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CPAVALIDATION REPORT

DET NORSKE VERITAS

Title of CPA:

SOCFINDO EFB PLUS POMECO-COMPOSTING PROJECT (CPANO.001)

Title of PoA to which CPA is to be included:

CO-COMPOSTING AND COMPOSTING

PROGRAM OF ACTIVITIES FORPALM OIL

MILLS IN INDONESIA

REPORT NO. 2011-9535/01REVISIONNO.01

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Report No: 2011-9535/01, rev. 01


4_Socfindo_CPA_FVR_01_WONGS_Brinks_FA_WONGYS_mleh_FA_mleh_FA_20120613_mleh20120615_FA_20120620_clean.docx

DNVCLIMATE CHENGE

SERVICES AS

Climate Change & EnvironmentalServicesVeritasveien 1,1322 HVIK, NorwayTel: +47 67 57 99 00Fax: +47 67 57 99 11http://www.dnv.comOrg. No: NO 994 774 352 MVA

Date of first issue: Pro ect No.:

31 January 2012 PRJC-314605-2011-CCS-MYSApproved by: Organisational unit:

Michael Lehmann DNV KEMA Energy & Sustainability

Accredited Climate Change ServicesClient: Client ref.:

PT. Socfin Indonesia Harold Williams

Identification of CPA: Socfindo EFB plus POME Co-composting Project (CPA No. 001)

Issue date of CDM-SSC-CPA-DD: 31 May 2012 (Version: 03)

Host Party: Indonesia

PoA: Co-composting and Composting Program of Activities for Palm Oil Mills in Indonesia

Methodology: AMS-III.F Version: 10

CPA ER estimate: 70 910 tCO2eover 7 years or 10 130 tCO2e on average yearlyGHG reducing Measure/Technology: Avoidance of methane emissions through composting

Size: Large Scale Small Scale

Validation Phases:

Desk Review Follow up interviews

Resolution of outstanding issues

Validation StatusCorrective Actions Requested Clarifications Requested

Full Approval and request for inclusion Rejected

In summary, it is DNVs opinion that the CPA Socfindo EFB plus POME Co-compostingProject (CPA No. 001) as described in the CDM-SSC-CPA-DD of31 May 2012 requesting

to be included in the PoA Co-composting and Composting Program of Activities for Palm

Oil Mills in Indonesia, meets the eligibility criteria established in the PoA and all relevant

UNFCCC requirements for including CPAs in a PoA and correctly applies the baseline and

monitoring methodology AMS-III.F, version 10. DNV thus requests the inclusion of the CPA

in the PoA.

Re ort No.: Date of this revision: Rev. No. Ke words:

2011-9535/01 2012-06-20 01 CDM

Kyoto Protocol

Programme of Activities

Re ort title:

Socfindo EFB plus POME Co-composting

Project (CPA No. 001)

Work carried out b :

Simon Wong Yon Sing, Fathullah Akmal

Khalid, Foo Wei Yee, Denise Lai Siew Sit

No distribution without permission from

the Client or responsible organisational

unit

Work verified b :

Hendrik W. Brinks, Michael Lehmann Limited distribution

Unrestricted distribution

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Report No: 2011-9535/01, rev. 01


Page i

Abbreviations

ABC Aerated Bunker Co-composting Plant

AMWS Animal Waste Management System

CAR Corrective Action Request

CDM Clean Development MechanismCDM-SSC-CPA-DD CDM small-scale programme activity design documentCDM-SSC-POA-DD CDM small-scale programme of activities design documentCH4 Methane

CL Clarification request

CME Coordinating/Managing Entity

CO2 Carbon dioxide

CO2e Carbon dioxide equivalentCOD Chemical Oxygen DemandCPA CDM programme activityCPO Crude Palm OilDNA Designated National Authority

DNV Det Norske Veritas

EFB Empty Fruit Bunch

EIA Environment Impact Assessment

EMMP Environmental Management and Monitoring Plan

FAR Forward Action Request

FFB Fresh Fruit Bunch

GHG Greenhouse gas(es)GPS Global Positioning System

GWP Global Warming Potential

IPCC Intergovernmental Panel on Climate Change

MCF Methane Correction Factor

MP Monitoring Plan

NCV Net Calorific Value

NGO Non-governmental Organisation

NPV Net Present Value

ODA Official Development Assistance

PERTAMINA Indonesian National Oil Company

PKS Palm Kernel ShellsPoA Programme of activitiesPoA-DD Programme of activities Design Document

POME Palm Oil Mill Effluent

RSPO Roundtable on Sustainable Palm Oil

SWDS Solid Waste Disposal Site

UNFCCC United Nations Framework Convention on Climate Change

WWTS Wastewater Treatment System

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Page ii

TABLE OF CONTENTS

1 INTRODUCTION ........................................................................................................ 11.1 Objective 11.2 Scope 12 METHODOLOGY ....................................................................................................... 22.1 Desk Review of the Project Design Documentation 22.2 Site visit and follow-up Interviews 52.3 Resolution of Outstanding Issues 52.4 Internal Quality Control 62.5 Validation Team 63 VALIDATION FINDINGS ......................................................................................... 7Appendix A: Protocol for Assessing Compliance of Specific CDM Programme Activities

with the Programme of Activities

Appendix B: Curriculum Vitae of validation team

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Page 1

1 INTRODUCTIONPT. Socfin Indonesia has commissioned DNV Climate Change Services AS (DNV) to assess

the information in the CDM-CPA-DD for the CPA titled Socfindo EFB plus POME Co-

composting Project (CPA No. 001)(hereafter called the CPA) against the requirements for

including CPAs to the PoA Co-composting and Composting Program of Activities for Palm

Oil Mills in Indonesia and further documentation requirements for including CPAs to a PoA.

This report summarises the findings of the validation of the specific small-scale CDM

Programme of Activities Design Document (CDM-SSC-CPA-DD).

1.1

ObjectiveThe assessment of a CPA requesting to be included in a PoA shall ensure that all therequirements determined in the PoA are met.

The assessment was performed on the basis of the eligibility criteria established in the PoA

and the UNFCCC criteria for including CPAs to programme of activities under the Clean

Development Mechanism (CDM), as well as criteria given to provide for consistent project

operations, monitoring and reporting according to AMS-III.F Avoidance of methane

emissions through composting, version10.

1.2 ScopeThe validation scope is defined as an independent and objective review by a Designated

Operational Entity (DOE) of the specific CDM-SSC-CPA-DD to be included in the PoA. The

DOE shall scrutinize the information in the CDM-SSC-CPA-DD to assess compliance with

the eligibility criteria established by the PoA, to check correctly application of AMS-III.F

(Version 10) and to check compliance with documentation requirements for CPAs.

The validation is not meant to provide any consulting towards the programme participants.

However, stated requests for clarifications and/or corrective actions may have provided input

for improvement of the project design.

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Page 2

2 METHODOLOGYThe validation consisted of the following three phases:I a desk review of the specific CDM-SSC-CPA-DD with relevant information to be

included in the PoA;

II follow-up interviews with programme stakeholders

III the resolution of outstanding issues and the issuance of the final validation report and

opinion.

The following sections outline each step in more detail.

2.1 Desk Review of the Project Design DocumentationThe following table lists the documentation that was reviewed during the validation:

2.1.1 Documentation provided by the project participants/1/ PT. Carbon Agro Indo: CDM-SSC-PoA-DD for PoA titled Co-composting and

Composting Program of Activities for Palm Oil Mills in Indonesia, Version 01 dated

28 June 2011 published for comments and Version 03 dated 17 January 2012 for final

report

/2/ PT. Carbon Agro Indo: Generic CDM-SSC-CPA-DD for PoA titled Co-compostingand Composting Program of Activities for Palm Oil Mills in Indonesia, Version 01

dated 28 June 2011 published for comments and Version 03 dated 31 May 2012 for

final report

/3/ PT. Carbon Agro Indo:CDM-SSC-CPA-DD for CPA titled Socfindo EFB plus POMECo-composting Project (CPA No. 001), Version 01 dated 28 June 2011 published for

comments and Version 03 dated 31 May 2012 for final report

/4/ PT. Carbon Agro Indo:Financial Analysis Spread Sheet for CPA titled Socfindo EFBplus POME Co-composting Project (CPA No. 001), Version 01 dated 28 June 2011

published for comments and CPA BB FInancial Analysis ver_3.xls for final report

Fertilizer savings calculation:Fertilizer Savings_template CPA inclusion_Option A.xls

Fertilizer savings calculation:Fertilizer Savings_template CPA inclusion_Option B.xls

/5/ PT. Carbon Agro Indo:Emission Reduction Spread Sheet for CPA titled Socfindo EFB

plus POME Co-composting Project (CPA No. 001), Version 01 dated 28 June 2011

published for comments and CPA BB Emission Reduction spreadsheet ver_4.xls forfinal report

/6/ PT. Socfin Indonesia: Environmental Management and Monitoring Plan (ref. number

660/084/Tarukim-SB/2005), approved on 20 June 2005

/7/ Roundtable on Sustainable Palm Oil : RSPO Principles and Criteria for Sustainable

Palm Oil ProductionIncluding Indicators and Guidance, dated October 2007

/8/ PT. Socfin Indonesia:Fertilizer Supply Agreements for Dolomite, Muriate of Potash,

Rock Phosphate Egypt and Urea, for the year 2009

/9/ PT. Socfin Indonesia: Socfindo Standard Fertilisation Programme, version 09-30 for

the year 2009

/10/ PT. Socfin Indonesia:Palm Oil Tree Census for Fertiliser Usage, for the year 2009/11/ PT. Socfin Indonesia:Sales and Purchase Agreement for Dolomite, Urea, Potassium

nd Rock Phosphate between PT. Socfin Indonesia and various fertilizer suppliers, for

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the year 2009

/12/ PT. Socfin Indonesia:Diesel Purchase Invoices, for the months of January 2010 toMarch 2010

/13/ Carbon Conservation:Proposal for Carbon Services for PT Socfin Indonesia, dated 9

April 2010

/14/ PT. Socfin Indonesia:Feasibility Study Co-Composting at Bangun Bandar Mill, dated

27 April 2010

/15/ PT. Socfin Indonesia:Minutes of Meeting of the Board of The Commissioners of the

P.T. Socfin Indonesia (Socfindo) held in Jakarta, dated 28 April 2010

/16/ PT. Socfin Indonesia:Declaration of No ODA for project activity CPA001- Socfindo

EFB plus POME Co-composting Project

/17/ Burden et al: A Business Case for the Aerated Bunker Composting (ABC) System,published in 2010

/18/ PT. Socfin Indonesia: Report on Stakeholder Consultation Meeting, dated 27

September 2010

/19/ UNFCCC Secretariat: Submission of Prior Consideration of CDM Form for PT Socfin

Indonesia, dated 1 October 2010

/20/ Indonesian CDM Designated National Authority:Receipt of Document from P.T. Socfin

Indonesia, dated 12 October 2010

/21/ North Sumatra Provincial Authority: Wastewater Test Reports for the year 2008, 2009

and 2010, dated December 2010

/22/ PT. Socfin Indonesia:Wastewater and Production Records for the year 2008, 2009 and2010, dated December 2010

/23/ PT. Socfin Indonesia:Contract for Piling Works between PT. Socfin Indonesia and PT.

Perintis Pondasi Teknotama, dated 4 July 2011

/24/ PT. Socfin Indonesia:Contract for Concrete, Steel & Roof Works between PT. Socfin

Indonesia and CV Cikini Raya, dated 4 July 2011

/25/ PT. Socfin Indonesia: Contract for Precast Concrete Panel between PT. Socfin

Indonesia and Wijaya Karya Beton, dated 4 July 2011

/26/ Technical Department of PT. Socfin Indonesia: Clarification on the choice of MCC

Panel and Bunker Filler, dated 15 August 2011

/27/ Sucofindo: Wastewater Analysis Certificate for the Wastewater MeasurementCampaign from 11 August 2011 to 23 August 2011, dated 27 August 2011

/28/ PT. Carbon Agro Indo and PT Socfin Indonesia: Cooperation Agreement to join CDM

Program of Activities, Co-composting Programme of Activities in Indonesia, dated 3

October 2011

/29/ PT. Carbon Agro Indo:Co-composting and Composting Program of Activities for PalmOil Mills in Indonesia Management Plan for the Inclusion of CDM Program of

Activities (CPAs), dated 16 December 2011

/30/ Dr John Burden and Rodney Barrett: Commissioning of the Aerated Bunker

Composting Facility on 8 March 2012, letter dated 14 March 2012

/31/ PT. Socfin Indonesia: Sample Employee Payslips for the months of January 2010 toMarch 2010, printed on 12 June 2012

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2.1.2 Methodologies, tools and other guidance by the CDM Executive Board/32/ CDM Executive Board: Validation and Verification Manual, EB44 Annex 1 version 1.2/33/ CDM Executive Board:Baseline and monitoring methodology Avoidance of methane

emissions through compostingAMS-III.F, EB59 version 10

/34/ CDM Executive Board: Guidelines on the assessment of investment analysis, EB62

Annex 5 version 05

/35/ CDM Executive Board: Information on Additionality (Attachment A of Appendix B of

4/CMP.1 Annex II), EB63 Annex 24 version 08

/36/ CDM Executive Board: CDM-SSC-PoA-DD Small Scale CDM Programme of Activities

Design Document form, EB33 Annex 43 version 01.0

/37/ CDM Executive Board: General Guidelines to SSC CDM methodologies, EB61 Annex

21 Version 17/38/ CDM Executive Board: Tool to determine the remaining lifetime of equipment, EB 50

Annex 15 version 01

/39/ CDM Executive Board: Standard for Demonstration of Additionality, Development of

Eligibility Criteria and Application of Multiple Methodologies for Programme of

Activities, EB65 Annex 3 version 01.0

/40/ CDM Executive Board: Co-composting Programme of Activities in Indonesia,

http://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F7

2DM11M3M8A6Q8M/view.htmllast accessed 20 December 2011

/41/ CDM Executive Board: Emissions from solid waste disposal sites, EB65 Annex 19

version 06.0.0/42/ CDM Executive Board:Baseline and monitoring methodology Methane recovery in

wastewater treatment AMS-III.H, EB58 version 16

/43/ CDM Executive Board: Tool to calculate baseline, project and/or leakage emissions

from electricity consumption, EB39 Annex 7 version 01

/44/ CDM Executive Board: Tool to calculate project or leakage CO2 emissions from fossil

fuel combustion, EB41 Annex 11 version 02

2.1.3 Documentation used by DNV to validate / cross-check the informationprovided by project participants

/45/ Ministry of Environment of Indonesia:EIA Requirements for Projects and/or Activities,

dated 2 October 2006

/46/ Intergovernmental Panel on Climate Change: 2006 IPCC Guidelines for Natinoal

Greenhouse Gas Inventories, published in year 2006

/47/ Stichnothe and Schuchardt: Greenhouse gas reduction potential due to smart palm oil

mill residue treatment, published in 2010.

/48/ Wong Wei-Shen, The Star:Natural BoosterSumatra Bioscience advocates the use of

organic fertiliser in oil palm plantations for higher yield and environmental

preservation, dated 4 June 2012
http://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F72DM11M3M8A6Q8M/view.htmlhttp://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F72DM11M3M8A6Q8M/view.htmlhttp://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F72DM11M3M8A6Q8M/view.htmlhttp://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F72DM11M3M8A6Q8M/view.htmlhttp://cdm.unfccc.int/ProgrammeOfActivities/Validation/DB/2MJW8CICWDNRL1F72DM11M3M8A6Q8M/view.html

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2.2 Site visit and follow-up InterviewsOn 8 August 2011, DNV visited the project site of PT. Socfin Indonesia and performed

interviews with project stakeholders.

Date Name Organization Topic

/49/ 2011-08-08 Mr. Lufaldy

Ernanda

Mr. Mark

Harding

Carbon

Conservation /

PT. Carbon

Agro Indo

Project technology. Project participants. Applicability criteria. Additionality. CDM consideration. Baseline, Project and

Emission reductioncalculations.

Stakeholder consultationprocess.

/50/ 2011-08-08 Mr. P. Sinurat

Mr. Julians

Sinuraya

PT. Socfin

Indonesia

Project technology. POME generation COD of wastewater Mill licenses. Legal and environmental

issues.

Stakeholder consultationprocess.

Monitoring plan and projectmanagement

2.3 Resolution of Outstanding IssuesThe objective of this phase of the validation was to resolve any outstanding issues which

needed to be clarified prior to DNV's positive conclusion on the CPA. In order to ensure

transparency a validation protocol was customised for assessing CPAs. The protocol shows in

a transparent manner the criteria (requirements), means of verification and the results from

validating the identified criteria. The validation protocol serves the following purposes:

It organises, details and clarifies the requirements a CPA requesting inclusion is expectedto meet;

It ensures a transparent validation process where the validator will document how aparticular requirement has been validated and the result of the validation.

The completed validation protocol for the CDM-SSC-CPA-DD titled Socfindo EFB plus

POME Co-composting Project (CPA No. 001) is enclosed in Appendix A to this report.

A corrective action request (CAR) is raised if one of the following occurs:

(a)The project participants have made mistakes that will influence the ability of theproject activity to achieve real, measurable additional emission reductions;

(b)The CDM requirements have not been met;(c)There is a risk that emission reductions cannot be monitored or calculated.

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A clarification request (CL) is raised if information is insufficient or not clear enough to

determine whether the applicable CDM requirements have been met.

It must be noted that the CPA titled Socfindo EFB plus POME Co-composting Project (CPA

No. 001) was submitted for validation together with the PoA-DD for the PoA Co-

composting and Composting Program of Activities for Palm Oil Mills in Indonesia. The

validation of the PoA-DD also raised issues relevant to the CPA titled Socfindo EFB plus

POME Co-composting Project (CPA No. 001). Hence, findings relevant to the CPA titled

Socfindo EFB plus POME Co-composting Project (CPA No. 001) are included in the

validation protocol of the validation report (DNV report no. 2011-9535) for the PoA Co-

composting and Composting Program of Activities for Palm Oil Mills in Indonesia.

2.4 Internal Quality ControlThe CPA validation report underwent a technical review before requesting inclusion of the

CPA. The technical reviews were performed by a technical reviewer qualified in accordance

with DNVs qualification scheme for CDM validation and verification.

2.5 Validation Team

Role Last Name F ir st Name Countr y

Type of involvement

Deskreview

Sitevisit/Interviews

Reporting

Supervision

ofwork

Technicalrev

iew

TA13.1competence

Financialexp

ertise

Team leader

(Validator)

Wong Yon Sing

(Simon)

Malaysia

Assessor under

training / Financial

expert after from

28 October 2011

onwards)

Khalid Fathullah

Akmal

Malaysia

Assessor under

training

Foo Wei Yee Malaysia

Financial expert

(before 28 October

2011)

Lai Siew Sit

(Denise)

Malaysia

Technical

reviewer

Brinks Hendrik Norway

Technical

reviewer

Lehmann Michael Norway

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3 VALIDATION FINDINGSThe CPA titled Socfindo EFB plus POME Co-composting Project (CPA No. 001), as

described in the CDM-SSC-CPA-DD of31 May 2012, meets the requirements to be included

in the PoA Co-composting and Composting Program of Activities for Palm Oil Mills in

Indonesia and correctly applies the baseline and monitoring methodology AMS-III.F, version

10.

DNV thus requests the inclusion of the CPA titled Socfindo EFB plus POME Co-composting

Project (CPA No. 001) in the PoA Co-composting and Composting Program of Activities

for Palm Oil Mills in Indonesia.

The total emission reductions from the CPA titled Socfindo EFB plus POME Co-compostingProject (CPA No. 001) are estimated to be on the average 10 130 tCO2e per year over the

selected 7 year crediting period. The emission reduction forecast has been checked and it is

deemed likely that the stated amount is achieved given that the underlying assumptions do not

change.

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APPENDIX A

PROTOCOL FOR ASSESSING COMPLIANCE OF SPECIFIC CDMPROGRAMME ACTIVITIES WITH THE PROGRAMME OF

ACTIVITIES

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Protocol for assessing compliance of specific CPA with the PoADNV Report No. 2011-9535/01, rev. 01 A-1

CHECKLIST QUESTION Ref. MoV* COMMENTSDraft

Concl.

Final

Concl.

A. General description of CPAA.1. Project boundaries

A.1.1 Are the CPAs spatial boundaries (geographical)clearly defined, allowing the unique identification of

the CPA?

/3/ DR The CPAs spatial boundaries are clearly

defined in the SSC-CPA-DD. It allows for

unique identification of the CPA.

OK

A.1.2 Are the CPAs system boundaries (components andfacilities used to mitigate GHGs) clearly defined?

/3/ DR Components and facilities used to mitigate

GHGs are clearly defined in the projectdocument.

OK

A.1.3 Has it been demonstrated that the CPA is within thegeographical borders of the PoA?

/1/

/3/

DR According to the project document, the CPA

is located in Medan, Sumatera Island, which

within the geographical and political

boundaries of the PoA.

OK

A.1.4 Has it been confirmed that no part of the CPA isregistered as a CDM project or included in a

registered POA?

/3/

/28/

DR

I

It has been confirmed that the CPA is not

registered as a CDM project or included in

another registered PoA.

This was crosschecked with the information

available on UNFCCC website and also the

confirmation from the CPA owner, PT Socfin

Indonesia in the agreement signed with the

CME.

OK

A.2. Participation requirementsA.2.1

Which Parties and CPA implementer are participatingin the CPA? Are they included in the PoA? /3/ DR The Host Party is the Republic of Indonesiaand this is mentioned in the SSC-PoA-DD.

The implementer is PT Socfin Indonesia.There is no Annex I Party for the CPA and

PoA.

OK

A.3. Duration of the CDM programme activity,Crediting Period

A.3.1Are the CPAs starting date and operational lifetimeclearly defined and evidenced?

/3/

/23/

DR

IThe CPAs starting date is specified as 4 July

2011, as evidenced from the contracts signed.

OK

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Concl.

Final

Concl.

/24/

/25/

The operational lifetime is 20 years. They are

clearly defined and evidenced.

A.3.2Has the crediting period been clearly defined and isthe start of the crediting period deemed to be

reasonable?

/3/ DR The project selects a 7-year, twice renewable

crediting period with a total length of 21

years.

OK

A.3.3Has it been confirmed that the length of the CPAcrediting period does not exceed the end of PoA?

/3/ DR Yes, it has been confirmed that the length of

the CPA crediting period does not exceed the

end of PoA.

OK

B. Eligibility of CPA and Estimation of EmissionReductions

B.1. Eligibility criteria for CDM Programme ActivitiesIt is assessed whether the CPA complies with the criteria for

inclusion in the registered programme of activities.

B.1.1 Has it been sufficiently justified that the CPAcomplies with:

Boundary:

(i) Physical boundary: The entire boundary of the CPA projectactivity must be physically located within the territory of the

Republic of Indonesia as set out in section A.4.1.2 of the

PoA-DD.

(ii)Time Induced Boundary: No CPA shall commence beforethe Start Date of the PoA, as set out in section B.1. of this

PoA-DD. In addition, no CPA shall commence later than 28

years after the start date of the PoA-DD as set out in section

B.1. of the PoA-DD.

/1/

/3/

/23/

/24/

/25/

/49/

/50/

DR

I

(i) The CPA project activity is physicallylocated within the territory of the

Republic of Indonesia. The address of the

project activity is Bangun Bandar crude

palm oil mill, Martebing village, Dolok

Masihul district, Serdang Bedagai

regency, North Sumatra, Indonesia. The

GPS coordinates provided by the projectparticipant are 985758.70E -

99436.33 E and 31624.46 N -32032.54 N.The location and GPS coordinates of the

CPA have been verified during the site

visit. Therefore, it is confirmed that the

CPA meets the criteria for physical

boundary defined in the PoA.

OK

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Concl.

Final

Concl.

(ii)The starting date of the PoA is 8 June2011 which is the date of commencement

of validation. The starting date of the

CPA is 4 July 2011 and this is evidenced

from the contracts signed in relation to

the project activity. The commencement

of the CPA is approximately one monthafter the starting date of the PoA.

Therefore, it is confirmed that the CPA

meets the criteria for time induced

boundary defined in the PoA.

Therefore, it is concluded that the CPA

complies with eligibility criterion 1 stated inthe PoA-DD.


Double Counting: To avoid double counting of emission

reductions each CPA must provide specific geographic GPS

coordinates for the Project Activity to enable uniqueidentification of the Project Activity.

/1/

/3/

/49/

/50/

DR

I

The GPS coordinates for the CPA are

985758.70E - 99436.33 E and31624.46 N - 32032.54 N. In addition,

the address of the CPA has been provided.

From address details and GPA coordinates, it

allows for unique identification of the CPA.

In addition, the address and GPS coordinates

have been verified during the site visit.Therefore, it is concluded that the CPA

complies with eligibility criterion 2 stated in

the PoA-DD.

OK


Cooperation Agreement: Each CPA owner must enter into a

/1/

/3/

/28/

DR The CPA owner represented by PT Socfin

Indonesia has entered into a cooperation

agreement with the coordinating entity

represented by PT Carbon Argo Indo on 3

OK

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Concl.

Final

Concl.

cooperation agreement with the Coordinating entity which

includes at a minimum the matters set out in section A.4.4.1(iv)

of the PoA-DD:

(i) The CPA Owner is aware and voluntarily agrees thatthe CPA will be subscribed to the present PoA under

the conditions as required by the approved PoA and the

contractual arrangement between the CPA Owner andthe Coordinating Entity.

(ii) Certifies the CPA has not been and will not beregistered as a single CDM project activity nor as a

CPA under another PoA, nor any voluntary scheme and

warrants on an ongoing basis that they will not seek to

have the project activity which forms the basis of the

proposed CPA registered as a CDM project or

registered under any other scheme that earns carboncredits for the emission reductions achieved while the

project is included in a CPA or proposed CPA under the

present PoA.

(iii) The CPA Owner will certify in writing that theproposed CPA is not a debundled part of a bigger

project.

(iv) CPA Owner cedes all rights to independently claim andown emission reductions under the Clean Development

Mechanism of the UNFCCC or any voluntary scheme

other than through the managing entity of the present

PoA as agreed.

October 2011. Significant matters presented

in cooperation agreement are:

(i) PT Socfin Indonesia voluntarilysubscribes to the PoA

(ii) The CPA cannot be registered in anyother Carbon Credit Scheme

(iii) Certification by PT Socfin Indonesiathat the CPA is not a debundledcomponent of another project

(iv) PT Socfin Indonesia cedes all rights toindependently claim and own emission

reductions.

Therefore, the signed cooperation agreement

verified demonstrates and confirms that the

CPA complies with eligibility criterion 3

stated in the PoA-DD.


/3/

/49/

/50/

DR

I

There is no existing co-composting or

composting activities at the site of the

proposed CPA. Without the proposed project,

OK

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No Pre-existing Co-composting or Composting at Site: Each

CPA shall be implemented at a Palm Oil Mill site where no

composting or co-composting activity was taking place before

the Project Activity.

POME is treated anaerobically in open

lagoons and EFB is sent to the plantations for

disposal. The site visit performed by DNV

also reveals no evidence of existing co-

composting or composting activities at the

site.

Therefore, the site visit by the validationteam was able to confirm that the CPA

complies with eligibility criterion 3 stated in

the PoA-DD.


Technology and compliance with Methodology: Each CPA

must be a newly developed, upgraded or expanded co-

composting or composting facility using composting technology

that:

(i) Uses Palm Oil Mill Organic waste as inputs and via anaerobic composting process within the parameters set out in

section A.4.2.1 of the PoA-DD produces organic compostfor reapplication to land as organic fertilizer

(ii) Meets the requirements of approved methodology AMS-III.F version 10, including its relevant assessment tools andguidelines:

1. This methodology comprises measures to avoid theemissions of methane to the atmosphere from biomass or

other organic matter that would have otherwise been left

to decay anaerobically in a solid waste disposal site

(SWDS), or in an animal waste management system

(AWMS), or in a wastewater treatment system

/3/

/14/

/49/

/50/

DR

I

The CPAs compliance with technology and

methodology is demonstrated as follows:

(i) The CPA uses Palm Oil Mill Organicwaste as inputs and produces organiccompost via an aerobic composting

process. The compost produces will be

applied as organic fertilizer. Palm Oil

Mill Organic wastes used in the CPA are

Empty Fruit Bunches (EFB) and Palm

Oil Mill Effluent (POME). These two

wastes are co-composted in a process

which will be controlled aerobically.(ii) The CPA meets the requirements of

approved methodology AMS-III.F

version 10, including its relevant

assessment tools and guidelines. This is

demonstrated as follows:

1. The CPA aims to avoid emissions ofmethane to the atmosphere from thedecay of EFB and POME. Without

OK

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(WWTS). In the project activity, controlled aerobic

treatment by composting of biomass is introduced.

2. The project activity does not recover or combust landfillgas from the disposal site (unlike AMS-III.G Landfill

methane recovery), and does not undertake controlled

combustion of the waste that is not treated biologically

in a first step (unlike AMS-III.E Avoidance of methaneproduction from decay of biomass through controlled

combustion, gasification or mechanical/thermal

treatment). Project activities that recover biogas from

wastewater treatment shall use methodology AMS-III.H

Methane recovery in wastewater treatment. Project

activities involving co-digestion of organic matters shall

apply methodology AMS-III.AO Methane recoverythrough controlled anaerobic digestion.

3. Measures are limited to those that result in emissionreductions of less than or equal to 60 ktCO2 equivalent

annually.

4. This methodology is applicable to the composting of theorganic fraction of municipal solid waste and biomass

waste from agricultural or agro-industrial activities

including manure.

5. This methodology includes construction and expansionof treatment facilities as well as activities that increase

capacity utilization at an existing facility. For project

activities that increase capacity utilization at existing

facilities, project participant(s) shall demonstrate that

special efforts are made to increase the capacity

utilization, that the existing facility meets all applicablelaws and regulations and that the existing facility is not

this, EFB would be left to decay

anaerobically in a SWDS and POME

would be left to decay anaerobically

in a wastewater treatment system. The

CPA introduces controlled aerobic

treatment of EFB and POME. This is

evidenced from the feasibility studyand has been confirmed during the site

visit.

2. The project activity does not involvelandfill gas recovery and combustion,

controlled combustion of waste,

gasification or mechanical/thermal

treatment. AMS-III.H is not

applicable as the project does notinvolve biogas recovery. AMS-III.AO

is not applicable as the project does

not involve anaerobic digestion. This

has been confirmed from documents

related to the project design and

verified from interviews during the

site visit.

3. Emission reductions achieved by theCPA is estimated to be on average

10 130 tCO2e annually. This is less

than the limit of 60 ktCO2e annually.

4. The applicability of this methodologyis confirmed as the CPA involves the

composting of waste from agro-industrial activities. In this case, EFB

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included in a separate CDM project activity. The special

efforts should be identified and described.

6. This methodology is also applicable for co-compostingwastewater and solid biomass waste, where wastewater

would otherwise have been treated in an anaerobic

wastewater treatment system without biogas recovery.

The wastewater in the project scenario is used as asource of moisture and/or nutrients to the biological

treatment process e.g. composting of empty fruit

bunches (EFB), a residue from palm oil production, with

the addition of palm oil mill effluent (POME) which is

the wastewater co-produced from palm oil production.

7. In case of co-composting, if it cannot be demonstratedthat the organic matter would otherwise been left to

decay anaerobically, baseline emissions related to suchorganic matter shall be accounted for as zero, whereas

project emissions shall be calculated according to the

procedures presented in this methodology for all co-

composted substrates.

8. The location and characteristics of the disposal site ofthe biomass, animal manure and co-composting

wastewater in the baseline condition shall be known, in

such a way as to allow the estimation of its methane

emissions, using the provisions of AMS-III.G, AMS-

III.E (concerning stockpile), AMS-III.D Methane

recovery in animal manure management systems or

AMS-III.H respectively.

Project activities for composting of animal manure shall

also meet the requirements under paragraphs 1, and 2 (c)of AMS-III.D. Further no bedding material is used in the

and POME from the palm oil mill are

composted. This is evidenced from the

feasibility study and confirmed during

the site visit.

5. The applicability of this methodologyis confirmed as the CPA involves the

construction of new treatmentfacilities. There is no expansion or

capacity increase involved. This has

been confirmed during the site visit

and supported by documents related to

the projects design.

6. The applicability of this methodologyis confirmed as the project involves

co-composting of wastewater (POME)and solid biomass waste (EFB).

POME would otherwise been treated

anaerobically in open lagoons without

biogas recovery as per current

practices. This has been confirmed

during the site visit. In the project

scenario, POME is used as a source of

moisture and nutrients to the

composting of EFB. This is evidenced

from design documents related to the

CPA.

7. Baseline emission from the decay ofEFB is not claimed for this CPA and

accounted for as zero. DNV hasconducted a site visit and it was found

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animal barns or intentionally added to the manure stream

in the baseline. Blending materials may be added in the

project scenario to increase the efficiency of the

composting process (e.g. to achieve a desirable C/N ratio

or free air space value), however, only monitored

quantity of solid waste or manure or wastewater diverted

from the baseline treatment system is used for emissionreduction calculation. The following requirement shall

be checked ex ante at the beginning of each crediting

period:

a. Establish that identified landfill(s)/stockpile(s)can be expected to accommodate the waste to be

used for the project activity for the duration of

the crediting period; or

b. Establish that it is common practice in the regionto dispose of the waste in solid waste disposal

site (landfill)/stockpile(s).

9. The project participants shall clearly define thegeographical boundary of the region referred in

paragraph 8 (b), and document it in the CDM-PDD. In

defining the geographical boundary of the region,

project participants should take into account the source

of the waste i.e. if waste is transported up to 50 km, the

region may cover a radius of 50 km around the project

activity. In addition, it should also consider the distance

to which the final product after composting will be

transported. In either case, the region should cover a

reasonable radius around the project activity that can bejustified with reference to the project circumstances but

that currently, EFB is dumped in the

palm oil plantations.

8. The location and characteristics of thedisposal site of EFB and POME have

been defined. EFB is dumped in the

plantations and POME is treated

anaerobically in open lagoons. Inaddition, the following requirements

have been established through

observations and interviews during the

site visit:

a.It is reasonable to assume that thepractices of EFB dumping and

anaerobic open lagoon POME

treatment would continuethroughout the duration of the

crediting period. There is ample

space in the plantations to

accommodate the EFB and the

anaerobic wastewater treatment

system has been designed to

accommodate the requirements of

the palm oil mill.

b.EFB dumping in plantations and

anaerobic treatment of POME is the

common practice in the region of

the proposed CPA.

9. The geographical boundary of theregion of the proposed CPA has beenclearly defined in the CPA-DD. It is

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in no case it shall be more than 200 km. Once defined,

the region should not be changed during the crediting

period(s).

10.In case produced compost is handled aerobically andsubmitted to soil application, the proper conditions and

procedures (not resulting in methane emissions) must be

ensured.11.In case produced compost is treatedthermally/mechanically, the provisions in AMS-III.E

related to thermal/mechanical treatment shall be applied.

12.In case produced compost is stored under anaerobicconditions and/or delivered to a landfill, emissions from

the residual organic content shall to be taken into

account and calculated as per the latest version of theTool to determine methane emissions avoided fromdisposal of waste at a solid waste disposal site.

(iii) In addition in order ensure the environmental integrity ofeach co-composting facility that is brought under this PoA

and to ensure that the co-composting facility does not

become a source of environmental pollution itself, each

facility must:

1. Locate the main composting facility upon animpermeable composting pad / floor of concrete or some

other impermeable material (This ensures leaching from

the compost does not take place directly into the soil

below and improves the composting process);

2. Incorporates a system / process to adequately deal withany run-off or leachate from the compost itself and / orensure any liquid discharge would be diluted or treated

the 50 km radius around the proposed

CPA location. This is justified as the

maximum distance for transporting

the waste utilised by the CPA is 50

km.

10.The produced compost will be usedfor direct application in the plantation.Therefore, aerobic handling of

produced compost has been ensured.

11.The provisions in AMS-III.E relatedto thermal/mechanical treatment are

not applied. This is because the

produced compost is not treated

thermally or mechanically.

12.The produced compost will not bestored anaerobic conditions or

delivered to a landfill. According to

project documents, the produced

compost will be directly applied to

landfill. This has been supported by

interviews with the project participant.

Therefore emissions from the residual

organic content are not taken into

account and calculated and this is

considered acceptable.

(iii) The environmental integrity of the CPAhas been ensured as follows:

1. The main composting facility willinstall a concrete floor to prevent soilcontamination of leachate. This has

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to environmentally acceptable levels before entering the

surrounding environment.

been confirmed during the site visit.

2. The composting process involves norun-off leachate leaking to the

surrounding environment. Excess

POME or liquid from the composting

process is stored in a buffer tank and

recycled back to the compostingprocess. The composting process is

isolated from rainwater as a roof is

constructed for this purpose. This is

evident from the projects design and

confirmed during the site visit.

Therefore, the validation team was able toconfirm that the CPA complies with

eligibility criterion 5 stated in the PoA-DD.


Start date: Each CPA Owner must be able to provide

documentary evidence to verify the start date of the CPA.

/3/

/23/

/24/

/25/

DR It has been verified that documentaryevidences have been provided. This allows

the CME to verify the start date of the CPA.

The start date of the CPA is evidenced by the

contracts signed with respect to the project

activity, specifically piling works, concrete,

steel and roof works and precast concretepanel, where these contracts are all signed on

the same date and its the earliest of all

financial commitment.

Therefore, the validation team was able to

confirm that the CPA complies with


OK

B.1.7 Has it been sufficiently justified that the CPA /1/ DR It has been demonstrated that the CPA (c.f. OK

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complies with:

Additionality: Each CPA must be able to demonstrate that the

Project Activity which forms the CPA would not have occurred

anyway due to an investment barrier by following and applying

all steps of the additionally assessment as set out in sections

E.5.1 and E.5.2 of the PoA-DD.

/3/

/4/

/10/

/11/

/14/

/15/

/23//24/

/25/

/34/

Section B.2 of the CPA protocol) would not

have occurred due to financial barrier. All

steps of the additionality assessment set out

in sections E.5.1 and E.5.2 of the PoA-DD

have been followed.


confirm that the CPA complies witheligibility criterion 7 stated in the PoA-DD.


PoA Specific Requirements:

(i) Environmental Impact Analysis (EIA): Each CPAwhich involves the implementation of a Compost Facility

with a compost output capacity:

a. Greater than or equal to 100 tons per day shallprovide a copy of their EIA which has been

submitted to, and approved by the IndonesianMinistry of the Environment.

b. Less than 100 tons per day, shall provide a copy ofthe Environmental Management and MonitoringPlan (EMMP) that was submitted and approved by

the responsible Indonesian authorities.

(ii) Compliance with Relevant National Standards: EachCPA Project Activity must comply with the relevant

Indonesian National or Regional Environmental Standard.

(iii) Stakeholder Consultation: Each CPA must be able todemonstrate with appropriate documentary evidence that

/3/

/6/

/18/

/45/

DR (i) It has been sufficiently justified that theCPA complies with the Environmental

Impact Analysis (EIA) requirements of

the PoA-DD and the host party of

Indonesia. Since the output capacity of

the project is 23 tons per day, the CPAhas provided its approved

Environmental Management and

Monitoring Plan (EMMP).


meets the criteria for environmental

impact analysis (EIA) defined in thePoA.

(ii) The CPAs compliance with national orregional environmental standard is

evidenced from the EMMP.

Environmental requirements from the

Indonesian Ministry of Environment

have also been reviewed.


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Stakeholder Consultation has been undertaken in

accordance with the requirements of CDM rules and

procedures.

meets the criteria for compliance with

relevant national standards defined in

the PoA.

The CPA has provided documentary

evidence to support that the stakeholder

consultation has been undertaken. It

allows the CME to determine that it isdone in accordance with the

requirements of CDM rules and

procedures.


meets the criteria for stakeholder

consultation defined in the PoA.





Debundling: To ensure a CPA is not a debundled component ofa large scale activity, the Project Activity under each CPA must

not have the same activity implementer as the proposed smallscale CPA or a coordinating or managing entity, which also

manages a large scale PoA of the same technology/measure

which is within 1 km of the boundary of the proposed small-

scale CPA, at the closest point.

/3/

/37/

/49/

/50/

DR

I

The CPA is not a debundled component of

another project activity. It has been

confirmed through site visit that there is no

other project activity within 1 km of the

boundary of the proposed CPA at the closest

point.Therefore, the validation team was able to



OK


SSC Threshold Criteria: Each CPA shall not reduce more than

/3/

/4/

/5/

DR The CPA is estimated to reduce 10 130

tCO2e on average yearly. This is less than the

limit of 60 ktCO2e annually.

OK

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60 ktCO2e annually. Therefore, the validation team was able to




Use of Development or Assistance Funds: Each CPA mustcertify in writing whether any Development Aid or Assistance

funds have been used for funding the construction and operation

of the Project Activity which forms the PoA. If any

Development Aid or Assistance funds have been used, then

before inclusion in the PoA, the CPA owner must provide

evidence to confirm that such funds do not result in a diversion

of any official development assistance funds.

/3/

/15/

/49/

/50/

DR

I

Interviews conducted during the site visit

also revealed that the CPA does not use anyDevelopment Aid or Assistance funds for its

construction or operation. Confirmation ofsuch was received from the project owner,

PT Socfindo in a form of a declaration.




OK

B.2. AdditionalityAdditionality of a CPA is assessed through eligibility criteria 7

above.

B.2.1 Is it demonstrated that the IRR of the CPA islower than 12.5% (before tax)?

/1/

/3/

/4/

/10/

/11//12//14/

/15/

/16/

/17/

/23/

/24/

/25/

DR To demonstrate the additionality, the CPA

uses an investment analysis. It has been

shown below that the project is not

financially attractive. Hence, it has been

justified that the CPA complies withadditionality criteria 1.

Choice of approach:As the proposed CPA generates benefits

through savings from reduced fertilizer

imports, and the alternative to the project

(baseline scenario) does not involve

investments, benchmark analysis was chosen

OK

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/30/

/31/

/34/

/48/

as an appropriate analysis method. Financial

attractiveness of the project without CER

revenues has been demonstrated. It is

confirmed that this choice of approach is

consistent with the requirements of section

E.5.2 of the PoA-DD.

Input parameters:

Key parameters applied in the projects

financial analysis are listed as per the PoA-

DD section E.5.2. They are assessed as

follows:

Technical lifetime of 20 years: This wascrosschecked against the technical

providers estimation included in the

Feasibility Study Report. Therefore, this

is considered to be in line with the

requirements of the PoA-DD.

Investment decision date of 28 April2010: This is evidenced through minutes

of meeting of the board of the

commissioners of the P.T. Socfin

Indonesia (Socfindo) held in Jakarta on

the same date. Therefore the investment

decision date of 28 April 2010 is accepted

and this is consistent with the


Date project starts operating of 8 March2012: This was crosschecked against the

technical providers estimation.

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Therefore, this is considered to be in line

with the requirements of the PoA-DD.

Annual compost production of 30 000tons: This is sourced from the technology

provider as evidenced in the feasibility

study. Therefore, this is considered to be

in line with the requirements of the PoA-DD.

The price of compost is not specified inthe CPA-DD: Compost produced by the

CPA will be used internally and is not

aimed to be sold to a third party.

Therefore, this exclusion is considered

acceptable and in line with the


Estimated fertilizer savings of 2 256.36million IDR per year: The compost

produced will be applied to plantation

and this will result in cost savings due to

reduced usage of fertilizer. Specific

information was available from externally

published sources in relation to thepercentage of fertilizer savings that would

be able to be achieved using that compost

technology in that region, thus it is

justified that Option A template was used

to calculate the estimated fertilizer

savings. The price of inorganic fertilizer

is obtained from the average purchase

price of Dolomite, Rock Phosphate, Urea

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and Potassium for the year of 2009.

Purchase contracts have been reviewed

and it was found that the value used in the

template is consistent with the purchase

price in year 2009. The fertilizer dosage

amount is obtained from the historical

records for fertilizer usage in the year2009. Similarly, these records have been

reviewed and it was found that the

amount selected is consistent with the

original source.

By participating in the programme, it is

estimated that this will result in a 35%

reduction of inorganic fertilizer use due

to the assumption that 1.5 tons ofcompost is produced from each ton of

EFB used. It is noted that this is of the

higher range as compared to figures

published in academic papers and also

used in other registered co-composting

CDM projects, which assumes a compost

production of 0.35 to 0.6 tons per ton of

EFB. In addition, this is evidenced by the

feasibility study. Therefore, this is

considered conservative and acceptable.

The assumption used in the financial

analysis to be in line with the


Currency of 1 USD = 9 013 IDR and 1Euro = 12 049 IDR: Currency rates are

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taken from the middle rate dated 27 April

2010 from the Bank Indonesia currency

rate calculator. This is inconsistent with

the requirements of the PoA-DD which

requires an average exchange rate during

the twelve months preceding the date of

the investment decision date. Capital and equipment cost of 14 281

million IDR: This is sourced from the

feasibility study. It is considered that the

feasibility study represents costs

estimated from technology providers.

This cost has been cross-checked with

publicly available information from a

paper presented during the 2010

International Conference & Exhibition on

Oil Palm Biomass and an article

published in a local newspaper. From

these two sources, the price of an aerobic

bunker composting system is reported to

be 2.00 million USD to 2.31 million USD

(18.7 billion IDR to 21.6 billion IDR).Capital and equipment cost of 14 281

million IDR used in the investment

analysis is lower than the costs published.

Therefore, this is considered to be

conservative. The bulk of the initial

capital cost is for the bunker system

which is where co-composting takes

place. For this item, 9.104 million IDR is

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allocated and this is equivalent to 63.75%

of the total investment cost. In addition,

signed contracts have been reviewed and

it was found that a total of 4 127 million

IDR (tax inclusive) of investment

expenditure has been committed against

an estimated 7 251 million IDR for thebunker building. These signed contracts

cover piling works, concrete steel roof

works and precast concrete panel for the

bunker building.

At the time of site visit, the bunker

building is still under construction and

more expenditure is expected towards the

bunker building. In conclusion, DNVconsiders the investment cost of 14 281

million IDR as per the feasibility study to

be acceptable and this cost has been

cross-checked with independent sources.

CER revenue of 3 510.25 million IDR peryear: This is sourced from the feasibility

study which is considered to be consistentwith the board or management estimation

of the CER price. The amount of revenue

from CER sales is accepted as it is in

accordance with the requirements of the

PoA-DD.

Operation and maintenance cost of 1864.68 million IDR: O&M cost for theproposed CPA comprises of fuel and

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electricity costs (410.26 million IDR),

labour costs (420.80 million IDR) and

maintenance costs (1 033.62 million

IDR). These costs are assessed separately.

The bulk of the O&M cost is incurred for

the operation and maintenance of the

bunker system. This is where emissionreduction through aerated co-composting

takes place. As part of the normal

operation of the bunker system, waste

materials fed are required to be pre-

processed and the bunker is continuously

aerated using fans. Materials composting

in the bunker are continuously monitored

for their temperature and oxygen level.From time to time, maintenance is

incurred in order to clean the composting

area, to maintain the control system and

to service the aeration fans. DNV has also

verified that the O&M cost applied in the

financial analysis are sourced from the

feasibility study. Therefore, this is

considered to be reasonable.

Fuel and electricity cost of 410.26 millionIDR: Fuel cost is sourced from historical

company purchase records, while the

estimation of fuel usage is sourced from

the feasibility study and information from

the technology provider. Under the

project activity, additional fuel is required

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for the operation of the spreader machine,

tractor, wheel loader and truck. The

additional amount of diesel consumed by

the project activity is 29 522.39 litres.

Additional diesel is used for the operation

of the spreader machine, tractor, wheel

loader and trucks. DNV has cross-checked this amount with the feasibility

study and confirmed that this is sourced

from the equipment

manufacturer/technology provider. DNV

has reviewed the historical diesel

purchase records and found that average

diesel prices paid for the months of

January 2010 to March 2010 is IDR 5764 per litre. The months of January 2010

to March 2010 were selected as these

were the months of the feasibility study

period. Diesel price used in the financial

analysis is IDR 4 500 per litre. The diesel

price used in the financial analysis is

lower than the actual price paid as per the

historical company purchase records

(between IDR 5 533 to IDR 6 006 at the

time when the FSR was finalised in April

2010). This is considered to be

conservative.

The project assumes no additional

electricity cost will be incurred for theCPA. Equipment and facilities related to

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the CPA use electricity generated from

the mill adjacent to the composting plant.

Due to this, DNV considers the exclusion

of electricity cost from the investment

analysis to be acceptable and

conservative.

Labour cost of 420.80 million IDR: Theamount of labour is sourced from thetechnology provider. The labour rate is

based on the internal labour rate of PT

Socfin. DNV considers that the CPA

requires additional amount of labour

since the project activity requires

additional material handling. In addition,

the co-composting system is operating

continuously and therefore requires

continuous supervision and manpower.

DNV considers the technology provider

recommendation that 12 additional

manpower required for continuous day to

day operation of the composting plant to

be reasonable. DNV has also reviewedthe actual historical labour rates of PT

Socfin which were available at the time

of decision making. It was checked that

the internal labour rates of PT Socfin

were between 28 million to 147 million

IDR while labour rates applied in the

financial analysis are between the range

of 24 million IDR and 80 million IDR.

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This is lower than the actual labour rates

of the CPA which is reasonable

considering the additional manpower for

the composting plant could be met by

lower skilled workers. Hence, DNV has

accepted the labour cost applied in the

financial analysis. Maintenance cost of 1 033.62 million

IDR: This is obtained from information

provided by the technology provider. In

addition, the maintenance cost is

supported by the feasibility study

prepared for the project activity.

Therefore, the maintenance cost is

deemed acceptable.

Land rental cost. This is not applicable asthe project activity takes place in the

premises of the CPA project proponent.

Rental of land from third parties is not

applicable.

Licensing and royalty cost: As PT Socfinis the owner of the composting plant a ndthe palm oil mill. there is no royalty or

licensing costs imposed on the CPA

owner (PT Socfin) as confirmed during

the site visit. This cost is taken as zero in

the financial analysis and this is

considered conservative.

Insurance: Expenses related to insuranceare taken as zero in the financial analysis.

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This is considered to be reasonable and

conservative.

Feedstock costs: Expenses related to thecosts for raw material feedstock inputs

into the compost facility are taken as zero

in the financial analysis. This is

considered to be reasonable andconservative.

Calculation and conclusion:Pre-tax project IRR calculations over 20

years of operation period were provided in a

spread sheet. The IRR without CDM

revenues were calculated as -5.14%. With

CDM benefits, the IRR of the project

increases to 21.96%.

Sensitivity Analysis:

This analysis has been carried out for

parameters contributing more than 20% to

revenues or cost to check on the robustness

of the financial analysis. -10% to 10%variations were made to the project revenue,

project investment and O&M cost. It was

shown and calculated in the financial analysis

spread sheet that none of the variations on the

3 parameters result in the IRR exceeding the

benchmark.

In addition, the following variations are

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needed for reaching the benchmark:

i) Project revenue: The IRR of the projectactivity will reach the benchmark if

project revenue is increased by 70%.

Revenue delivered by the project is in the

form of cost savings and this is dependenton the amount of fertilizer savings and

fertilizer cost. Based on this, the

maximum amount of revenue delivered

by the project is limited by the fertilizer

costs that would be incurred in the

absence of the project activity. It is

assessed that apart from CDM, the project

does not introduce new revenue streamsor causes an increase in existing revenue

streams (e.g. increased palm oil

production). Therefore, i t is assessed that

an increase of the project revenue of 70%

is deemed to be unlikely.

ii) Project investment: The IRR of theproject activity will reach the benchmark

if the project investment cost is reduced

by 80%. At the time of validation, the

project proponent has already committed

to expenditures related to the project

activity. Signed contracts have been

reviewed and it was found that a total of 4

127 million IDR (tax inclusive) ofinvestment expenditure has been

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committed. This represents 29% of the

estimated project investment cost of 14

281 million IDR. From this, it is

concluded that a reduction of project

investment cost of 80% is not achievable.

iii)O&M cost: The IRR of the projectactivity will reach the benchmark ifO&M costs are reduced by 85%. It has

been assessed that these costs are

estimated conservatively and supported

by external evidences. Annual O&M cost

is calculated to be about 13% of total

investment cost. This has been compared

with other registered CDM projects

involving co-composting of EFB andPOME in the host country of Indonesia

(Project 444516%, Project 406426%

and Project 371721%). Due to this, it is

concluded that a reduction of O&M cost

by 85% is unlikely.

In conclusion, given the above investment

barrier, it is sufficiently demonstrated that the

project is not a likely baseline scenario and

that emission reductions thus are additional

to what would otherwise have occurred.

B.3. Calculation of GHG Emission ReductionsProject emissions

It is assessed whether the project emissions are stated according

to the methodology and the PoA-DD and whether the

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argumentation for the choice of default factors and values -

where applicableis justified.

B.3.1 Is the calculation of project emissions of the CPAin accordance with the procedure described in the

PoA-DD?

/1/

/3/

/5/

/14/

/46//49//50/

DR

IThe calculation of project emissions in the

CPA has been checked and it is in

accordance with the procedure described in

the PoA-DD.

The PoA-DD lists project emissions of theCPA as follows:

a. CO2 emissions due to incrementaltransportation distances;

b. CO2 emissions from electricity and/orfossil fuel consumption by the project

activity facilities;

c. Methane emissions during compostingprocess;

d. Methane emissions from runoff water;e. In case the compost is stored under

anaerobic conditions and/or delivered to

a landfill: the methane emissions from

the disposal/storage of compost.

CO2 emissions due to incremental

transportation distances:

The calculation of this source of emission is

done as per the procedures specified in the

PoA-DD. It has been confirmed through site

visit the co-composting facility is located inthe boundary of the project activity. As a

result of this, incremental transportation for

OK

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POME and EFB is not anticipated. Therefore,

this source of emission is disregarded.

CO2 emissions from electricity and/or

fossil fuel consumption by the project

activity facilities:

Project emission due to final composttransportation is estimated to be 248.04

tCO2e per year. This is based on the

anticipated diesel oil consumption of

76 582.36 kg per year which is based on

internal estimations and supported by the

feasibility analysis. The NCV of diesel oil of

43.3 TJ/kg and the CO2 emission factor of

diesel oil of 74 800 kg/TJ. These values areapplied from the upper default values of the

2006 IPCC Guidelines for National

Greenhouse Gas Inventories. The density of

diesel oil of 0.84 kg/litre was soruced from

PERTAMINA (national oil supplier,

http://www.pertamina.com/index.php/detail/r

ead/minyak-diesel)

This is calculated as per option B specified in

the procedures specified in the PoA-DD. It

has been checked that the same equation,

assumptions and input parameters were used

in the CPA-DD. The selection of option B to

calculate this emission is considered

acceptable as the chemical composition ofdiesel oil is not available at the time of
http://www.pertamina.com/index.php/detail/read/minyak-dieselhttp://www.pertamina.com/index.php/detail/read/minyak-dieselhttp://www.pertamina.com/index.php/detail/read/minyak-dieselhttp://www.pertamina.com/index.php/detail/read/minyak-dieselhttp://www.pertamina.com/index.php/detail/read/minyak-diesel

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validation.

Methane emissions during composting

process:This emission is considered to be zero. This

is considered acceptable as the temperature

and oxygen content of the compostingprocess are monitored. This assumption is in

line with the specifications of the PoA-DD

and the methodology AMS-III.F version 10.

Methane emissions from runoff water:

There is no run-off water from the project

activity and this is evidenced from theprojects design. Unutilized POME will bere-applied to the co-composting process and

the co-composting area is roofed to isolate

rainwater. Therefore, this emission is

considered to be zero and this is acceptable.

Methane emissions from the

disposal/storage of compost:

It has been confirmed during the site visit

that the final compost from the project

activity will be directly applied in the

plantation. It does not involve anaerobic

storage of compost or landfill disposal.

Therefore, this source of emission is taken tobe zero and this is consistent with the

specifications of the PoA-DD.

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B.3.2 Are CPA-specific conservative assumptions usedwhen calculating the project emissions?

/3/ DR CPA-specific conservative assumptions are

used when calculating the project emissions.

OK

B.3.3 Are CPA-specific uncertainties in the projectemission estimates properly addressed?

/3/ DR There are no CPA-specific uncertainties in

the project emissions calculation.

OK

B.4. Calculation of GHG Emission ReductionsBaseline emissions

It is assessed whether the baseline emissions are stated

according to the methodology and the PoA-DD and whether the

argumentation for the choice of default factors and valueswhere applicableis justified.

B.4.1 Is the calculation of baseline emissions of theCPA in accordance with the procedure described

in the PoA-DD?

/1/

/3/

/5/

/21/

/22/

/27//42/

/49/

/50/

DR

I

CC

The calculation of baseline emissions in the

CPA has been checked and it is in

accordance with the procedure described in

the PoA-DD.

The PoA-DD lists project emissions of the

CPA as follows:

a. Baseline emission due to methanegeneration potential of the solid waste

composted

b. Baseline emission due to methaneemission from baseline wastewatertreatment system

c. Baseline emission due to methaneemissions on account of inefficiencies inthe baseline wastewater treatment

systems and presence of degradableorganic carbon in the treated wastewater

discharged into river/lake/sea

d. The amount of methane that would have

OK

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to be captured and combusted in the year

to comply with the prevailing regulations

Baseline emission due to methane

generation potential of the solid waste

composted:

This source of emission is regarded as zero.According to the baseline practice as

observed during the site visit, EFB from the

palm oil mill is disposed in the plantations. Itwas confirmed during the site visit that the

EFB dump site is located in plantation lands

and in patches of not more than 2 meters

high and 5 meters wide. Therefore, anaerobic

decomposition of EFB cannot be ascertained

to the MCF values prescribed by Tool to

determine methane emissions avoided from

disposal of waste at a solid waste disposal

site referred by the methodology in the

calculation of BECH4,SWDS,y.

Therefore, the baseline emission from the

current dumping situation of the EFB istaken as zero, and is consistent with

paragraph 7 of AMS-III.F. This is considered

to be acceptable and conservative.


emission from baseline wastewater

treatment system:The baseline emissions are estimated form

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the influent flow rate and the COD value of

POME applied to the co-composting process.

The wastewater flow is estimated from the

average POME generated by the mill for the

past three years (2008 to 2010), which is 47

612.39 m3 per year. This has been verified

from the historical data of the mill.

The COD value of the POME is estimated

through a 10-day measurement campaign

done during 11 to 23 August 2011. DNV has

cross-checked the results of the measurement

campaign with original wastewater test

certificates issued by an independent

laboratory. In addition, historical data hasalso been checked to ensure that the

measurement campaign is conducted during

typical operation conditions. It is noted that a

complete set of 1 year data as required by

paragraph 26 of AMS-III.H version 16 is not

available as the COD records of the

untreated POME were not available. The

monitoring of untreated POME is not part of

the normal operation of the mill as

confirmed during the site visit.

In accordance with the methodology,

average value from the measurement

campaign has been used and the result has

been multiplied by 0.89 to account for theuncertainty range. Hence, baseline emission

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from anaerobic lagoons has been calculated

in accordance to paragraph 27 of AMS-III.H

version 16. The COD value of the POME is

taken to be 58.5 kgCOD/m3.

The COD removal efficiency of the baseline

treatment is calculated using a final CODdischarge value of 0.197 kgCOD/m3. This is

determined from past 3 years monthly

records of the COD of the final discharge to

water body. The COD removal efficiency

calculation has been checked and it is

correctly calculated at 99.7%.

The methane correction factor (MCF) for thebaseline wastewater treatment system is 0.8

and this is correctly applied. It was

confirmed during the site visit that the

baseline wastewater treatment system

involves anaerobic deep lagoons. Lagoon

depth confirmed during the site visit and via

engineering drawings of the lagoons was 5

meters and this is more than the limit of 2

meters. Therefore, the MCF value applied is

consistent with the default value listed in

AMS-III.H.

The methane producing capacity of the

wastewater (Bo,ww) and the global warmingpotential of methane (GWPCH4) are correctly

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taken as 0.25 kgCH4/kgCOD and 21

respectively. These values are appropriately

sourced from the default values listed in

AMS-III.H.

The baseline emissions will be calculated

based on the actual amount of methanerecovered. For ex-ante estimation purposes,

the estimated baseline emission calculated is

10 378.58 tCO2e annually.


emissions on account of inefficiencies in

the baseline wastewater treatment systems

and presence of degradable organic

carbon in the treated wastewater

discharged into river/lake/sea:This emission is estimated from the amount

of wastewater discharged to water body in

the baseline and the COD of the wastewater

discharged. The wastewater flow is

estimated from the average POME generated

by the mill for the past three years (2008 to

2010), which is 47 612.39 m3 per year. This

has been verified against the historical data

of the mill. The final COD discharge value is

taken as 0.197 kgCOD/m3 and this is

determined from past 3 years monthly

records of the COD of the final discharge towater body.

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The methane correction factor (MCF) for the

discharge pathway of the wastewater

treatment system is 0.1 and this is correctly

applied. It was confirmed during the site visit

that the treated wastewater of the baseline

wastewater treatment system is discharged tothe water body. Therefore, the MCF value

applied is consistent with the default value

listed in AMS-III.H.

Similarly, the methane producing capacity of

the wastewater (Bo,ww) and the global

warming potential of methane (GWPCH4) are

correctly taken as 0.25 kgCH4/kgCOD and21 respectively. These values are

appropriately sourced from the default values

listed in AMS-III.H.

The baseline emissions will be calculated

based on the actual amount of wastewater

discharged. Forex-ante estimation purposes,

the estimated baseline emission calculated is

4.38 tCO2e annually.

The amount of methane that would have

to be captured and combusted in the year

to comply with the prevailing regulations:

This emission is taken to be zero as there are

no prevailing regulations mandating the

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6511- CPA FVR_26Jun2012