… initiating development and export of Mozambique’s substantial natural gas resources in an environmentally sustainable manner,

thereby contributing towards economic growth and poverty reduction.

Southern Africa Regional Gas Project

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

Project Description

Development of Gas Fields in Mozambique Inhambane Region (Pande and Temane)

3

Components in Mozambique and South Africa

Mozambique 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

4

Upstream Project

Point of Sale

CPFGas Fields Point of Delivery

Pipeline Project

Pipeline

SCI

Sasol Synfuels Natref Others

Downstream

DistributionNetwork

Sasol Gas

UsersTemane Pande

SPT 70% CMH 25% IFC 5%

Wellhead Price + CPF Price

Gas Sales Agreement

Gas Buyer & Shipper

Sasol GasGas Transportation Agreement

Transmission Tariff

SPT 70% CMH 25% IFC 5%

CPF PriceSasol 100%

iGas Option CMH Option

Jointly up to 50%

ROMPCO

Central Processing Facility

GasPaymentContract

Institutional & Implementation Arrangements

-

5

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

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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

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WBG approach to mobilize private financing and mitigate political risks…

IFCIFC Investment and Advisory Role:

Equity investment in Upstream

Advisory assistance to CMH in mobilizing financing for the Upstream

Facilitating local participation

MIGAPolitical Risk Cover for equity and debt to SPT & Rompco including:

Breach of contract Currency transferability Expropriation War & Civil Disturbance

IBRD Enclave PRGPolitical Risk Cover for debt to SPT & Rompco including:

Sovereign obligations including changes in laws

Currency transferability Expropriation

Stringing of the Pipe along the right-of-way in Mozambique

Changane River floodplain, vicinity of pipeline

crossing

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A regional project with World Bank Group participation…

Upstream Development – Unincorporated Joint Venture Funding Origin Total

CMH Equity 18.00 Debt Facilities 38.00 Total CMH 56.00 IFC 10.00 SPT Equity 148.00 Debt Facility including political risk coverage from: 182.00

PRG 20.00 MIGA 25.7 ECAs 50.00

Total SPT 330.00 Investments in Upstream Project 396.00 Gas Pipeline currently wholly-owned by Sasol Equity 285.00 Debt Facilities including political risk coverage from: 320.00

PRG 10.00 MIGA 89.00 ECAs 77.00

Investments in the Gas Pipeline 605.00 TOTAL Financing Required for the Project 1001.00

Total Project Cost: US$ 1 billion Total Project Cost: US$ 1 billion

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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

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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

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MIGA Phase I: Political Risk Cover for Equity

MozambiqueROMPCOBranch

MIGA

SASOL

SPT

SPT Equity GuaranteeUSD27 m

ROMPCO Equity GuaranteeUSD45 m

ROMPCOEquity

South Africa

Equity

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MIGA Phase II: Modification of Coverage to Include Debt

MozambiqueROMPCOBranch

MIGA

SCMB

EFIC

SPT

SACE

SPT Loan GuaranteeUSD25.65 m

ROMPCO Loan GuaranteeUSD89.05 m (MIGA USD42.75 m, SACE USD25 m, EFIC USD21.3 m)

Re-insureUSD25 m

Re-insureUSD21.3 m

ROMPCOLoan

South Africa

Loan

SASOL

SPT Equity GuaranteeUSD2.7 m

ROMPCO Equity GuaranteeUSD4.5 m

Equity

Equity

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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.

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Guarantee Structure

GOMSPT SPT

(Sasol owned, (Sasol owned, Moz company)Moz company)

ROMPCOROMPCO(Sasol owned, RSA (Sasol owned, RSA

company)company)

SCMB (Lead arranger)

Petroleum Production Agreement

Pipeline Agreement

Project Agreement

Project Agreement

Inde

mni

ty

Agr

eem

ent

Loan Agreement Loan Agreement

Guarantee Agreement SPT

Guarantee Agreement ROMPCO

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Proposed Pricing of the Guarantee

Guarantee fee 2 % p.a. collected semi annually Bank retains all

Standby fee 0.75 % p.a. Bank retains all

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.

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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.

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Project Participants

Mozambique

Gas Fields and CPF Pipeline

ROMPCOROMPCOBRANCHSPTIFCCMH

ENHGOM

80%20% 100%

25%

SASOL GAS HOLDING

South Africa

100%

SASOL

SPI

5% 70%

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Project Agreements

Rights and Obligations

South Africa Mozambique

Commercial Operations and Participation

Cross Border Agreement

Cross Border Agreement

Gas Transportation Agreement

Upstream Operation and Maintenance Agreement

Mozambique Pipeline Agreement

Pipeline Agreement Gas Sales Agreement

Pipeline Shareholders Agreement

Gas Act Petroleum Production Agreement

Joint Operating Agreement

Regulatory Agreement

Production Sharing Agreement

Pipeline Operation and Maintenance Agreement

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1.1. Petroleum Production Agreement (PPA)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”.

2.2. Pipeline Agreement (PA)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.

3.3. Gas Sales Agreement (GSA)Gas Sales Agreement (GSA): Regulating the commercial relationship between the sellers- SPT, CMH, & IFC, and the buyer, Sasol Gas Limited

4.4. Gas Transportation Agreement (GTA)Gas Transportation Agreement (GTA): Securing a revenue stream for Rompco though an adquate ship or pay obligation of the transporter, for 25 years

5.5. Joint Operation AgreementJoint Operation Agreement: Between SPT and CMH for the development of the Pande & Temane Fields. SPT is designated as the Operator under the Agreement

6.6. Cross-Border AgreementCross-Border Agreement: Framework agreed by GoM and GoSA to facilitate trade of natural gas between the two countries

7.7. Regulatory AgreementRegulatory Agreement: Provides for the licensing and sets out the scope of regulatory dispensation granted by the RSA under the Gas Act to Sasol

Project Agreements