BACKGROUND

1
BACKGROUND

• CEF (Pty) Ltd was established in terms of the CEF
  Act
• (No 38 of 1977)
• This Act established 3 entities
• CEF (Pty) Ltd
• Central Energy Fund and
• Equalisation Fund
• Levies were collected from motorists and paid
  into the
• two Funds
• Monies were used to
• Invest in major capital projects and
• Smooth out the petrol price

2
PURPOSE

• CEF manages defined energy interests for the
  South African Government and acts as a catalyst
  for the development of new energy entities.

3
MANDATE

• CEF was restructured and received a revised
  mandate in 2001 that focused on 3 areas
• Progress renewable energy projects and undertake
  projects to provide energy to outlying areas.
• Assist in a Low Smoke Fuels Project.
• Corporate Governance of the CEF Group.
• PetroSA was being formed.

4
MANDATE (contd)

• During December 2003, CEF received an additional
  mandate
• CEF is to establish an Energy Development
  Corporation, initially as a division of CEF.
• CEF shall fund the activities of EDC to allow
  them to develop and grow.
• During October 2004, CEF received another
  mandate
• To establish a national energy research,
  development and innovation body (NERI).

5
CEF GROUP STRUCTURE
CEF (Pty) Ltd incorp. EDC CEO and Chairperson A
Mjekula
Central Energy Fund
100 SFF ASSOCIATION CEO P Coetzee Chairperson
A Mjekula
100 Petroleum Agency SA CEO J
Holliday Chairperson J Rocha
100 iGAS COO M de Pontes Chairperson Z
Rustomjee
100 PETROSA CEO S Mkhize Chairperson P Molefe
100 OPCSA CEO P Coetzee Chairperson A
Mjekula
100 NERI
49 Bannietor Mining
30 Süd-Chemie Zeolites
6
FOCUS OF CEF GROUP

• Renewable energy
• Low smoke fuels
• Alternative energy
• Oil trading and tank terminal management
• Exploration, oil and gas production
• Petroleum products
• Promoting and marketing offshore and onshore
  exploration
• Gas infrastructure development
• Oil pollution prevention and control
• Research and development

7
CEF COMMERCIAL PROJECTS

• Renewable/Alternative Energy (Investment 2005
  2008)
• Rm
• - Low smoke fuel 57
• - Solar water heaters 35
• - Wind farm 168
• - Biogas 27
• - Biofuel 164
• - Sugar Bagasse 60
• - Bethlehem Hydro 8
• - Paper Pulp 15
• - Solar Cookers 6
• TOTAL 540

8
PetroSA
9
INTRODUCTION TO PETROSA

• National upstream and downstream petroleum
  corporation
• International player with African focus
• Established 2002 through merger of State oil EP
  company (Soekor) 1969 and GTL company (Mossgas)
  1987
• Current business
• Exploration, oil and gas production
• GTL manufacturing - SA
• Oil and chemicals trading
• Oil terminal and storage

10
MAJOR CHALLENGES

• Major cash flow stream of PetroSA under threat as
  FA/EM gas supply to Manufacturing plant depleted
  by 2007.
• Secure long-term feedstock supply to
  Manufacturing plant on a commercially viable
  basis.
• Uncertainty exists as to total investment
  required to secure feedstock for Manufacturing
  plant.
• Expand E P asset base aggressively.
• Due to capital intensive industry and long
  business cycles, prioritise and pursue projects
  of critical importance to secure future of
  PetroSA within available financial means.

11
MAJOR CHALLENGES (CONTINUED)

• Financing of projects by utilising strength of
  balance sheet limited due to short period of
  secured cash flow generation from current
  operations.
• Lack of acceptable dividend policy to enable
  pursuance of objectives.
• Exchange control regulations not conducive for
  investment in upstream activities.
• Streamlining of internal business processes.

12
WAY FORWARD

• Finalise evaluations as to optimal feedstock
  solution for Manufacturing plant and associated
  investment required as matter of urgency.
• Pursue aggressive growth in E P asset base,
  organically and non-organically.
• Streamline exchange control and investment
  approvals in terms of PFMA.
• Negotiate and finalise off take agreements with
  industry.
• Agree formal dividend policy with Shareholder.
• Evaluate internal processes and procedures to
  ensure appropriateness and efficient support to
  core businesses.

13

• FINANCIAL PERFORMANCE TO SEPTEMBER 2004

14
Income Statement for the period ending September
2004
15
Summary Gross Revenue Analysisfor the period
ending 30 September 2004
16
iGAS
17
iGAS
iGas was created by a Cabinet decision and CEF
was directed by the Minister of Minerals and
Energy to form a company which has the following
mandate

• iGas will act as the official State agency for
  the development of the hydrocarbon gas industry
  in Southern Africa.
• iGas will promote the diversification of energy
  usage into hydrocarbon gas.

18
iGAS Guiding Principles

• iGas will be guided by normal commercial
  criteria.
• Investment decisions cannot rely on state funding
  or state guarantees other than that from CEF.
• iGas may enter into joint ventures from time to
  time.

19
iGas Projects

• Rompco
• Company owning the natural Gas pipeline from
  Mozambique to South Africa.
• This pipeline of 865km extends from the
  Temane/Pande gas fields in Mozambique to Secunda
  in South Africa.
• Investment Required
• Equity R534 million
• Guarantees R550 million
• The equity will be funded 40 from CEF cash and
  60 from loan funding.

20
iGas Projects (contd)

• Integrated Liquified Natural Gas(LNG) to Power
  Project in the Eastern Cape.
• iGas Investment Required
• Approximately R500 million

21
Petroleum Agency SA
22
HISTORY

• Formed as Petroleum licensing Unit division of
  Soekor 1996.
• Established as subsidiary of CEF by Ministerial
  Directive in 1999.
• Appointed as designated agency in terms of
  MPRDA, June 04.

23
ROLE

• Promote offshore and onshore oil and gas
  exploration and production.
• Maintain and add value to the national data base.
• Receive applications and make recommendations for
  award of rights and permits.
• Monitor all exploration activities.
• Review and monitor upstream petroleum related
  environmental issues.

24
WHY

• SA imports gt200 000bbls crude /day
• R20 billion / year outflow.
• Indigenous production will result in significant
  saving of foreign exchange.
• Forecast worldwide shortage of crude higher
  crude prices.
• A degree of self sufficiency greater SA Inc
  growth potential.
• Real potential for significant local crude
  production.

25
PROGRESS

• In operation today
• 8 offshore exploration licenses
• 3 technical co-operation agreements
• Significant upgrading of deepwater oil potential.

26
Main areas of activities
27
SPECIAL PROJECTS

• Extended Continental Shelf Claim
• World Petroleum Congress
• Upstream Training Trust

28
OIL POLLUTION CONTROL SOUTH AFRICA
29
OPCSA BACKGROUND

• OPCSA was registered as a section 21 company
  during 1992 and managed as a department of SFF
  Association with the function to provide
  pollution prevention, control and clean-up
  services within Saldanha Bay harbour facilities.
• SFF was at the time engaged in extensive oil
  trading activities that necessitated pollution
  control and prevention measures.

30
OPCSA OVERVIEW

• Ministerial Directive
• To expand the pollution control activities to all
  ports in South Africa.
• Expansion must be done on a cost recovery basis.

31
OPCSA BACKGROUND

• From October 2002, OPCSA has operated
  independently of SFF and has its own Board of
  Directors.
• OPCSA Head Office is based in Bellville.
• It provides management, insurance and
  administrative services to the company.
• All the non-core activities, such as Human
  Resources, Finance, Internal Audit and IT is
  currently outsourced to CEF.

32
VISION

• To be the partner of choice in the provision
  of oil pollution prevention and control services
  in South Africa, Africa and the Middle East.

33
MISSION

• To provide a cost effective oil pollution
  prevention and control service in South Africa,
  Africa and the Middle East that will address all
  the requirements of all the stakeholders relating
  to environmental legislation.

34
SHORT TERM OBJECTIVES(Current financial year)

• To enter into viable and sustainable agreements
  with PetroSA and NPA in Saldanha and Mossel Bay.
• To conduct a country wide market survey of oil
  pollution and prevention services.
• To develop a marketing strategy that will address
  the needs identified.
• To enter into an agreement with DEAT whereby
  OPCSA will perform all pollution prevention and
  control services on DEATs behalf.
• Investigate possibility to become a (Pty) Ltd
  Company.

35
MEDIUM TERM OBJECTIVES(2-3 years)

• To develop the Mossel Bay base into a regional
  response basis.
• To enter into agreements with all the oil
  companies operating out of Durban to provide a
  service in the harbour and at the SBM.
• To develop the Durban base into a regional
  response basis.
• To enter into agreements with African oil
  producing countries whereby OPCSA will perform
  all pollution prevention and control services on
  their behalf.

36
LONG TERM OBJECTIVES(3 years)

• To enter into agreements with Middle East oil
  producing countries whereby OPCSA will perform
  all pollution prevention and control services on
  their behalf.
• Form international alliances with other players
  in the field.
• Provide training on a regional basis to outside
  companies.

37
OPCSA OVERVIEW

• Current Status
• SALDANHA
• Agreement in place with Caltex.
• Ad-hoc agreement with PetroSA .
• Potential Income of R6,62 million based on
  providing pollution control services.
• The costs of maintaining the Saldanha operation
  and Bellville head office amounts to R10,84
  million.

38

• SFF Ogies Facility
• Oil used to be stored in 8 mine containers.
• OPCSA manages the environmental pollution risk of
  the facility on behalf of SFF.
• Operational Expenses R3.34 million per year.
• All Expenses recovered from SFF in terms of a
  management agreement.

39

• SFF Ogies Facility
• SFF owns coal mining rights in the Ogies area.
• OPCSA responsible to commercialize the coal.
• Two contracts have been entered into that will
  earn SFF R170 million over the next 5-8 years.
• A coal dump of 550 000 tons to be put out to
  tender soon.

40
MAJOR CHALLENGES FACING THE GROUP

• Mossel Bay Refinery feedstock beyond 2008
• Energy Development Corporation
• Sustainability
• Major expansion in the short term will require
  CEF to gear its balance sheet optimally
• Capital allocation
• Winding down of SFF
• Hydrocarbon exploration and exploitation
• Skills building and retention
• Defining the holding company role
• Cost cutting

41
THE WAY FORWARD

• CEF IS ENTERING A PERIOD OF MAJOR
• EXPANSION
• New projects and investments will be
  identified.
• Systems put into place to facilitate best
  choice of projects for the group.
• Funds will be at a premium.
• Alternative sources of funding must be sought.
• Location and type of funding must be looked at
  to ensure the best returns on a group basis.
• Balance between commercial and developmental
  projects.

42
RISKS

• CEF
• Loss of capital and dividend income from
  investment in subsidiaries
• Dividend policy
• EDC
• Availability of financial resources
• Lack of commercially viable investments/projects

43
RISKS (contd)

• PETROSA
• Depletion of Gas Reserves in the South Coast
• Ageing plant
• Refusal by the Oil majors to lift PetroSA product
• Loss of technical skills/expertise
• Reduction of cash reserves due to reduction in
  production
• Inability to raise financing due to limited life
  or uncertainty about the future

44
RISKS (contd)

• OPSCA
• Delegation of authority from DEAT and DOT
• Acceptance by oil industry
• Commercialisation
• PETROLEUM AGENCY SA
• Lack of Hydrocarbon discovery
• Loss of exploration data
• SFF
• Environmental risk
• iGas
• Funding of large commercial projects