG, by the economically attractive earned by the scenario of the fuel switching from HFO to NG and BIC commitment to the environment, the management of BIC had decided to adopt the better carbon intensive fuel as the fuel for BIC power generation. In conclusion, the revenue of CDM brings the additional income to BIC for enabling fuel switching from HFO to NG. b. Barrier due to the Prevailing Practice BIC is the 1 st industrial park from other industrial parks in Batam that had taken the risk to switch their power plant s fuel type from HFO to NG since The common practice in the power sector in the 22 existing industrial parks in Batam is to generate power by HFO as fuel because it is readily available, it does not need technically skilled manpower. In addition, availability of other type of fuel such as natural gas has not been feasible taking into account due to the poor gas infrastructure in Indonesia. The utilization of natural gas in the PAPP has been gradually adopted starting from 2 units of existing diesel based power plant in 2005 to 16 units in In terms of regulatory framework related to energy issue, there is no obligation from the Government to use cleaner fuel. Hence fuel switching from petroleum oil to NG is not a common practice in Batam. As a result of this project there shall be similar initiatives being implemented by other Industrial Parks possibly under the CDM. c. Technology barrier Though the project has not implemented a technology which is totally new, the operational aspects are new to the Engineers / Supervisors who have adequate experiences in running (operation and maintenance) the power plant based on HFO. The PAPP s technology has been supplied by the Wärtsilä from Finland. The engineers from Wärtsilä have been involved with the engineers of the power plant in retrofitting the engines and also provided training to the staff in regards to the new operational features of the gas based power generation system. The operational staffs have to acclimatise to this new operational environment and it may take some time for them to be familiar with the new system. Also the spare parts for the new system have to be imported from Wärtsilä and hence involve additional spares management to optimize the operational period. The above explanation on additionality shows that the PAPP is not a business as usual project.

13 CDM Executive Board page 13 B.6. Emission Reductions: B.6.1. Explanation of methodological choices: For this activity, the baseline will be the continuation of use of the current fossil fuel type, HFO, without taking into account any power capacity expansion. 1. Baseline Emissions The baseline scenario is continuing utilization of HFO at PAPP and delivering the electricity generation to the captive customers. Baseline emission calculation is estimated by the following formula: (1) Where : BE,y = Baseline emissions due to the generation of electricity supplied to the captive consumer in year y of the crediting period (tco 2 ); EG PJ,,y = Quantity of electricity supplied by the PAPP to the captive customers in year y (MWh/y); EG AVR = Average annual quantity of electricity supplied to the captive consumers in (MWh/y); EF BL, plant,y = CO 2 emission per electricity generation when HFO would be used as fuel in the power plant (tco 2 /MWh); The electricity generation that is used to determine the baseline emission is the electricity generation either from the historical data or the actual data that has the minimum amount. Then, a. (2)

14 page 14 Where : EG PAPP,x = Quantity of electricity supplied by the power plant to the captive consumers in 2002, 2003 and 2004 (MWh/y); x = Three most recent historical years prior to the implementation of the PAPP, which is 2002, 2003 and 2004; b. HFO,BL ηpapp, hist (3) Where : EF FF,BL = CO 2 emission factor of HFO used in the PAPP prior to the implementation of the project activity (tco 2 /TJ); ηpapp, hist = Efficiency of the PAPP prior to the implementation of the project activity; c. ηpapp, hist = (1000/3.6) x [EG PAPP,x / (FC HFO,x x NCV HFO, )] (4) Where : FC HFO,x NCV HFO = Quantity of HFO combusted in the PAPP in 2002, 2003 and 2004 (t) = Net caloric value of HFO combusted in the PAPP (TJ/kt) EG PAPP,x = Quantity of electricity supplied by the PAPP to the captive customers in (MWh/y)

15 page Project Emissions The project emission will be determined as the emission due to the combustion of NG and LFO during the electricity generation by the PAPP to the captive consumers. Taken into consideration the Methodological Tool Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion (version 01), the formula of project emission is determined as followed : PE, y = = (FC NG,j,y x COEF NG,y ) + (FC LFO,j,y x COEF LFO,y ) = (FC NG,j,y x COEF NG,y ) + (FC LFO,j,y x NCV LFO,y x EF CO2,LFO,y ) (5) Where, PE, y = Project emissions due to the generation of electricity supplied to the captive consumer in year y of the crediting period (tco 2 ); FC NG,j,y = Quantity of NG combusted in the PAPP in year y (m 3 ) COEF NG,,y = Average CO 2 emission coefficient of NG combusted in the PAPP in year y (tco 2 /m 3 ) FC LFO,j,y = Quantity of LFO combusted as ignition in the PAPP in year y (kt) NCV LFO,,y = Weighted average Net caloric value of LFO combusted as ignition in the PAPP in year y (TJ/kt) EF CO2,LFO,,y = Weighted average CO 2 emission factor of LFO combusted as ignition in the PAPP in year y (tco 2 /TJ) 3. Leakage The calculation of leakage is not required. 4. Life Time of Gas Engine The 16 engines have 20 year of life time and it will be gradually stopped operation starting 2013, as mentioned in the following table.

16 page 16 Table 3. Number of Engine Operation ( ) DG set Date of Starting Operation Date of Ending Operation OPERATIONAL MONTH Oct Oct Oct Oct Oct Oct Nov Nov Nov Nov June June June June July July Jan Jan Oct Oct Oct Oct Jan Jan Mar Mar Mar Mar Mar Mar Oct Oct Total In summary, the calculation of emission reduction by PAPP will adopt the number of engine operation every year in 10 years of crediting period. 5. Emission Reduction Taking account all formulas, then the emission reduction can be calculated as follows : ER y = BE y - PE y (6) Where : ER y = Emission reductions during the year y (tco 2 /y) BE y = Baseline emission during the year y (tco 2 /y) PE y = Project emission during the year y (tco 2 /y) The amount of emission reduction for 10 years can be seen, as follows :

17 page 17 Table 4. Emission Reduction vs. Number of Engine Operation ( ) Year ER y BE y -PE y /192* (BE y -PE y ) /192* (BE y -PE y ) /192* (BE y -PE y ) /192* (BE y -PE y ) /192* (BE y -PE y ) At the start of the 2 nd and 3 rd crediting period, the continued validity of baseline and update baseline shall be assessed. B.6.2. Data and parameters that are available at validation: Data / Parameter: Data unit: Description: Source of data used: Value applied: EG PAPP,x kwh Quantity of electricity supplied by the PAPP to the captive consumers in year 2002, 2003 and 2004 Data logs at the PAPP ,539, ,204, ,052,180 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: - The data is taken from the record from Power Plant in BIP for 3 years prior to the implementation of the project. Data / Parameter: FC HFO,x Data unit: l (liter) Description: Quantity of HFO combusted in the PAPP in 2002, 2003 and 2004 Source of data used: Data logs at the PAPP Value applied: ,287, ,461, ,891,049

18 page 18 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: - The data is taken from the record of Power Plant in BIP for 3 years prior to the implementation of the project. Data / Parameter: NCV HFO,x Data unit: TJ/kt Description: Net caloric value of HFO combusted in the PAPP in 2005 Source of data used: The GCV has been taken from Pertamina Report on 12 August 2005; The NCV has been calculated by adopt the confidence level of 95% from GCV value, 2006 IPCC Guideline, Vol. 2 (Energy), chapter 1, page 1.16 Value applied: Justification of the AMS III.B. and tool to calculate project or leakage CO 2 emissions from choice of data or fossil fuel combustion (version 01) description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: NCV LFO,y Data unit: TJ/kt Description: Net caloric value of LFO combusted as ignition in the PAPP in year y Source of data used: 2006 IPCC Guideline, Vol. 2 (Energy), chapter 1, page 1.18 Value applied: 43 Justification of the AMS III.B. and tool to calculate project or leakage CO 2 emissions from choice of data or fossil fuel combustion (version 01) description of measurement methods and procedures actually applied : Any comment: Data / Parameter: η PAPP, hist Data unit: - Description: Efficiency of the PAPP prior to the implementation of the PAPP Source of data used: The average historical efficiency of the project activity in 2002,2003 and 2004 Value applied: Justification of the choice of data or -

19 page 19 description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: EF HFO,BL Data unit: tco 2 /TJ Description: CO 2 emission factor of HFO combusted in the PAPP prior to the implementation of the project activity Source of data used: IPCC 2006 guidelines, Vol. 2 (Energy), chapter 1, page Value applied 77.4 Justification of the AMS III.B. and tool to calculate project or leakage CO 2 emissions from choice of data or fossil fuel combustion (version 01) description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: EF CO2,LFO,y Data unit: tco 2 /TJ Description: The weighted average CO2 emission factor of LFO in year y Source of data used: IPCC 2006 guidelines, Vol. 2 (Energy), chapter 1, page Value applied 74.1 Justification of the AMS III.B. and tool to calculate project or leakage CO 2 emissions from choice of data or fossil fuel combustion (version 01) description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: COEF NG,y Data unit: tco 2 /m 3 Description: Average of CO 2 emission coefficient of NG combusted in the PAPP in 2006 and 2007 Source of data used: Test report from the NG suppliers invoices Value applied Justification of the choice of data or The calculation is based on the weighted average mass fraction of carbon description of in NG and use the formula in the book Compendium of Greenhouse Gas measurement methods Emission Methodologies for the Oil and Gas Industry, American and procedures actually Petroleum Institute (February 2004). applied :

20 page 20 Any comment: Data / Parameter: ρ HFO,y Data unit: kg/m 3 Description: Weighted average density of HFO in 2006 and 2007 Source of data used: Test report from the HFO suppliers invoices Value applied Justification of the The value is used for calculating the volume of HFO consumption in unit choice of data or of weight description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: ρ LFO,y Data unit: kg/m 3 Description: Weighted average density of LFO in 2006 and 2007 Source of data used: Test report from the LFO suppliers invoices Value applied Justification of the The value is used for calculating the volume of HFO consumption in unit choice of data or of weight description of measurement methods and procedures actually applied : Any comment: - Data / Parameter: GWP CH4 Data unit: tco 2e / tch 4 Description: Global warming potential of methane valid for the relevant commitment period Source of data used: IPCC Value applied Default value for the first commitment period = 21 tco 2e / tch 4 Justification of the - choice of data or description of measurement methods and procedures actually applied : Any comment: - B.6.3 Ex-ante calculation of emission reductions:

21 page 21 In this section, the baseline emission is calculated by using the data in 2002, 2003 and Then, the project emission will be determined by using the assumption of NG and LFO consumption by adopting the actual NG based electricity generation and consumption. In monitoring of the PAPP, BIC will calculate the emission reduction based on the actual number of NG and LFO consumption and it s electricity generation. 1. Baseline Emissions Relating to formula no. 1, the average amount of baseline emission of the PAPP is 305,578 tco 2 /y in period Project Emissions BIC has projected the electricity generation (kwh) of the PAPP until the coming years The projection is the total of electricity generation from NG and LFO. Therefore, the electricity generation from NG will be calculated by deduct the total projection of electricity generation with the electricity generation from LFO. Then, the projection of NG consumption has been calculated by taken the ratio of the actual electricity generation from NG and NG consumption in The ratio of electricity generation from NG and NG consumption can be seen, as follows : Table 5. Ratio of Electricity Generation and Fuel Consumption of NG Description Jan Oct Electricity Generation (kwh) 433,713,979 NG Consumption (m 3 ) 126,628,828 Ratio (kwh/m 3 ) On the other hand, the LFO is projected in the same amount of consumption of 3,289 m 3 for 10 years period. By multiply the LFO consumption with the NCV of LFO of 43 TJ/1000t, then the electricity generation from LFO is 33, kwh. Table 6. The Projection of Electricity Generation and Fuel Consumption of NG

22 page 22 Year Power Generation for 16 Gas Engines Power Generation from LFO Power Generation from NG NG Consumption for 16 Gas Engines kwh kwh kwh m ,789, , ,756, ,903, ,421, , ,387, ,591, ,842, , ,808, ,050, ,263, , ,229, ,508, ,263, , ,229, ,508, ,263, , ,229, ,508, ,263, , ,229, ,508, ,263, , ,229, ,508, ,263, , ,229, ,508, ,263, , ,229, ,508, Average 499,789, , ,756, ,910, The amount of emission reduction will be shown in section B.6.4. B.6.4 Summary of the ex-ante estimation of emission reductions: Year BEy (tco 2 ) PEy (tco 2 ) ERy (tco 2 ) , ,771 52, , ,771 53, , ,771 53, , ,771 53, , ,771 53, , ,909 50, , ,580 39, , ,342 37, , ,866 31, , ,657 21,916 TOTAL 3,055,782 2,606, ,573 AVERAGE (tco 2 /y) 305, ,621 44,957 B.7 Application of a monitoring methodology and description of the monitoring plan: B.7.1 Data and parameters monitored:

23 page 23 Data / Parameter: Data unit: Description: Source of data to be used: Value of data: Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: - EG PJ,y kwh Electricity supplied to the captive consumer in year y of the crediting period kwh meter installed at PAPP As per actual meter readings Read electricity meters and record information. The data will be calculated monthly and annually, 100% monitored and archived on paper manually for 12 years. The electricity supplied will be cross checked with the fuel consumption in related to the efficiency of PAPP is comparable with the efficiency in previous year FC NG,j,y Data / Parameter: Data unit: m 3 Description: Quantity of NG combusted in process j during the year y Source of data to be Flow meter installed at PAPP used: Value of data: As per actual meter readings Description of measurement methods and procedures to be applied: QA/QC procedures: Any comment: - Read flow meter and record information. The data will be calculated monthly and annually, 100% monitored and archived on paper manually for 12 years. The consistency of metered NG consumption quantities should be cross checked with available invoices from the financial records FC LFO,j,y Data / Parameter: Data unit: m 3 Description: Quantity of LFO combusted in ignition, start-up and shut-down operation during the year y Source of data to be Sounding tape meter that is utilized by BIC used: Value of data: As per actual meter readings Description of The direct measurement by using the tape meter inside LFO s main tank. measurement methods The data will be calculated monthly and annually, 100% monitored and and procedures to be archived on paper manually for 12 years. applied: QA/QC procedures: The consistency of metered fuel consumption quantities should be cross checked with available invoices from the financial records. Any comment: - COEF NG,y Data / Parameter: Data unit: tco 2 /m 3

24 page 24 Description: Weighted average mass fraction of CO 2 in NG in year y Source of data to be Gas composition is provided by the fuel supplier in invoice used: Value of data: As per calculation Description of The calculation is based on the weighted average mass fraction of carbon measurement methods in NG and use the formula in the book Compendium of Greenhouse Gas and procedures to be Emission Methodologies for the Oil and Gas Industry, American applied: Petroleum Institute (February 2004) in every NG delivery. The calculation is calculated for each invoice received from supplier. The calculation is recorded, 100% monitored and archived on paper manually for 12 years. QA/QC procedures: Verify if the value is within the uncertainty range of the IPCC default values of the 2006 IPCC Guidelines. If the values fall below this range collect additional information from the testing laboratory to justify the outcome additional measurements. Any comment: - Data / Parameter: ρ LFO,y Data unit: kg/m 3 Description: Weighted average density of LFO in year y Source of data to be Values provided by the LFO supplier used: Value of data: As per actual information from LFO supplier in invoice Description of measurement methods and procedures to be applied: QA/QC procedures: - Any comment: - Measurement should be undertaken in line with national or international fuel standard for each fuel delivery. The number will be archived on paper manually for 12 years. NCV LFO,y Data / Parameter: Data unit: TJ/kt Description: Weighted average net caloric value of LFO in year y Source of data to be 2006 IPCC guidelines, chapter 1. Energy, Table 1.2. used: Value of data: 43 Description of measurement methods and procedures to be applied: QA/QC procedures: - Any comment: - The amount will be archived on paper manually for 12 years. Any further revision of the IPCC Guidelines should be taken into account Data / Parameter: Data unit: Description: EF CO2,LFO,y tco 2 /TJ Weighted average CO 2 emission factor of LFO in year y

25 page 25 Source of data to be IPCC 2006 guidelines, chapter 1. Energy, Table 2.2. used: Value of data: 74.1 Description of The amount will be archived on paper manually for 12 years. measurement methods Any further revision of the IPCC Guidelines should be taken into and procedures to be account. applied: QA/QC procedures: - Any comment: - All the monitoring data and calculation of emission reduction will be archived during and at least two years after the crediting period. B.7.2 Description of the monitoring plan: This section details the steps taken to monitor on a regular basis the GHG emissions reductions from BIC s fuel switching project. The main components within the monitoring plan are: 1. Parameter to be monitored, and how the data will be collected; 2. The equipment to be used in order to carry out monitoring; 3. Operational procedures and quality assurance responsibilities. If necessary, this Monitoring Plan can be updated and adjusted to meet operational requirements, provided that such modifications are approved by a Designated Operational Entity during the process of verification. The Power Plant Manager will be responsible for the activities related to implementation of the procedures. 1. Parameter to be monitored and how the data will be collected Parameters to be monitored, and how data will be collected are described in section B.7.1. Continuously readings of all field meters will be registered in either electronic form or on paper worksheets. Data collected will be entered in electronic worksheets and stored. CER quantity calculations will be carried out by the Power Plant Manager using a MS Excel spread sheets. Backup of the data electronically may be conducted on a weekly basis, and hard copy data may be printed weekly or monthly. All data will be kept for the full crediting period, plus two years.

26 page The equipment to be used in order to carry out monitoring The most important equipment necessary to carry out monitoring is: NG consumption at the plant will be metered & monitored by flow meters and LFO consumption will be determined by site reading of fuel stock level. The amount of NG and LFO consumption will also be monitored from paid fuel-invoices. All meters and sensors will be subject to regular maintenance and testing regime according to the technical specifications from the manufacturers to ensure accuracy and good performance. Periodic controls of the field monitoring records will be carried out to check any deviation. 1. Operational procedures and quality assurance responsibilities. BIC has established the CDM management structure with the specific responsibilities. The Monitoring Operators will be responsible to collect data from site and data entry to computer systems. The Monitoring Plan Officer will be responsible for the activities related to implementation of all procedures required to allow an accurate assessment of the reductions resulting from the project. He will evaluate the collected data, calculate emission reduction and prepare the monitoring report.

27 page 27 The CDM Project Manager will evaluate and give final approval to the monitoring report. To support the CDM Project Manager will be supported by CDM Project Advisor. BIC may, as well, conduct regular training and quality control programs to ensure that good management practices are ensured and implemented by all project operating personnel in terms of recordkeeping, equipment calibration, overall maintenance, and procedures for corrective action. B.8 Date of completion of the application of the baseline and monitoring methodology and the name of the responsible person(s)/entity(ies) Date of completing the final draft of this baseline section : 15/02/08 Organization PT Asia Carbon Indonesia Street / Post Box Jl. Villa No. 7 City Jakarta Postcode / Zip Country Indonesia Telephone Fax E.mail chitra@asiacarbon.com URL SECTION C. Duration of the project activity / crediting period C.1 Duration of the project activity: C.1.1. Starting date of the project activity: 24 November C.1.2. Expected operational lifetime of the project activity: years C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period C C Starting date of the first crediting period: Length of the first crediting period:

28 page 28 C.2.2. Fixed crediting period: 01 July years C C Starting date: Length: SECTION D. Environmental impacts D.1. If required by the host Party, documentation on the analysis of the environmental impacts of the project activity: BIC has conducted the Environmental Impact Assessment (EIA) to the prior the implementation of the PAPP in The replacing of higher GHG intensity fuel, HFO, with lower GHG intensity fuel, NG, reduces GHG emissions and associated pollution. Then, the NG is easily transportable and the installation of additional equipment does not require any major construction equipment. The Regional of Environment Impact Management Agency (BAPEDALDA) has granted a support letter on the fuel switching from HFO to NG at BIP engines on 20 August The emission test conducted by third party recognized by Bapedalda showed significant different of the emission level between utilization of NG and HFO. Therefore, the environment impact of PAPP is lower from the prior to the implementation of PAPP. D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: The project activity requires no new AMDAL/EIA and will not result in significant impacts to the environment. SECTION E. Stakeholders comments E.1. Brief description how comments by local stakeholders have been invited and compiled: Stakeholder consultation was held on the 19 th of December 2006 at BIP office was attended by the representative from the local environmental agency, mining and energy agency, some tenants of

29 page 29 BIP, the local community located close BIP, the non-governmental organisation, and the state gas company (PGN). These are the stakeholders which would indirectly or directly related to the project activity. During the opening of the stakeholder consultation, the objective of the stakeholder consultation was presented: - To inform the stakeholders on the new project - To explain the stakeholders about the benefits of the new project and the impact to their living environment - To receive comments from the stakeholder. The objective of the project activity is to convert the existing HFO engines to natural gas engines. The audiences were then given the opportunity to express their opinions and comment regarding the project activity. E.2. Summary of the comments received: The comments taken from the audiences are listed hereafter: - The head of the environmental agency praised the initiative taken by BIP in environmental management. He would like to know whether only BIP that has implemented gas engines in Batam and the contribution from developed country in terms of technology in the project - An audience asked about the possibility of power plants to be implemented as CDM projects and whether replacement of Kerosene cooking stove by LPG and replacement of fuel in transportation would also entitle for carbon credits. He asked about the method to calculate Greenhouse Gas emissions - Question was asked about the regulation related to CDM implementation in Indonesia During the discussions, other comments were received but not related to the project activity: - CO gas is considered more harmful to the health compared to CO 2 and BIP was asked to also focus on reducing CO emissions. - The questions from audience related to energy conservation program implemented by BIP and also possibility of potential cost reduction to tenants E.3. Report on how due account was taken of any comments received:

30 page 30 - Regarding the implementation of gas engines in Batam, BIP explained about its leading role in taken the initiatives to convert the engines from HFO engine to Natural gas engine. It was explained to the head of the environmental agency that contribution of developed country in this project in terms of technology is in the gas engine design - Regarding the possibility of power plants to be implemented as CDM project, it was explained that it depends on type of power plant, and whether the baseline emissions are higher than the project emissions. With regards to replacement of kerosene cooking stove to LPG cooking stove and replacement of fuel of transportation, it was explained that these are theoretically entitled to obtain carbon credits, but the methodology is not yet available. The IPCC guidelines would be sent to the audience asking about method to calculate emissions from fossil fuel - Regarding the regulation related to CDM implementation in Indonesia, It was explained that the related regulation are Regulation No. 17/2004 related to ratification of Kyoto Protocol, and the Minister of environment decree No. 265/2005 regarding the establishment of Designated National Authority (DNA). Other responses to comments: - CO is not covered as Greenhouse Gas (GHG). Therefore, the current action is focused on CO 2 reduction. - Regarding the questions from audience related to energy conservation program implemented by BIP and also possibility of potential cost reduction to tenants, it was explained by BIP that the conversion of the engines is one of the energy conservation program. With regards to cost reduction, BIP mentioned that here is no clear evidence that the energy conservation program would reduce cost considering the high cost of operation. Annex 1 CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY 1. PT Batamindo Investment Cakrawala Organization: PT Batamindo Investment Cakrawala

31 page 31 Street/P.O.Box: Wisma Batamindo, JI. Rasamala 1, Mukakuning Batam 29433, Indonesia. Building: City: Batam State/Region: Kepulauan Riau Postfix/ZIP: Country: Indonesia Telephone: FAX: URL: Represented by: Title: Deputy General Manager Office Salutation: Mr. Last Name: Kong Middle Name: Seng Kiong First Name: Robin Department: Mobile: Direct FAX: Direct Tel: Personal 2. PT Asia Carbon Indonesia Organization: PT Asia Carbon Indonesia Street/P.O.Box: Jl. Villa no. 7 Building: City: Jakarta State/Region: DKI Jakarta Raya Postfix/ZIP: Country: Indonesia Telephone: FAX: chitra@asiacarbon.com URL: Represented by: Title: Country Director Salutation: Ms Last Name: Priambodo Middle Name: First Name: Chitra Department: Mobile: Direct FAX:

32 page 32 Direct Tel: Personal

33 page 33 Annex 2 INFORMATION REGARDING PUBLIC FUNDING Not Applicable

34 PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) - Version 03 CDM Executive Board Annex 3 BASELINE INFORMATION A. HFO Consumption DG set Unit Date of Starting Operation Date of Ending Operation Date of Fuel Switch Installed Capacity (MW) YEAR kwh 6 Oct Oct July ,985,590 33,303,450 31,712,900 Fuel, Lit 7,746,397 8,325,862 7,928,225 2 kwh 7 Oct Oct June ,187,870 34,878,740 33,439,770 Fuel, Lit 6,296,968 8,719,685 8,359,943 3 kwh 12 Oct Oct May ,265,290 29,237,480 33,018,980 Fuel, Lit 7,316,323 7,309,370 8,254,745 4 kwh 27 Nov Nov July ,582,450 28,493,720 35,330,980 Fuel, Lit 6,145,613 7,123,430 8,832,745 5 kwh 11 Nov Nov August ,668,230 31,501,380 34,557,520 Fuel, Lit 5,917,058 7,875,345 8,639,380 6 kwh 9 June June May ,882,160 28,768,040 33,274,150 Fuel, Lit 8,850,176 7,180,990 8,289,506 7 kwh 26 June June June ,340,220 20,920,310 25,705,150 Fuel, Lit 7,011,540 5,219,793 6,401,542 8 kwh 05-Jul Jul July ,652,720 36,571,880 38,323,910 Fuel, Lit 6,822,792 9,107,474 9,546,095 9 kwh 25-Jan Jan March ,992,230 28,851,700 34,230,970 Fuel, Lit 3,935,209 7,180,400 8,524, kwh 8 Oct Oct November ,559,570 16,705,380 36,238,130 Fuel, Lit 9,639,893 4,176,345 9,059, kwh 1 Oct Oct December ,928,800 31,055,610 34,253,190 Fuel, Lit 9,482,200 7,763,903 8,563,298 34

35 PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) - Version 03 CDM Executive Board DG set Unit Date of Starting Operation Date of Ending Operation Date of Fuel Switch Installed Capacity (MW) YEAR kwh 15-Jan Jan September ,429,980 40,410,800 36,181,500 Fuel, Lit 6,857,495 10,102,700 9,045, kwh 25-Mar Mar-21 2 May ,222,620 18,152,720 42,687,290 Fuel, Lit 6,055,655 4,538,180 10,671, kwh 30-Mar Mar April ,228,770 35,890,960 20,805,070 Fuel, Lit 4,807,193 8,972,740 5,201, kwh 28-Mar Mar March ,231,230 34,839,050 24,272,300 Fuel, Lit 4,057,808 8,709,763 6,068, kwh 9 Oct Oct February ,381,560 32,622,850 14,020,370 Fuel, Lit 9,345,390 8,155,713 3,505,093 Total kwh 442,539, ,204, ,052,180 Fuel, Lit 110,287, ,461, ,891,049 35

36 PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) - Version 03 CDM Executive Board B. Emission Reduction Calculation DESCRIPTION AMOUNT REMARKS SOURCE A. Baseline EGPAPP,x = 1,432,795, kwh/y Quantity of electricity supplied by the PAPP to captive consumers during BIC record EGAVR = 477,598, kwh/y Average annual quantity of electricity supplied by the PAPP to captive consumers in Calculation FCHFO, = 357,640, l Average Quantity if HFO combusted in the PAPP in BIC record = kt Calculation FCAVR,HFO, = kt Calculation GHV: Pertamina Report on 12 August and NCV: NCVHFO = TJ/kt Net Caloric Value of HFO in IPCC Guideline ηpapp,hist = Efficiency of the PAPP prior to the implementation of the project activity Calculation EFFF,BL = tco2/tj CO2 emission factor of HFO used in the PAPP prior to the implementation of the project activity 2006 IPCC Guideline, Vol. 2: Energy, p EFBL,plant,y = tco2/mwh Baseline emission factor of the PAPP in year y if HFO would be used as fuel in the PAPP 36