Pilot Programme for Climate ResiliencePacific Regional Track

DRAFT PROPOSALProgram Concept Note for the Use of Resources from the PPCR Competitive Set-Aside

Prepared by SPREP for ADB

12 August 2013

Clean Water, Clean Fuel: Resilient Infrastructure in Pacific Island CountriesA Private Sector Initiative

Program Concept Note for the Use of Resources from the PPCR Competitive Set-Aside

1. Country/Region: Pacific Region 2. CIF Project ID#: TBD

3. Project/Program Title: Clean Water, Clean Fuel: Resilient Infrastructure in Pacific Island Countries, a Private Sector Initiative **

4. Date of Endorsement of the Investment Plan:

SPCR Regional Track Investment Plan – April 2013

5. Funding Request (in million USD equivalent):

Grant: N/A Non-Grant (loan, equity, guarantee, etc.): Concessional loan

6. Implementing MDB(s): ADB Private sector arm Public sector arm

7. Executing Agency: Secretariat of the Pacific Regional Environment Programme (SPREP)

TTL: Espen Ronneberg

8. MDB Focal Point and Project/Program Task Team Leader (TTL):

ADB Headquarters- Focal Point: Daniele Ponzi TTL: Maria Lourdes Drilon

** PLEASE NOTE THE ADDITION OF SOME BRIEF BACKGROUND TECHNICAL RESOURCES THAT WILL BE REFERRED TO IN THIS PROPOSAL (under separate cover titled “Resource Text”)

ContentsI. Program Description

Water, Energy and BuildingA Program of Linked Projects

i. SOLAR WATER PURIFICATIONii. COCONUT BIOFUEL PRODUCTIONiii. ENERGY PRODUCTION FROM WASTE (tyre recycling)iv. ORGANIC WASTE RECYCLING (sustainable fertilizers and renewable energy)v. SUSTAINABLE BUILDINGSvi. Solar Hydro Village Energy

Technical Support and Monitoring and Evaluation Oversight – SPREP

II. RationaleEnergy SectorPotable Water SectorWaste Recycling SectorSustainable Building Sector

III. Consistency with Investment CriteriaIV. Type of Private Sector EngagementV. InnovationVI. Technology, Product, and/or Business ModelVII. MarketVIII. Financial Plan (Indicative)IX. Expected Results and IndicatorsX. Implementation Feasibility and Arrangements

Annex Table of Contents of the Resource Text (under separate cover) 1pp.

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I. Program DescriptionFirst and foremost, the programme provides opportunities to support and strengthen the PPCR objectives of the National SPCR projects as well as all three components of the Pacific Regional Track SPCR. More specifically, the proposed investments will:

provide opportunities to build climate resilience capacity in three PPCR countries and the other eleven countries of the Pacific

contribute to mainstreaming climate resilience, particularly to Government and the private sector through respective Chambers of Commerce

provide solid, practical applications of climate resilience building in key economic and humanitarian sectors;

link directly to Components One and Three led by SPREP with close connections to Component Two of the Regional Track;

address real rather than perceived needs of communities needing new tools and practices to minimize the adverse impacts of climate change on the mostly coastal populations of the Pacific.

The program is innovative in a number of specific techniques that encompass the overall approach and methodology for making best possible use of the available concessional resources. Innovation can be clearly illustrated

i) in its concept and in the linkages between the proposed initiatives and to other national and regional climate change and adaptation initiatives;

ii) in the way these investments are delivered, partially through women’s groups and rural communities with technical backstopping, M+E services and knowledge management services being provided by SPREP on a day to day basis;

iii) in the opportunities to reduce waste-causing pollution, provide a sustainable system of safe, affordable potable water, to reduce fossil fuel usage and natural resources conservation, and

iv) in an approach to private sector “mainstreaming” that supports both building resilience and ensuring the sustainability and replicability of the investments.

The program will focus on innovative resilient infrastructure solutions in the water and energy sectors to address demand for affordable clean drinking water, affordable locally produced diesel fuel alternatives and waste recycling. The water purification project will be linked to micro financing to women’s groups in rural and isolated communities throughout Samoa. The initial focus will be in Samoa with plans for replication in Tonga and PNG.

Sustainability will be guaranteed with systematic monitoring and technical back-stopping in all relevant disciplines from the executing agency. This will be the first programme of its kind in the Pacific. Successful outcomes will build both climate resilience and disaster risk management capacity in the region. There are three main projects proposed: i) Coconut biofuel; ii) Solar water purification, and iii) Solid and liquid waste recycling.

The programme is made up of six proposals for separate projects. All projects brought forward by the private sector have been included here as the final list of accepted proposals that will be forwarded to the CIF for consideration and approval, will be determined by ADB in their role as the implementing agency for the CIF Set-aside funding. Therefore

Focus on Water, Energy and Recycling

Given i) the very nature of disparate small island states of the Pacific Island Countries (PICs), and their limited capacity to responsibly dispose of the accelerating volumes of solid and liquid waste, and ii) the demand and need for cleaner cheaper fuels and more readily accessible affordable access to drinking water, the proposed program will focus on three key sectors; water (improved access to potable water) and energy (coconut-based biofuel production). More specifically, the programme will provide innovative solutions to

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waste recycling, sustainable buildings, and the growing needs for affordable and safe clean water and clean fuel demand in the three SPCR countries (Samoa, PNG and Tonga) recognizing the need for future replicability throughout the Pacific.

Implemented over three years, the programme will contain components of research and development, pilot testing, and installation of viable infrastructure to address specific deficits that exist in these priority sectors. Expected return in the investment will be realised in less than five years for all the projects.

A Program of Linked ProjectsThe attached Resource Text (separate cover) contains a detailed description of the six proposals and background to the projects covered under this programme. We have used the term programme to accommodate the comprehensive nature of the approach and methodology for each of the six project components;

i. SOLAR WATER PURIFICATIONii. COCONUT BIOFUEL PRODUCTIONiii. ENERGY PRODUCTION FROM WASTE (tyre recycling)iv. ORGANIC WASTE RECYCLING (sustainable fertilizers and renewable energy)v. SUSTAINABLE BUILDINGSvi. Solar Hydro Village Energy

NOTE: (detailed proposals are enclosed in the Resource Text document under separate cover, in Section 4. PROPOSALS).

i. SOLAR WATER PURIFICATION Addresses the steady reduction in potable ground water, water supply for rural and isolated

communities and a sustainable reduction in The innovation of this technology is multifaceted. Primarily, it can take water with a high level of

pollutants (including sea water, household liquid waste, rainwater, polluted fresh water) and purify it (gravity feed) using the sun’s energy to produce potable distilled water and salt, an additional marketable by-product. A single panel costing about $400 can supply a household with around twenty litres per day of pure uncontaminated drinking water for a minimum of ten years (likely twenty to twenty-five years as testing continues).

The project is developed with two main components: a) a commercial water farm in two locations to provide more affordable safe drinking water to communities using bottled water in the key urban areas, and b) a microfinance institution managed community drinking water project for family and community drinking water supply through the 310 village network.

MOUs established between partners, largely Samoa based, options to expand to Tonga and Solomon Islands, further investigations required to expand to PNG.

ii. COCONUT BIOFUEL PRODUCTION The project will provide a gasoline/diesel substitute that can be used by transport and industry;

excess energy for the electricity grid (syngas and heat exchange), and a waste solid (activated carbon) that possesses significant export potential plus ash for local soil amelioration.

Fossil fuel pollution (GHG) will be significantly reduced by a neutral carbon cycle. The macroeconomic impacts target the balance of payments and foreign exchange savings from reduced import of fossil fuels ever increasing in price. The socio-economic impacts relate to increased rural employment, re-utilisation of hitherto defunct productive land adding to GDP enhancement and rural poverty alleviation.

What is revolutionary is the opportunity to leap forward from fast pyrolysis to produce useful hydrocarbon fuels rather than the less useful bio-oils currently obtained.

The production process is modular, thus scaling up is relatively straight forward.

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iii. ENERGY PRODUCTION FROM WASTE (tyre recycling) The company seeks to be the first ever in the South Pacific to introduce pyrolysis biomass

technology encompassing the use of waste (end-of -life) tyres to produce energy and carbon black for export. In simple terms waste tyres are used as feed into the machinery to produce high-grade carbon black and electricity. This technology has zero harmful emissions based on recent University studies.

Phase two of the operations will be the collection of solid waste (rubbish) to feed into an incinerator to produce electricity. In establishing this new industry in Samoa, we hope to have a fully operational waste disposal and collection system that will allow for the elimination of waste being dumped in landfill sites.

Outcomes will include:o Reduced CO² emissions (most of Samoa's energy comes from the burning fossil fuels);o More affordable electricity for the population, with electricity prices set to reduce even

more over time; o Collection of waste tyres and value adding to this waste resource;o Provide employment and training for local staff.o Reduce the risks of contamination in soil and water bore hole resources from toxic leakages

created from waste tyres and waste (rubbish) at landfill. Fundamental reasoning for this company’s existence is in the four R's: Reduce, Reuse, Recycle and

Recover.

iv. ORGANIC WASTE RECYCLING (sustainable fertilizers and renewable energy) This project will build a state of the art biomass digester based on the latest biogas technologies

available that will then significantly reduce/eliminate landfill from green wastes and sewage that is releasing hazardous methane gas into the atmosphere.

It will also replace high carbon footprint imported gasses and reduce high cost imported gasses reducing cost of living and increasing likelihood of adoption by families as a cost effective cooking alternative to wood, electricity and kerosene.

The digesters will provide a cost effective replacement for imported fertilizers and an environmentally renewable source of plant nutrition in support of Samoa’s drive toward food security and sustainable agricultural production.

The climate benefits are clear due to the carbon neutral nature of biomass burning. This is of course highly beneficial for Samoa. Success of a project on this scale will also provide a positive platform for the region in duplicable similar projects.

v. SUSTAINABLE BUILDINGS This project will mainstream the concept of reduced GHG reductions in the design and building of

structures by passive and active design features by building a factory that reduces the heat build-up, is designed to be naturally cool, has renewable resources and the use of RE built into its design from the beginning, conserves available renewable resources and creates an energy neutral outcome for food processing. This would also create zero green house gas emissions for biodegradable waste for disposal.

Passive energy design criteria would be developed and building techniques refined so as to enable efficient and effective implementation of reduced demand from the fossil fuel generated suppliers.

Knowledge and technology transfer would be recorded and made available as a resource for training in the trades training resources and also used to develop the industry to meet the needs of the environment and the economy.

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The building would be built within 3 to 4 months and would be designed to achieve environmental aims of no GHG emissions from operations, net energy supplier to the grid, 23 degrees operating temperature with 60% humidity, sealed with positive pressure using solar and methanol electricity generation. The Ministry of Natural Resources and Environment and Energy division of the Ministry of finance has set ambitious targets for the use of RE and the reduction of energy demands and is supportive of the aims of this proposal

vi. Solar Hydro Village Energy (Pico-scaled Solar Pumped Hydro Applications to Village Energy) Using a hydro-pumped storage allows to improve the quality of the provided electricity and to

reduce the peak power of the other energy generating systems. This system flattens out the load variation on the power grid, and permits thermal power stations, that provide base-load electricity to continue operating at peak efficiency while reducing the need for peaking power plants that use costly and polluting fuels.

The tsunami-ravaged SW of Upolu where the population has relocated to the top of the ridge well above the littoral plain offers ideal testing wherein small reservoirs can be located at both the beach level and ridge/residential level. The system also offers water pumping service for relocated villagers.

It is recommended that the potential JV organizations complete a feasibility study including a cost/benefit study related to the medium-scale project. This study will determine the advantages and disadvantages of this initiative and the willingness to execute.

Innovative Support and Monitoring and Management – SPREP

SPREP will provide guidance to all the projects under an innovative combination of: linking monitoring and reporting to the knowledge products; recording and sharing lessons learned creating links to existing and planned regional and national initiatives on climate change and

adaptation; as executing agency for aspects of the Regional SPCR, to link the private sector projects to

SPCR intended outcomes on a day to day basis, and to provide overall technical backstopping where possible and necessary.

(See Innovation Section below).

II. RationaleEnergy Sector Rationale

Storage of electricity is a difficult problem. The main problem occurs when renewable energy systems such as solar and wind are concerned. Solar is reasonably predictable on a daily rhythm but wind energy is intermittent. Inexpensive means of storing renewable energy when it is available and rationing it out when the demand load demands are sorely needed.

There are now large scale pumped storage hydro systems that utilize cheap power to pump to a head (upper reservoir) and reticulate to the lower turbine when power tariffs are high. Solar and wind power are ideally suited to this approach. This Project will serve to illustrate a pico-scale solar pumped hydro pilot study suitable for a nuclear sized Samoan family.

The advantages of such systems are:o - More than 100 years of experience;o - High efficiency, in the 70% to 85% range;o - Multipurpose facilities;o - Environmental friendly;

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o - CO2- avoiding;o - Highest availability compared to other technologies;o - Quick response to load variation (few seconds) and reserve capacity.

Another benefit of pumped storage is to help level the fluctuating output of intermittent power sources like solar and wind. The pumped storage absorbs load at times of high output and low demand, while providing additional peak capacity. It is particularly likely that pumped storage will become especially important as a utility grid regulator for very large scale photovoltaic generation.

The energy strategy in Samoa calls for a reduction in losses, imports and demand and an increase in the use of renewable energy. The Strategy for the Development of Samoa supports the development of agro processing with clear links to the development of the rural economy. Reducing urban drift and improving the utilisation of the provided infrastructure.

The sustainable buildings initiative clearly meets the demands of the two goals and shall reduce GHG, reduce climate change vulnerability and shall improve income opportunities for the rural economy. It shall also provide incentives to produce sustainably from the land as the cost of the product through production shall be lower leading to better payment capability for the raw materials.

The concept of climate change adaptation is to be mainstreamed into the design and local weather systems adaptation and mitigation into the buildings and processes for manufacturing in the Pacific Island Countries. At present the building code is undergoing review and this is an ideal time to propose changes and provide an example of it to enable its introduction into the code. Develops a tailor made tool for designing and implementing passive designs into the building industry to maximise use of natural resources and renewable energy.

Biogas: Due to the high cost of LPG in Samoa, the financial viability of such a project is forecast to be very high. The only limiting factor for the private sector to become involved in this type of venture is the high initial investment costs and the lack of financial instruments in the current finance sector to permit such a project to go ahead.

At this stage Samoa does not have any commercial biogas digestion projects on this scale. This means that much of the green waste and sewage is disposed of in landfill. With the biogas technology that is currently available the majority if not all of this waste can be recovered and converted into valuable alternative energy and fertilizer products. The local impacts to Samoa are significant in terms of environmental sustainability, clean energy, and sustainable fertilizer, lower costs of fertilizers and energy as well as direct and indirect employment. This makes this project particularly important and valuable to Samoa and the Samoan community.

In addition to these benefits, installation of a commercial facility can be achieved with the guidelines for acceptable projects.

Current market barriers to entry are the significant costs to set up the facility due to the unfavorable commercial bank finance that is available which makes a project of this size unfeasible due to the short loan terms and very high interest rates.

There is a significant demand for gas in Samoa and based on forecasts, Biogas Samoa will be able to quite effectively compete to capture a significant portion of this market share.

Waste Recycling Sector Rationale Almost all of recyclable waste in Samoa is currently dumped at landfill, located at Tafaigata.

Samoa's recycling capabilities are not of any medium to large scale commercially viable projects. Currently there are only a few small enterprises that engage primarily in the collection of metal, copper and aluminium recyclables.

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Barriers facing a majority of these small business owners is the necessary skills and abilities to raise projects well worth investing time and money into, this coherently poses non-favourable circumstances in raising sufficient equity in feasible recycling projects.

Tyre recycling will also include significant export by-products: steel (extracted from tyres) and carbon black (used as a strengthening reinforcing agent in the plastics and rubber manufacturing industry). China (one of the worlds' largest producers and consumers of carbon black) is forecasted to consume 35% of Global Carbon Black by 2017. In 2011, the PRC has withheld carbon black exports for purposes pertaining to its manufacturing sector. Because of this shift, there is currently a world shortage for carbon black.

Potable Water Sector Rationale Extreme weather events, irregular rainfall (with resulting floods and droughts), changing

weather patterns and saltwater intrusion will all have significant impacts on agriculture production and food security. This will have follow-on effects on diet (with more reliance on imported, often less healthy, foods) and livelihoods/income for families relying on agriculture for their existence. Some farmers already have been forced to grow crops (e.g., taro) in raised tin containers, and some of the smaller islands have lost coconut palms to saline intrusion.

These changes also affect the secure supply of potable water. The combination of changes in rainfall patterns and saline intrusion has a large impact in freshwater supplies. Climate change models indicate that these effects will be more significant in the future. For example, a possible 10% reduction in average rainfall by 2050 for Kiribati would lead to a 20% reduction in the size of the freshwater lens on Tarawa Atoll1.

The water sector in the Pacific has received increasing attention in recent years as a result of growing stresses on potable water supplies due to both rapid urban population growth and expanding needs of rural populations. The purchase of potable drinking water is often a major component of household expenditures (estimated at US1095.00 per annum in urban areas) given the suggested need to boil the water for drinking that is currently delivered through the existing reticulated water supply system in the capital, Apia as well as in rural areas. Reticulated water in rural areas is currently not treated or purified.

The competition for water resources in the Fuluasou and Vaisigano water catchments around Apia, is critical. Both public water supply and public energy supply are provided by the same two river systems. Hydropower operations in Fuluasou river catchment is now non-operational due to insufficient water quality and complete infilling of the intake reservoir with sediment.

Three major drinking water suppliers in Apia are delivering:a) low consumption volumes of artesian spring water (untreated, potable, around Tala$1

per litre)) and b) high energy consuming reverse osmosis purification process (most common, delivered

in twenty litre plastic bottles for around Tala$0.35 cents per litre). Surface water and groundwater are the only sources of water used for water supply provision,

with the exception of rainwater harvesting practiced widely in the Falealupo Peninsula and in otherwise isolated and rural households. Surface water provides approximately 65% of the water supply and groundwater 35%. There is no known water quality monitoring for wastewater-associated pollution2. Investigations conducted in 2007 indicated the following priority issues:

III. Severe degradation of catchment zone - water quality and quantity, pollution (eutrophication, suspended solids in the Apia Catchment)

III. Reduction in stream flow or quality (in the Tafa'igata Aquifer)

1 Pacific Regional: Strategic Program for Climate Resilience (SPCR), Approved 30 April 2013, page 38.2 SOPAC Water, Sanitation and Hygiene: http://www.pacificwater.org/pages.cfm/country-information/samoa.html

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III. Salinisation of ground water (Faleolo Aquifer)III. Pollution (agro-chemical, Togitogiga Catchment)III. Reduction in stream flow (Irrigation -Tanumalala/Aleisa)

Future demand for accessible, affordable and safe drinking water is a critical concern in Samoa. The situation in Tonga and PNG is envisaged to be similar3. The proposal therefore addresses the need for climate resilient basic services and critical infrastructure provision to both rural and urban populations. This investment will provide an affordable, low-tech, low maintenance source of potable water to urban and rural populations further minimizing stresses on increasingly saline ground water aquifer sources and reduced surface flows. The detailed proposal included in the Resource Text (under separate cover) outlines a clear economic rationale to support this innovation.

Potable Water Delivery MechanismsDescribed in more detail in Part IV Innovation, the two proposed delivery systems are important to the rationale, why it should receive the funding and how it will advance the SPCR objectives.There are two primary stages to develop this innovative technology, supported by equally innovative delivery systems. In short,

Phase One will utilize the majority of the loan to develop the two water farms on Upolu and Savai’i islands (the two largest Samoan islands). Revenue streams from this venture will partially subsidise4 the purchase of family-sized or community-sized purification panels in Phase Two.

Phase Two: An established and respected micro finance institution in Samoa will manage small loans to women’s groups to purchase outright the water purification panels. Women will effectively take charge of drinking water production, possible sale and community delivery in rural areas.

An alternative to the Phase Two above would be to partially break up the loan to the water company to include a direct loan to the microfinance organization as a low risk loan with an agreed amortization period5.

Sustainable Buildings Rationale The energy strategy calls for a reduction in losses, imports and demand and an increase in the

use of renewable energy. The Strategy for the Development of Samoa supports the development of agro processing with clear links to the development of the rural economy.

Reducing urban drift and improving the utilisation of the provided infrastructure. This initiative clearly meets the demands of the two goals and shall reduce GHG, reduce climate change vulnerability and shall improve income opportunities for the rural economy.

It shall also provide incentives to produce sustainably from the land as the cost of the product through production shall be lower leading to better payment capability for the raw materials.

The concept of climate change adaptation is to be mainstreamed into the design and local weather systems adaptation and mitigation into the buildings and processes for manufacturing in the Pacific Island Countries.

At present the building code is undergoing review and this is an ideal time to propose changes and provide an example of it to enable its introduction into the code. Develops a tailor made tool

3 This is as yet to be verified. The initial project concept note for submission on 15 August will include a small number of necessary follow-up investigations needed to finalise the technical and organizational components of the proposal.

4 Actual subsidy to be determined once the business case is prepared and revenue forecasts clearly determined.5 The Micro finance company SPBD, has a 12 year respected history in the region with an enviable default percentage of less than one percent (http://www.spbdmicrofinance.com/).

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for designing and implementing passive designs into the building industry to maximise use of natural resources and renewable energy.

III. Consistency with Investment Criteria With the climate trend for the Pacific pointing to more extreme conditions and increased climate variability in future, Pacific Island countries have little choice but to develop comprehensive risk management plans for the natural hazards they face.i. Pilot and demonstrate approaches for integration of climate risk and resilience into

development policies and planningThe impact of these projects will be to provide the successful resilient infrastructure prototypes necessary to generate policy adaptation to extend their use and application. Close collaboration will all key Ministries in the water, waste, planning and building sectors will be maintained throughout implementation as a means of capacity and awareness building. Demonstrating cost effectiveness, practicality and environmental responsibility will be the tools to measure success. These are also the basis of effective policy change, based on physical evidence and proven feasibility.The future planning and development of safe water provision in Samoa and other Pacific small island states will be one of the most critical issues facing Governments throughout the region in the coming decades. Solid and liquid waste disposal is commonly referred to as a “sleeper”, an issue that once awoken, is going to have potentially devastating impacts if action is not initiated immediately. These projects address these and other priorities.

ii. strengthen capacities at the national levels to integrate climate resilience into development planningPolicy makers are not directly involved in these initiatives. There will however be policy implications from these developments. Government support for recycling efforts, minimizing GHG emissions, delivering safer more affordable drinking water will facilitate rapid initial set-up to commence production as quickly as possible. Virtually all of the proposed projects are ready to go now and can readily meet the criteria to be substantially commenced in lest than 18 months. The real value of these relatively small investments is the potential to generate new skills and capacity of decision makers that can be an example to all the Pacific.

iii. scale-up and leverage climate resilient investment, building on other ongoing initiativesThis is the primary objective behind all these proposed investments. Starting with a relatively small operation, planning readiness to scale up in the immediate future. There is consensus amongst all the companies on this issue.

iv. enable learning-by-doing and sharing of lessons at country, regional and global levelsAs demonstration projects, SPREP as the project facilitation partner will assist the companies to capitalize on any and all opportunities to document, illustrate, learn and share the practical outcomes from these projects with PIC partners. SPREP’s direct link to the SPCR implementation will ensure all levels of communications are included in the sharing of pilot performance data, recording valuable experiences and passing this on through all available networks. SPREP maintains a significant regional and international network of partners and interest groups.

In addition to the above, the proposed program of investments link directly to (and contribute to) the following areas of the Pacific Region Track SPCR:

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all three Outcomes of Component One (1. Integrated CCA and DDR are mainstreamed; 2. Tailor made tools developed; and 3. Capacity for mainstreaming available)

the first Outcome of Component Two (resilient infrastructure) the first Outcome of Component Three (regional technical support mechanism)

IV. Type of Private Sector EngagementThis programme comprises a number of initiatives, each supportive and linked to each other under the theme of building climate resilience with resilient infrastructure investment that will develop and sustain new water, energy and recycling resources for the Pacific Island Countries, starting with the three Pacific SPCR countries.While the proposals are 100% private sector, it is expected that there will be considerable interest over time for the public sector to become working partners and indeed joint venture partners or possibly even develop wholly public sector projects.

V. InnovationAll private sector partners acknowledged the importance of the word “innovation” in the criteria and intended outcomes of this seed funding from the CIF. Therefore, if there is one aspect of this proposed programme that will be exemplary, it is clearly the collective innovation and creativity with which these proposals have been developed. It is not simply the technologies or business model; the innovations are part of all aspects of design, development, management and implementation including:

innovative science and technologies in the water, biofuel and recycling projects;

innovative management systems linking M+E to reporting, knowledge management, publications and communications needs of the projects (SPREP);

making direct linkages between the project technologies (and project implementation) to the scientists, current research throughout the Pacific and the existing network of SPREP to ensure applicability, replicability and possible inclusion in regional level projects managed and implemented by SPREP;

mainstreaming these initiatives through the business community represented by the Chambers of Commerce, utilizing this resource to also provide climate change resource persons at strategic locations throughout the project implementation.

As part of the project Preparation Grant Request6, technical backstopping and monitoring and evaluation activities will be provided by SPREP throughout the course of the initial three years implementation. This will be led by the SPREP Climate Change Team with coordination support from their Monitoring and Evaluation Unit. Unique to this programme will be the technical oversight provided by SPREP utilizing their capacity to provide technical support throughout implementation. This technical backstopping will ensure: Lessons Learned (and Knowledge Management)

collection of lessons learned, preparation of relevant media for distribution regionally; Sustainability (and M+E)

performance monitoring and evaluation to maintain the implementation processes, ensure replicability for other applications in the region

Technical backstoppingproviding any necessary expertise from the organization where opportunities exist to extend the

6 This will need to be determined with ADB given the shared use of project preparation grants is not that common. If there was an opportunity to request grant funding in support of this aspect of ensuring sustainability of the project, this would be welcomed by SPREP.

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project beneficiaries, including water resources management, coastal management, pollution control, climate change adaptation etc. linking science and scientists to the developments.

Mainstreaming into the Private SectorAnother unique component of this programme will be the utilization of the existing strong network of Chambers of Commerce in the Pacific. In four key Chamber Headquarters (Samoa, Tonga, Fiji and PNG) a climate change resource person will be placed within the Chamber to provide support to the implementation of Components One and Two of the SPCR (Pacific Track)7 as well as having a ‘mainstreaming’ role to provide information and support to other private sector organizations to build resilience and CCA initiatives. The Chambers will also be the “Champions” of the private sector initiatives funded by the Set-aside. This innovative use of professional networks will likely be a ‘mainstreaming’ methodology not previously utilized in PPCR projects, a model that may well be an important addition ot the business model for rolling out these small concessional loans.

Biomass/Biofuel Innovation Biomass utilisation is not new. Gasification is commonplace throughout Asia. What is

revolutionary is the opportunity to leap forward from fast pyrolysis to produce useful hydrocarbon fuels rather than the less useful bio-oils currently obtained. This allows the application of fossil fuel use against the full panoply of electricity generation, industrial and transportation sectors.

The GDT process is modular. Thus scaling up is relatively straight forward. Small units, if required, can be sited in plantation hubs depending on the economics of transportation. All significant senile plantations in Samoa can be accessed. This program is directly transferable to other islands of the Pacific. Immediate targets would be the Fiji island of Taveuni and the Gazelle peninsula in PNG. There are no barriers to exploiting senile plantations in Asia. Cebu in the Philippines is a prime example.

Recycling Innovation More specifically for example, the pyrolysis process until recently (in the last fifteen years) has

undergone immense technological advances to make it 'clean' energy. Utilising our machinery, waste tyres are fed into a continuous Pyrolysis chamber. Resulting products include, high grade carbon black, gas and heavy fuel oil which gets pumped into a turbine which produces electricity.

Emissions that would otherwise end up as carbon emissions are directed into the Pyrolysis chamber to get burnt again resulting in zero emissions. This results in an innovative way of eliminating emissions.

The diagram of the business model below illustrates the comprehensive approach to the process and the nature of potential benefits to families and communities, contributing to better living standards for Samoa. This will eventuate in lesser environmental threats that are posed from changes of the climate caused by global warming trends. Building up resilience with the communities, will better prepare Samoa in times of natural disasters.

The STR project seeks to reduce Samoa's reliance on burning fossil fuels for its energy needs. If our program is implemented across the South Pacific ,this combination will greatly reduce the Pacific's total emissions.

Income levels in Samoa are detrimental to reducing the risk and damages of natural disasters. Samoa's exposure to climate change is real. With the recent disaster of Hurricane Evan in

7 Pacific Regional: Strategic Program for Climate Resilience (SPCR) dated 30 March 2012, approved April 2013.

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September 2012. Samoa lacked the infrastructure to respond to populations living quite a distance from the capital of Apia in a reasonable time frame.

A majority of homes, businesses and buildings were destroyed after the devastation of Evan. Implementing better infrastructural policies to reduce the risk of damages caused by natural disasters in Samoa will be beneficial on an environmental and socio-economic level. Samoa is a lower-middle income economy, despite its efforts to generate more income and to sustain income growth. External risk factors such as increasing prices of fossil fuels particularly in the energy sector and imported foods are degenerative in income sustainability.

Samoa Tyre Recycle L. T. D. Business model January 2013.

Potable Water Innovation F Cubed is a global leader in direct solar desalination technology , the technology allows the

processing of any sources water and is multi-functional utilizing the Carocell panels allows the implementation of water processing at Point of Use ( Households) to large scale water farms given it modular nature.

The Carocell technology produces 3 usable water sources , distilled water , disinfected flow through water and rain water harvesting. It can be utilized for processing sea water contaminated water and waste water including sewage.

By utilizing the unique zero liquid discharge capabilities, salt is produced as a available by product when processing seawater

This project encompasses multiple aspects of the technologies used utilizing the micro finance facility to provide distilled ,disinfected water and rain water collection to the under severed rural population representing 28,000 house holds .

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Establishing a sales distribution and manufacturing Joint Venture company with a local partner for sales ,training and operation of the 2 water farms, the water farms consist of 1 HA of panels plus evaporation channels for salt production and a bottling plant for 20 ltr bottles and infrastructure to deliver bulk water to the immediate neighbourhood , 1 farm is to be location on Upolu and the other to be located on Savaii

It is envisaged that this business model can be rolled out across the pacific nations providing them with a totally sustainable and integrated water supply including salt production.

It is proposed that the US 4million dollar loan will be used as follows US 3million dollar to establish the joint venture and the 2 water farms and a further US1 million as a revolving credit line for our micro finance partner SPBD ( South Pacific Business Development) which will be utilized by our POU ( point of use) customers.

Sustainable Buildings Innovation

The concept of passive design for agro processing is not in place in the world much less the pacific undoubtedly it is coming. The decreasing tariff barriers under WTO have caused increasing technical and sanitary phyto sanitary barriers for exporters from the pacific island countries.

The costs of transport are prohibitive and the proposed labeling of energy use in the production of goods shall all impact eventually on the Pacific Island Countries being increasingly marginalized. This innovation seeks to mitigate this and improve our ability to compete by meeting building needs that shall reduce our reliance on fossil fuels and improve our ability to meet the threats of climate change and reduce the barriers to trade by achieving compliance with buyer demands.

This business model attempts to build on our sustainable strengths in tropical agriculture, with available renewable resources and to mitigate the impacts of climate change on our ability to produce and trade. Natural Foods has made slow investments in machinery to reduce energy demands, systems and efficiency with ISO certification and renewable energy with the use of solar hot water systems.

NFIL would like to capture the methanol in its waste disposal so as to minimize its impact on the environment and improve its viability and to turn a cost into a benefit. This shall build on the South Pacific Programme for Climate resilience by introducing and showing that CCA principles can be used for improved production standards and are a viable way of addressing the needs of buildings in the pacific.

This shall serve as a replicable model for building in the pacific and mainstream the need for such.

VI. Technology, Product, and/or Business ModelPotable Water Technology F Cubed is dedicated to being the global leader in producing and delivering cutting edge direct

solar water processing technologies, cost effective strategies and sustainable innovation for the world’s most precious resource, WATER.

F Cubed’s unique technology is a solution to the world’s water issues only using natural renewable solar energy. F Cubed panels produces pure clean drinking water, from any feed

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water source by bio-mimicking the natural water cycle of evaporation and condensation; also producing a secondary water supply of UV disinfected, heated, and filtered water, precipitating inorganic compounds and leaving no waste. Each panel (20-year operating lifecycle) treats an average of 60 liters per day of unusable water, exceeding WHO drinking water standards, leaving zero carbon footprint. Modular in design the unit can operate as a single unit or multi units.

The Carocell direct solar desalination system has been developed over an 8-year period with commercial sales in the last 2 years; the product is being exported to over 30 countries.

Coconut Biofuel Technology Green Distillation Technologies in Australia have taken the pyrolysis process to the next stage.

Normal fast pyrolysis produces syngas, bio-char and a liquid fraction known as bio-oil. Unfortunately bio-oil cannot be directly used as a hydrocarbon because of high intrinsic chemical moisture content and high oxygen compound content.

GDT has successfully proven through its patented process production of a usable oil from EOL tyres and cotton waste. GDT has expended considerable corporate funds plus Australian Federal grants in achieving this signal leap in development. This is a validated technology and currently in operation.

Sustainability: Senile coconuts will supply adequate feedstock resources in Samoa for many years. The no. of acres under plantation is 27, 360 ha, and approx. 3.42 million palms. The question then is to determine the best use for the stripped plantations.

This is a decision for the owners. If continuing copra production is opted for depending on the Rotterdam price for coconut oil then a dwarf hybrid re-planting scheme can be entered into with a target replacement of up to 5:1.

If the option is to continue with pyrolysis a decision as to the feedstock must be made then. If the GDT re-engineered process is successful for whole coconut palms then similar results may be obtained from other woody species. For example, invasive woody leguminous weeds such as Gliricidia, Calliandra and Leucaena are rapidly regenerative and can be considered “energy plantations”. They can be regularly harvested as they rapidly coppice after cutting .

Tyre Recycling Technology STR seeks to be the first ever in the South Pacific to introduce Pyrolysis biomass technology

encompassing the use of waste (end-of -life) tyres to produce energy and Carbon Black for export. In simple terms waste tyres is used as feed into our machinery to produce high-grade carbon black and electricity.

This technology has zero harmful emissions based on a Queensland University Study Method. Phase two of our operations will include the collection of waste (rubbish) to feed into a

incinerator to produce electricity. In establishing this new industry in Samoa, we hope to have a fully operational waste disposal and collection system, that will allow for the elimination of waste being dumped at landfill

Besides the benefits addressed above, the economic and environmental benefits will be felt across all industries and communities. The resulted outcomes will be as follows:1. Reduced CO² emissions, as most of Samoa's energy is sourced from the burning of fossil

fuels;2. More affordable electricity for the population, with electricity prices set to reduce even

more over time; 3. Collection of waste tyres and value adding to this waste resource;4. Provide employment and training for local staff.5. Reduce the risks of contamination in soil and water bore hole resources from toxic leakages

created from waste tyres and waste (rubbish) at landfill.

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Once both phases of our projects is fully operational, we hope that this project will be duplicated in neighbouring countries.

carbon black and energy are two of the products extracted and developed through use of our plant. There is how ever one more product and that is steel. Steel serves as a strengthening re-enforcing agent in heavy duty rubber products such a tyres. Tyres are shredded whole with the steel. As the tyres are travelling down the conveyor belt, magnetisers are used to extract the steel. This is the main reason why we are able to produce high grade carbon black.

Carbon black has many useful applications in the manufacturing industry and in the agricultural industry worldwide. It has been commercialised in a number of industries. Carbon black is a strengthening reinforcing agent un plastic and rubber products. Without carbon black many products such a garden hoses, tyres, plastics would not have the durability need for its function. A tyre without carbon black would simply explode under the heavy pressure of a car. This is how important and crucial carbon black is in manufacturing.

Tyre pyrolysis power plants have already been built all over the world, and this type of clean biomass has been in existence for a minimum of 10 years, its viable in a way that allows for the creation of a new market to fix the problems of waste tyres at landfills. The largest tyre pyrolysis power plant is in Missouri.

Sustainable Buildings Technology

Passive building technologies are untested in the wet tropical conditions of the world. Examples of passive technology development have been demonstrated in temperate zones and in China where the continent acts to maintain low humidity conditions.

This is not an appropriate technology to introduce into the high humidity environment of the small tropical island states. However modified versions can be looked at developed and enables improved environmental controls that shall not cause increased GHG emissions.

Natural Foods are producing products from local resources that contribute to the economic development of Samoa. Creates viable sustainable income for the rural communities and develops financial opportunities to counteract the urban drift and abandonment of the rural land. We have endured tropical cyclones, tsunamis, pests and diseases, droughts and flooding which has impacted on our raw material supplies and our ability to trade and continue to trade today despite all these difficulties.

We have developed a farming model which seeks to mitigate these problems and develop opportunities. This farming model involves the introduction of the concept of using Mango trees as windbreaks for an orchard growing products that we intend to process thus providing protection for the interior plants from the effects of tropical cyclones.

VII. MarketPotable Water Market in Samoa There is about 140,000 rural people but only about 20 % can afford to buy bottle water , about

60 + % of the 40,000 urban people buy bottle water, therefore the current market is estimated at 159,000 litres per day which equates to a sales value of US31,800.00 per day  ie 11.6 mill PA with an estimated cost per family is US1095.00 Per year

The bottle water is currently produced by various methods including RO which requires large amounts of energy which is produced in some cases by diesel generators, the solar water farms

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will provide the opportunity for 18 % of this water to be substituted with a sustainable water supply.

The market is divided into 4 segments:o Direct sales of panels utilizing micro finance , estimated sales of 1000 -2500 per year

o Sales of panels to non micro finance customers 500 per annum, these combined sales are targeting the 28,000 rural house holds including those that are currently economically excluded being able to purchase bottle water

o Sale of bottled water in 20 liter containers will be wholesale at US$2.00 per bottle allowing for a distribution margin for the current bottle manufactures of over $2.00 per Bottle.

o Sales of Bulk water at the 2 water farm location of 118,000 litres per day from each site at $2.00 per 1000ltrs. The site of the water farm will be identified to sell this bulk water

o Income is further supplemented by the sale of salt 1470 tonne per year at US150.00 per tonne replacing the current import of salt and creating a new industry in Samoa

Our production cost of distilled water is less than US$2.00 per 1000 litres with minimal operational costs , current bottled water production require a RO and possible de ionising this is estimated at a minimum of 1 WKH per 1000 litres including use of chemicals and creating a reject stream into the environment.

In relation to bulk water it eliminates the infrastructure cost and the purification processors , in relation to house hold the Carocell replaces the need to boil water saving as much as 4tonne of CO 2 emission per household per year. There are multi benefit in relation to sustainability including sickness from water borne disease , improved productivity , hygienic personal washing.

Waste Recycling Market in Samoa Almost all of recyclable waste in Samoa is currently dumped at landfill, located at

Tafaigata. Samoa's recycling capabilities are not of any medium to large scale commercially viable projects.

Currently there are only a few small enterprises that engage primarily in the collection of metal, copper and aluminium recyclables. Barriers facing a majority of these small business owners is the necessary skills and abilities to raise projects well worth investing time and money into, this coherently poses non-favourable circumstances in raising sufficient equity in feasible recycling projects.

Three factors that hinder the local energy market are as follows:1. Samoa's dependence on fossil fuels particularly in diesel generators are vulnerable

to international oil prices. 2. The only importer of petroleum products, Petroleum Products Samoa (PPS) has

monopolised the market. The EPC are unable to source its own petroleum products from overseas because of current contracts and policies enacted by the PPS through the Government.

3. The diesel currently being used in Samoa is of high sulphur content, being 500 ppm (five hundred parts per million). When other developed nations are using low sulphur approximately 10 ppm (10 parts per million).

Our major export by-products: steel (extracted from tyres) and carbon black (used as a strengthening reinforcing agent in the plastics and rubber manufacturing industry).

China (one of the worlds' largest producers and consumers of carbon black) is forecasted to consume 35% of Global Carbon Black by 2017. In 2011, the PRC has withheld carbon black exports for purposes pertaining to its manufacturing sector. Because of this shift, there is currently a world shortage for carbon black.

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It is with these market factors that we intend to partially fill that void. Our closest carbon black market is gold mining in Australia. Waste tyres pose risks to landfill. The bubbling effect from tyres can cause toxic leakages to contaminate soil and water ways. This is the main reason why tyres are banned from being dumped at land fill. In response to this, a whole infrastructure program of tyre collection is in use.

BIOGAS MARKET According to a former Director of BOC gasses a local Samoan gas distributor, approximately

28,980 kg of LPG gas is distributed each week in Samoa. This equates to approximately 49671.72 cubic meters of gas per week. There is therefore a relatively significant demand for gas in Samoa and based on forecasts, Biogas Samoa will be able to quite effectively compete to capture a significant portion of this market share.

Current market barriers to entry are the significant costs to set up the facility due to the unfavourable commercial bank finance that is available which makes a project of this size unfeasible due to the short loan terms and very high interest rates. Depending on the volume of gas that is produced and the intention to assess the feasibility of gas fired vehicles, should this be viable it will mean extensive additions and expense to the project to get filling stations set up. There will also need to be a formalization of the current negotiations with the Ministry of Natural Resources and Environment to utilize all the organic waste streams currently disposed at the local waste disposal site.

Current completion from local distributors of imported gas is not seen as too significant of a threat as biomass digestion for gas production has been shown to be equal or lower to LPG according to a study conducted by the Victorian Government in Australia. We are reasonably confident that this will be the case for Samoa.

The climate benefits are clear due to the carbon neutral nature of biomass burning. This is of course highly beneficial for Samoa. Success of a project on this scale will also provide a positive platform for the region in duplicable similar projects.

SUSTAINABLE BUILDINGS MARKET Building costs are high, energy costs are high and financing costs are high. This has meant that

buildings have been built so as to be secure with no real thought for their operating costs. Air conditioning systems Passive design and using RE shall increase the building costs and the

leaders in passive house technologies (Germany) say this is typically by 10 -15%. Achieving a neutral state in a properly designed and implemented factory would reduce operating costs by more than that over the period of the loan and would be a permanent feature.

Natural Foods have market surveys of products it can produce that show the market size, costs and access requirements. It currently is exporting to the United States, New Zealand, Australia, Japan and American Samoa. The tropical cyclone of December meant a cancellation of some orders and now NFIL (Natural Foods) seeks to put in mitigation to reduce the impacts of climate events on its production. As products are locally produced from plants grown in Samoa they assist in the development of the land. NFIL believes land should be sustainably farmed using science based initiatives that take into account the nature of tropical agriculture.

Fruit pathways have been evaluated and the current systems NFIL has in place means that compliance shall not be an issue. The products of the Australasian markets shall be able to compete on the basis of freshness and shelf life at a cost that is beneficial to the economy of Samoa. The issue of supply is being addressed through the PSSF.

The development of the industry shall improve food security for Samoa but there shall be no waste as it is intended that graded fruit shall be used either for fresh export or for processing into value added healthy snacks or to sell in the local market for local consumption.

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VIII. Financial Plan (Indicative)(this table will be completed following initial ADB due diligence investigations)Source of Funding(by type of instrument, equity, debt, guarantee, grants, credit lines, etc.)

Amount (USD million equivalent)

Percentage (%)

Project developerMDBsPPCRLocal banksOther investorsBilateralsOthers TOTAL 100

Not all companies have provided preliminary financial information. The following are initial projections from the companies able to complete the financial proposals in the time available.

SAMOA WATER AND SALT COMPANY FINANCIAL SUMMARY Establish Joint venture with local partner currently in discussions with Kew Consult Ltd. Sale

of panels /operating the water farms/ logistics. Organise mirco finance for SPBP US1million revolving for finance of 1 panel per household

and micro entrepreneurs for small water sales. Establish 2 x 1 HA Water Farms

Bottle water sales wholesaleBulk Water SupplySalt Production

US $3.0 Million loan from SPCR Employ 16 people in Samoa.

Total Loan Sought from SPCR US $ 4.0 Million

COMPANY REVENUE PROJECTIONSBottled Water Sales

5% people = bottled water 3 litres / per person per day30,000ltrs / day / 20 liter = 1500 Bottles per day @ us$2.00 Wholesale = $3000.00 Gross per Day A$1,095,000.00 per annum

Supply High Quality Bulk WaterProduction per HA + Rain water harvesting = 123,000 litres per day2 x 1 HA water farms = 246,000ltrs – 30,000lts bottled water = 216,000 litres per day216,000 litres per day = 79 mega litres per year @ $2,000.00 = A$158,000.00 Gross rev( 500 litres per day for 432 households) ( 2000 people)

Salt Production Sale of Salt 1470 Tonne @ $150.00 = $220,500.00

ANNUAL GROSS INCOMEBottled Water ( 20 ltr units) $1,095,000.00

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Bulk Water Supply 79 Megs $ 158,000.00Sale of Salt $ 220,500.00

Total Gross Income $1,473,500.00

SAMOA TYRE RECYCLING COMPANY FINANCIAL SUMMARY

Source of Funding Amount (USD $) Percentage (%)Project Developer 0 0ADB or World Bank 0PPCR Funds 8.5 million 60Local Banks 1.34 million (DBS) 10Other investors 4. 2 million 30Bilateral organisations 0 0Others 0 0Total 14.04 million 100%

COCONUT BIOFUEL COMPANY FINANCIAL SUMMARYProject Phasing

There are 2 phases:1. Re-engineering at GDT HQ in Warren, NSW, Australia2. Establishment of a commercial scale-up to 3 modular unit near Saleleloga, Savai’i, Samoa.

Putative Costs Stages 1 - 41. Re-engineering / Project Incentive Grant US$ 400,0002. Manufacture / Freight / install to turnkey 3 Module plant US$ 2,400,0003. Material handling / Packaging / Robots / Warehousing turnkey US$ 2,300,0004. Computer software / Programming and Site Commissioning US$ 75,000Future allowances Stages 5 – 6 5. Manufacture / Freight / install to turnkey additional 3 Modules US $ 2,200,0006. 3 x I Module units / installed turnkey at remote Island Nations US $ 2,200,000

Totals .Stages 1-4 Loan drawdown inclusive of Project Incentive Grant US$ 5,175,000Stages 5-6 Savaii Plant to capacity plus remote Island Nations . US$ 4,400,000.

PACIFIC BIOGAS COMPANY FINANCIAL SUMMARY

Source of Funding Amount (USD$ equivalent) Percentage (%)Project developer8 150,000.00 4%ADB or World Bank 3.5 million 92%Samoa Government9 150,000.00 4%Total 3.8 million 100%

8 Contributions will be project management and technical support as “in kind contributions”.9 Contribution of Government will be in the form of land at the Tafaigata Landfill site

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IX. Expected Results and Indicators(this table will be completed following initial ADB due diligence investigations)

Results Indicators

Development Results(s):…

X. Implementation Feasibility and ArrangementsThis Section will be completed following initial ADB due diligence investigations in order to provide information on the implementation feasibility of the proposed projects and a timeline by when the project will start implementation on the ground and when the project will be completed. ADB will also provide the expected PPCR Sub-Committee approval date and the expected MDB Approval date.

Once the initial ADB due diligence investigations have been completed, the potential risks and mitigation measures can also be identified, including for example, the risks that might prevent the project development outcomes from being realized, including but not limited to, political, policy-related, social/stakeholder-related, macro-economic, or financial risks.

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Annex Table of Contents of the Resource Text (under separate cover)

Contents

Section 1. Summary of Tasks and Work PlanContext and JustificationObjectivesFive Specific tasksOutputsWork PlanClimate Support FacilityCoordination and Supervision

Section 2. PPCR objectivesObjectives of the SPCR

Section 3. Original Work Order #29Private sector engagement in resilience building to climate change in Pacific Island Countries

Section 4. PROPOSALSI. SOLAR WATER PURIFICATIONII. COCONUT BIOFUEL PRODUCTIONIII ENERGY PRODUCTION FROM WASTE (tyre recycling)IV. ORGANIC WASTE RECYCLING (sustainable fertilizers and

renewable energy)V. SUSTAINABLE BUILDINGSVI. Solar Hydro Village Energy

Section 5. PRIVATE SECTOR COMPANY INFORMATIONI. SOLAR WATER PURIFICATION - F-cubed

II. COCONUT BIOFUEL PRODUCTIONIII. ENERGY PRODUCTION FROM WASTE (Samoa Tyre Recycle Limited,

Pacific Energy Solutions)

IV ORGANIC WASTE RECYCLING (sustainable fertilizers and renewable energy)

V. SUSTAINABLE BUILDINGS (Natural Foods International)VI. Solar Hydro Village Energy (Solar Samoa Ltd)

Section 6. Private Sector and the Pilot Program for Climate Resilience

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