Southern Africa Regional Gas Project … initiating development and export of Mozambique’s substantial natural gas resources in an environmentally sustainable manner, thereby contributing towards economic growth and poverty reduction.

Project Description Development of Gas Fields in Mozambique Inhambane Region (Pande and Temane) A Central Processing Facility (CPF) to process/clean the gas before transport A 865km 26-inch diameter Pipeline between the Gas Fields and Sasol’s plant in Secunda, South Africa, including 5 take off-points in Mozambique for future domestic gas use

Components in Mozambique and South Africa Temane/Pande Gas Field Development Central Processing Facility (CPF) Pipeline between Temane and Ressano Garcia (at the border) South Africa Pipeline between Komatipoort and Secunda Secunda Synthetic Fuels Plant Expansion Sasolburg Plant Conversion Natural Gas Network Conversion

Institutional & Implementation Arrangements Upstream Project Pipeline Project Downstream Point of Sale Gas Fields CPF Pipeline Point of Delivery Central Processing Facility Temane Pande Users Distribution ROMPCO Network SCI Sasol Synfuels Natref Others Sasol 100% SPT 70% CMH 25% IFC 5% SPT 70% CMH 25% IFC 5% CPF Price iGas Option CMH Option - Jointly up to 50% Sasol Gas Wellhead Price + CPF Price Gas Buyer & Shipper Transmission Tariff Gas Payment Contract Gas Transportation Agreement Gas Sales Agreement Sasol Gas

Project Benefits General population Long-term benefits from the provision of major infrastructure Local gas market development through 5 take off points Gas exploration and gas-based industries Fiscal Benefits: About US$ 498 million in royalties and taxes over 25 years Revenues transparently accounted for in the budget Monitoring arrangements for expenditures through MTEF Additional revenues are expected from returns on GoM equity participation Environmental benefits through usage of cleaner fuel

Project Benefits contd. Local communities About 3000 jobs created during construction, of which 1000 are Mozambican nationals Social Development Fund of US$ 5million established by Sasol for investment in community-based activities Small businesses and local contractors Increased opportunities for local suppliers of goods and services Sector professional and management staff On the job training and transfer of technology and expertise US$ 3 million training budget provided by Sasol

WBG approach to mobilize private financing and mitigate political risks… IFC IFC Investment and Advisory Role: Equity investment in Upstream Advisory assistance to CMH in mobilizing financing for the Upstream Facilitating local participation MIGA Political Risk Cover for equity and debt to SPT & Rompco including: Breach of contract Currency transferability Expropriation War & Civil Disturbance IBRD Enclave PRG Political Risk Cover for debt to SPT & Rompco including: Sovereign obligations including changes in laws Currency transferability Expropriation Changane River floodplain, vicinity of pipeline crossing Stringing of the Pipe along the right-of-way in Mozambique

A regional project with World Bank Group participation… Total Project Cost: US$ 1 billion

IFC:Enabling Mozambican Participation Large project needed Mozambican participation to allay political risk and to give a sense of ownership Mozambique’s dilemma: How to fund its equity without recourse to government money ? IFC advised on strategic options to fund equity with a focus on local participation Invest alongside CMH in the upstream component

IFC: Equity Investment and Advisory Role 5% equity in the upstream project for a total proposed investment of $18.5 million Mobilize funds for CMH Local Participation Phase 1: Institutional investors Phase 2: companies and individual investors once revenue stream is stable

MIGA Phase I: Political Risk Cover for Equity ROMPCO Equity Guarantee USD45 m SPT Equity Guarantee USD27 m SASOL Equity ROMPCO Equity South Africa SPT ROMPCO Branch Mozambique

MIGA Phase II: Modification of Coverage to Include Debt Re-insure USD25 m Re-insure USD21.3 m SACE MIGA EFIC SPT Loan Guarantee USD25.65 m ROMPCO Loan Guarantee USD89.05 m (MIGA USD42.75 m, SACE USD25 m, EFIC USD21.3 m) SPT Equity Guarantee USD2.7 m SASOL SCMB ROMPCO Equity Guarantee USD4.5 m Loan Equity ROMPCO Equity South Africa Loan SPT ROMPCO Branch Mozambique

Using IBRD guarantees to support Private Enclave Project in Mozambique First IBRD Enclave guarantee: …proposed guarantee for an export-oriented, commercial project generating foreign-exchange outside of Mozambique… …adequate arrangements ensuring that the borrower will be able to meet its obligations to IBRD in respect of IBRD guarantee of the loan. Use of a PRG is critical in achieving financial close: Risk of the transaction Benefits from an explicit counter-guarantee Linkage with Bank’s remedies, Bank’s sector dialogue and conditionality.

Guarantee Structure GOM SPT ROMPCO SCMB (Lead arranger) Petroleum Production Agreement Pipeline Agreement SPT (Sasol owned, Moz company) ROMPCO (Sasol owned, RSA company) Indemnity Agreement Project Agreement Project Agreement Loan Agreement Loan Agreement Guarantee Agreement SPT Guarantee Agreement ROMPCO SCMB (Lead arranger)

Proposed Pricing of the Guarantee Guarantee fee 2 % p.a. collected semi annually Bank retains all Standby fee 0.75 % p.a. Front-end fee 1% Initiation fee US$ 100,000 Processing fee 0.50 % of principal of guaranteed loan First Loss Project lenders to take first loss in amount equivalent of 5% of principal amount of the guaranteed loan plus six month interest payments for the applicable interest payment period.

Environment & Social Safeguards Compliance South African and Mozambican EIAs/EMPs (1999-2003) Bank Group safeguard policies applied to the entire project Bank Group has required the sponsor to carry out: Regional Environment and Social Assessment (RESA) to assess the broader environmental context and manage the induced impacts Resettlement Planning and Implementation Program (RPIP) Social development Action Plan A consolidated Summary and an Update to facilitate communication and disclosure Pipeline re-routed to minimize impacts. 13 Baobabs that could not be avoided were transplanted.

Project Participants

Project Agreements

Project Agreements Petroleum Production Agreement (PPA): The GoM grants SPT and CMH exclusive rights for the development, production & disposition of reserves located in the Pande & Temane Field Reservoirs, “the Petroleum Production Area”. Pipeline Agreement (PA): GoM grants authorization to ROMPCO to construct, own & operate the gas pipeline, related infrastructure & equipement to trasport natural gas, for 30 years. Gas Sales Agreement (GSA): Regulating the commercial relationship between the sellers- SPT, CMH, & IFC, and the buyer, Sasol Gas Limited Gas Transportation Agreement (GTA): Securing a revenue stream for Rompco though an adquate ship or pay obligation of the transporter, for 25 years Joint Operation Agreement: Between SPT and CMH for the development of the Pande & Temane Fields. SPT is designated as the Operator under the Agreement Cross-Border Agreement: Framework agreed by GoM and GoSA to facilitate trade of natural gas between the two countries Regulatory Agreement: Provides for the licensing and sets out the scope of regulatory dispensation granted by the RSA under the Gas Act to Sasol