1. 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.

2. 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

3. 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

4. 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

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

6. 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

7. 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

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

9. 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

10. 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

11. 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

12. 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

13. 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.

14. 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)

15. Proposed Pricing of the Guarantee
Guarantee fee 2 % p.a. collected semi annually
Bank retains all
Standby fee % p.a.
Front-end fee 1%
Initiation fee US$ 100,000
Processing fee % 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.

16. Environment & Social Safeguards Compliance
South African and Mozambican EIAs/EMPs ( )
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.

17. Project Participants

18. Project Agreements

19. 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