The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) REPORT NO.: RES43862 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TECHNICAL ASSISTANCE PROJECT FOR THE DEVELOPMENT OF CARBON CAPTURE AND STORAGE IN THE REPUBLIC OF SOUTH AFRICA APPROVED ON MARCH 21, 2017 TO THE REPUBLIC OF SOUTH AFRICA Energy and Extractives Global Practice Eastern and Southern Africa Region Regional Vice President: Hafez M. H. Ghanem Country Director: Marie Francoise Marie-Nelly Regional Director: Riccardo Puliti Practice Manager/Manager: Julia M. Fraser Task Team Leader(s): Joseph Mwelwa Kapika, Franz Gerner The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) ABBREVIATIONS AND ACRONYMS CCPP Carbon Dioxide Capture Pilot Project CCS Carbon Capture and Storage CCS TF World Bank Multi-Donor Carbon Capture and Storage Capacity Building Trust Fund CGS Council for Geoscience CO2 Carbon Dioxide DA Designated Account DMRE Department of Mineral Resources and Energy ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan FEED Front-End Engineering Design FMS Financial Management Specialist GHG Greenhouse Gas GoSA Government of South Africa ICB International Competitive Bidding IEA International Energy Agency ISDS Integrated Safeguards Data Sheet IFR Interim Financial Report NCB National Competitive Bidding NDP National Development Plan NPP National Procurement Procedures PAC PCSP International Advisory Committee PCSP Pilot Carbon Dioxide Storage Project PDO Project Development Objective PSSC PCSP Storage Subcommittee PTA Programmatic Technical Assistance for Capacity Building for Carbon Capture and Storage in the Republic of South Africa PTAS Project Technical Advisory Services QCBS Quality- and Cost-Based Selection RAMP Risk Assessment and Management Plan REOI Requests for Expressions of Interest RFP Request for Proposal SACCCS South African Centre for Carbon Capture and Storage SANEDI South African National Energy Development Institute SBD Standard Bidding Document TAP Technical Assistance Project for the Development of Carbon Capture and Storage in South Africa ToR Terms of Reference The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) BASIC DATA Product Information Project ID Financing Instrument P149521 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 22-Mar-2017 30-Dec-2021 Organizations Borrower Responsible Agency Department of Mineral Resources and Energy National Treasury (DMRE),Council for Geoscience (CGS) Project Development Objective (PDO) Original PDO The Project Development Objective (PDO) is to assess the feasibility of, and build expert capacity for, carbon capture and storage in South Africa. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A3137 22-Mar-2017 09-Feb-2018 10-Nov-2018 30-Dec-2021 23.00 0 23.00 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. SUMMARY 1. The development of Carbon Capture and Storage (CCS) technology remains a priority for the Government of South Africa (GoSA) for the abatement of Carbon Dioxide (CO2) emissions in the country, most of which emanate from the power sector which is dominated by coal-fired power stations. The World Bank Group Climate Change Action Plan (2021-2025) recognizes that CCS may be an important lever for decarbonization, and the technology is included in the pathways detailed in the Global Warming of 1.5°C1 special report by the Intergovernmental Panel on Climate Change (IPCC) and is also part of Net Zero by 2050 – A Roadmap for the Global Energy Sector2 by the International Energy Agency (IEA). 2. This Restructuring Paper proposes to restructure the Technical Assistance Project for the Development of Carbon Capture and Storage in the Republic of South Africa (the Project) by: (i) Extending the closing date of the Project by 18- months from December 30, 2021 to June 30, 2023; (ii) Transferring implementing agency responsibility from the South African National Energy Development Institute (SANEDI) to the Council for Geoscience (CGS); (iii) Changing the site of the Pilot Carbon Dioxide (CO2) Storage Project (PCSP) from the uMkhanyakude Municipality in the Kwa Zulu Natal Province to the Govan Mbeki Municipality in the Mpumalanga Province; (iv) Streamlining the governance and implementation arrangements for the project by providing clear delineation between decision-making and day-to-day project management; and (v) incorporating capacity building as part of the activities to be financed under Component 1 of the Project. 3. The environmental and social performance of the Project is rated as Moderately Satisfactory due to the delay in project implementation and preparation of follow-on site specific safeguards instruments. Safeguards instruments which have been prepared to date, include the preliminary Environmental and Social Impact Assessment (ESIA) and Environmental and Social Management Plan (ESMP) for the original PCSP site which was located in the uMkhanyakude Municipality in the Kwa Zulu Natal Province, and the preliminary ESIA with ESMP for the Carbon Dioxide Capture Pilot Project (CCPP, Component 2) which was prepared by Eskom. Both the preliminary ESIAs with ESMPs were cleared and disclosed by the Bank in 2016. As part of this restructuring, a new PCSP site has been proposed and this therefore requires preparation of a new site specific ESIA and ESMP for Component 1 of the project. For Component 2 (CCPP – Front-End Engineering Design), the associated environmental and social impacts have been assessed as part of the preliminary ESIA study that was prepared by plant owner Eskom and cleared and disclosed by the Bank in March 2016. This indicated no materially significant impacts associated with the proposed CCCP due to it being located within the larger Kusile Power Station footprint. B. BACKGROUND 4. The Project was approved by the Board of Executive Directors of the World Bank on March 22, 2017 and declared effective on November 10, 2018, with a closing date of December 30, 2021. The Project is co-financed with the GoSA for a total amount of US$38 million (Table 1). Project financing from the World Bank Carbon Capture and Storage Trust Fund (CCS TF) is in the amount of US$23 million and counterpart funding from GoSA is for the equivalent of US$15 million. 1 IPCC, 2018: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. 2 IEA, 2021: Net Zero by 2050 – A Roadmap for the Global Energy Sector. The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Table 1: Project Costs and Financing Cost WB CCS TF GoSA Project Components (US$, millions) Financing Financing (US$, millions) (US$, millions) Component 1. Pilot CO2 Storage Project 36.50 21.50 15.00 Component 2. CO2 Capture Pilot Project Front- 1.50 1.50 0.00 End Engineering Design Total 38.00 23.00 15.00 5. The Project Development Objective (PDO) is to assess the feasibility of, and build expert capacity for, carbon capture and storage in South Africa. To achieve the PDO, the project supports the financing of the following two components: a. Component 1: Pilot Carbon Dioxide (CO2) Storage Project (US$36.50 million) for the investigation and characterization of a suitable CO2 storage site and the subsequent injection, storage and monitoring of CO2 at the identified site. It is planned for between 10,000 to 50,000 metric tons of CO2 to be injected at a depth of at least 800m. At project appraisal, the location considered for storage investigation was within the Zululand geological basin at a site located in the uMkhanyakude District Municipality of the Kwa-Zulu Natal Province, with a theoretical storage capacity of 500 million metric tons of CO2. b. Component 2: CO2 Capture Pilot Project Front-End Engineering Design (FEED) (US$1.5 million) for the preparation of a FEED study for a capture pilot plant at the Kusile Power Station. It is intended for the CCPP to become a learning facility on CO2 capture for industry and academia, and a capacity building hub on CO2 capture technologies for South Africa and the region. 6. The project is aligned with South Africa’s climate change targets, and the country’s Integrated Resource Plan (IRP). South Africa has the largest power sector in Africa. Out of approximately 56,000 MW of installed capacity, coal power generation represents the most important source with 74% of the installed capacity, followed by renewables (15%), oil (7%) and nuclear (3%). Due to the large penetration of coal generation, the power sector is a key contributor to Greenhouse Gas (GHG) emissions with 48% of the total CO2 emissions. While South Africa is increasingly producing power from renewables, these still only make up 6% of the total electricity production. C. PROJECT STATUS 7. Project performance is rated Unsatisfactory (U) for both progress towards achievement of the PDO and overall Implementation Progress (IP). The project has continued to show a lack of implementation progress and no disbursement of the grant has been made since effectiveness. 8. Project implementation has been delayed by the lengthy period that it took to achieve effectiveness of the Project from the date of approval by the IBRD Board of Executive Directors, sub-optimal governance arrangements that delayed The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) decisions at key milestones, and the protracted process for obtaining consent from stakeholders at the originally designated site for the PCSP. As a result, none of the project activities can be concluded before the current project closing date of December 30, 2021. Despite the significant lack of progress, GoSA has reaffirmed that the Project remains a priority. To accelerate implementation and ensure that the PDO can be realized, GoSA has requested that the Project be restructured. 9. The project is in compliance with all legal covenants. 10. There are no outstanding or unqualified audit reports, or Interim Financial Reports (IFRs) for the grant. C. RATIONALE FOR RESTRUCTURING 11. The proposed restructuring is necessary to re-start and accelerate implementation and achieve the PDO. CGS, the proposed new implementing agency, possesses expansive technical geoscientific capabilities to implement the Project. Geoscience is prominent in Component 1 of the Project, which accounts for the largest proportion of planned activities and over 90% of the estimated costs of the Project. CGS has also been a key contributor to the development of carbon capture and storage in South Africa, having led an 18-month investigation of South Africa’s geological CO2 storage potential and compiled and published the Carbon Dioxide Storage Atlas for South Africa, and defined the scope for the seismic reflection survey and well drilling for the uMkhanyakude site for the PCSP. 12. As part of the project restructuring, it is proposed to shift the site for the PCSP from the uMkhanyakude Municipality in Kwa Zulu Natal Province to the Govan Mbeki Municipality in the Mpumalanga Province. This will place the PSCP in closer proximity to carbon dioxide emissions, and reduce CO2 transportation requirements, since Mpumalanga Province is where most of Eskom’s coal generation fleet is located, as well as the Secunda petrochemical complex, one of the largest single point CO2 emission sources in the world. Furthermore, additional investigations and monitoring that have occurred since the Atlas on Geological Storage of Carbon Dioxide in South Africa was completed in 2010, and upon which the original siting was made, have shown increased observations of seismicity in the Kwazulu Natal Province and the potential reactivation of regional faults traversing the province. 13. For day-to-day implementation, a project implementation unit (PIU) at the new implementing agency has been established, which has already progressed some initial activities including acquisition, verification, and auditing of geological data. Emanating from the revised Procurement Plan as contained in the Project Procurement Strategy for Development (PPSD) (Annex I), specifications for key activities aimed at fast-tracking implementation have also been developed some of which are under advance procurement. As part of this restructuring and consistent with the PDO, capacity building on Capture and Storage (CCS) is being incorporated into Component 1 of the Project. The capacity building activities will complement work done under the Bank - executed Programmatic Technical Assistance for Capacity Building for Carbon Capture and Storage in the Republic of South Africa that has provided a comprehensive and aligned package of support on CCS. Eskom has also reconfirmed its commitment to the Project and for the Kusile Power Station to be used for Component 2 (Annex II). 14. Since none of the project activities can be concluded before the closing date of December 30, 2021 given the delays that the Project has experienced, an 18-month extension of the project’s closing date, from December 30, 2021 to June 30, 2023 is proposed. This also aligns with the current closing date of the CCS TF and will enable progress towards achieving the PDO. The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) II. DESCRIPTION OF PROPOSED CHANGES 15. Based on the request of GoSA, the proposed key changes under this restructuring are: (i) Extending the closing date of the Project by 18-months from December 30, 2021 to June 30, 2023; (ii) Transferring implementing agency responsibility from SANEDI to CGS; (iii) Changing the site of the PCSP from the uMkhanyakude Municipality in the Kwa Zulu Natal Province to the Govan Mbeki Municipality in the Mpumalanga Province; (iv) Streamlining the governance and implementation arrangements for the project by providing clear delineation between decision-making and day-to-day project management; and (v) incorporating capacity building under Component 1 of the Project. Implementing Agency and Institutional Arrangements 16. It is proposed to change project implementing agency responsibility from SANEDI to CGS. 3 The CGS is mandated to promote research and the extension of knowledge in the field of geoscience as well as the provision of specialized geoscientific services and based on its mandate has the technical capabilities and required resources to implement the project. The financial management and procurement capabilities of CGS have also been appraised. 17. GoSA has designated a Deputy Director General (DDG) staff within the Department of Mineral Resources and Energy (DMRE) to be the government’s Project focal point. The DDG will provide guidance and input on aspects of project implementation that relate to government policy, legislation, and regulation. This will include coordination of CCS related policy development across government departments and facilitating the provision of regulatory permits and other clearances as necessary. 18. With DMRE assuming a more explicit role in project implementation, it has been agreed to dispense with the two steering committees (Pilot CO2 Storage Project Steering Committee and the South African Center for Carbon Capture and Storage Steering Committee) established at appraisal since the arrangement had proved to be sub-optimal and had delayed decision-making at key milestones. The proposed implementation arrangements are detailed in Annex III. Pilot CO2 Storage Project (PCSP) Site 19. As part of the restructuring, two potential sites at Volksrust and Govan Mbeki respectively, in the coalfields of the Mpumalanga Province were considered for the PCSP. Both sites are located at the confluence of significantly large geological basins including the Witwatersrand, the Transvaal and the Karoo. The two sites are also in a region that is seismically stable, an important factor for ensuring safe storage of the CO2 once injected. Based on a review of available data and preliminary geological investigations conducted between July and December 2020, the Govan Mbeki site has been selected. The CO2 storage medium being targeted is a deep saline aquifer, at a depth of greater than 800 m in the Ventersdorp geological formation where indications are that CO2 could be safely injected and stored. 20. To provide independent technical advice on the Govan Mbeki site, the World Bank team retained two international experts. Based on the information provided, the experts in their assessment found that the site appeared to be suitable for implementing the pilot CO2 storage facility. Its proximity to the petrochemical facility at Secunda also presents the potential for high concentration CO2 to be more easily available, thus potentially reducing the cost and 3CGS is one of the ten national science councils in South Africa and is successor of the Geological Survey of South Africa that was formed in 1912. The other nine science councils are: Council for Scientific and Industrial Research (CSIR), Agricultural Research Council (SRC), Human Sciences Research Council (HSRC), South African Medical Research Council (MRC), National Research Foundation (NRF), National Health Laboratory Service (NHLS), South African Council for National Scientific Professions (SACNASP), Mine Health and Safety Council and Coaltech Research Association. The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) complexity of the project. The assessment also observed that some of the potential risks with the selected formation could be ameliorated by also characterizing the Witwatersrand formation, which could serve as a contingency if the latter proved unviable. 21. Given the experience with the previous site, the necessity for an appropriate public communication and citizen engagement strategy that will be implemented throughout project implement is recognized. To this effect, several consultations have already taken place with various stakeholders and a letter of support for the Project obtained from the Govan Mbeki Municipality (Annex IV). Components Description 22. The description of Component 1 of the Project will be amended to include capacity building on CCS as follows: Pilot Carbon Dioxide (CO2) Storage Project 1. Carrying out of: (a) geological investigation and characterization of a suitable CO2 storage site; (b) schematic and detailed engineering design of PCSP facilities; (c) procurement and construction of PCSP facilities; (d) subsequent injection, storage and monitoring of CO2 in the identified storage site, in accordance with an Operational Plan for the PCSP; and (e) activities to build expert capacity in carbon capture and storage. Environmental and Social Safeguards 23. The project is classified as a Category A as per the Bank’s Safeguards Operational Policies due to the potentially significant irreversible and sensitive environmental and social impacts. Since the location of the injection well has changed from the original location in Kwa-Zulu Natal to Mpumalanga, the project will have to prepare a new site specific ESIA, to identify potential environmental and social impacts and mitigation measures including preparation of an ESMP and any other relevant plans to define appropriate mitigation measures, institutional arrangements and the budget for implementation and monitoring. The project implementation team that has been assembled by CGS includes environmental and social specialists that have prepared Terms of Reference (ToR) for the ESIA study and who will be responsible for its implementation and monitoring of activities, including undertaking a robust stakeholder engagement and consultations. The ESIA is expected to take approximately 12 months and procurement is planned to be launched by July 31, 2021. As part of the proposed restructuring the Integrated Safeguards Data Sheet (ISDS) has been updated to reflect the changes both in the project description which includes the location of the PCSP, and the implementing agency. Procurement 24. The project is currently under the World Bank’s ‘Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ dated January 2011, revised July 1, 2014 and ‘Guidelines: Selection and Employment of Consultants Under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ dated January 2011, revised July 1, 2014. The change in procurement to adopt the World Bank Procurement Regulations from 20164 would allow the Recipient to take advantage of the key features of the Regulations including use of National Procurement Procedures (NPP) and use of Sustainable Procurement to build capacity of Small and Medium- sized Enterprises (SMEs). When using NPP, procurement documentation would need to cater for compliance to the Bank’s Anti-Corruption Guidelines, right to sanctions and inspection and audit rights. A PPSD has been prepared for the project 4 Procurement Regulations for IPF Borrowers (dated July 2016), revised November 2017 and August 2018. The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) to provide an assessment of the market, the project needs and the best procurement approach and selection method to achieve the Project Development Objective. Financial Management and Disbursement Arrangements 25. A financial management assessment has been carried out to determine whether CGS as Project implementing agency has acceptable financial management arrangements which will ensure: (1) that the project funds are used only for the intended purposes in an efficient and economical way; (2) the preparation of accurate, reliable and timely periodic financial reports; and (3) safeguard of the assets. The overall conclusion of the financial management assessment is that the project’s financial management has an overall risk-rating of “Low” and the financial management arrangements satisfy the Bank’s minimum requirements. The proposed financial management and disbursement arrangements are described in Annex V. Legal Covenants 26. The legal covenant on Schedule 2, Section I, B, 1 (a) and (b) of the Grant Agreement, relating to the Action Plan and Reporting through Closure of PCSP and Decommissioning, will be amended to align the dates with the revised closing date. Results Framework 23. The Results Framework will be revised to: (i) extend the target end date of the Project’s results indicators in line with the revised closing date; and (ii) update existing indicators in conformity with the new implementing agency, new PCSP site and the overall revised implementation schedule. III. SUMMARY OF CHANGES Changed Not Changed Implementing Agency ✔ Results Framework ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Other Change(s) ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ APA Reliance ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_IA_TABLE IMPLEMENTING AGENCY Implementing Agency Name Type Action South African National Energy Development Implementing Marked for Deletion Institute (SANEDI) Agency Department of Mineral Resources and Implementing No Change Energy (DMRE) Agency Council for Geoscience (CGS) Implementing New Agency OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications TF-A3137 Effective 30-Dec-2021 30-Jun-2023 30-Oct-2023 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2017 0.00 0.00 2018 0.00 0.00 2019 0.00 0.00 2020 0.00 0.00 2021 0.00 0.00 2022 0.00 8,000,000.00 2023 0.00 9,000,000.00 2024 0.00 6,000,000.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement :Establishment of Steering Committees | Description :Schedule 2, Section I, B, 1 (a) of the Grant Agreement: The Recipient shall, not later than thirty (30) days after the Effective Date establish the PCSP Steering Committee and the CCPP FEED TF-A3137 Complied with No Change Steering Committee (Steering Committees), respectively, and, thereafter maintain said Steering Committees with a composition, mandate and resources satisfactory to the World Bank. | Due Date :21-Aug-2017 The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Finance Agreement :Action Plan and Reporting through Closure of PCSP and Decommissioning | Description :Schedule 2, Section I, F, 4 (a) of the Grant Agreement: (a) not later than June 30, 2021, or such later date as the World Bank may establish following consultations with the Recipient and the Project Implementing Entity, cause the Project Implementing Entity to prepare and adopt an action plan, approved by the Recipient and satisfactory to the World Bank, for monitoring the implementation of the closure of the PCSP during Stage 7, and decommissioning the infrastructure associated TF-A3137 with the CO2 injection. Not yet due Revised (b) thereafter, (i) continue for a period of seven (7) years after December 31, 2021, or such later date as the World Bank may establish following consultation with the Recipient and the Project Implementing Entity, annually to furnish the World Bank with such progress reports as the Project Implementing Entity may prepare in respect of Stage 7 for the benefit of and as approved by the Recipient, and (ii) afford the World Bank a reasonable opportunity to exchange views with the Recipient and the Project Implementing Entity on such progress reports. | Due Date :30-Jun-2021 GA: Sch. 2, Section I, F, 4 (a): (a) not later than December 30, 2022, or such later date as the World Bank may establish following consultations with the Proposed Recipient and the Project Implementing Entity, cause NYD the Project Implementing Entity to prepare and adopt an action plan, approved by the Recipient and satisfactory to the World Bank... TF-A3137 Finance Agreement :Progress Reporting until PCSP Not yet due Revised Closure&Decom; GA Schedule 2, Section I, F, 4 (b) | Description :Progress Reporting through Closure of PCSP and Decommissioning. Schedule 2, Section I, F, 4 (b) of the Grant Agreement: (b) Thereafter, (i) continue for a period of seven (7) years after December 31, 2021, or such later date as the World Bank may establish following consultation with the Recipient and the Project Implementing Entity, annually to furnish the World Bank with such progress reports as the Project Implementing Entity may prepare The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) in respect of Stage 7 for the benefit of and as approved by the Recipient, and (ii) afford the World Bank a reasonable opportunity to exchange views with the Recipient and the Project Implementing Entity on such progress reports. | Frequency :Yearly GA: Sch. 2, Section I, F, 4 (b): (b) Thereafter, (i) continue for a period of seven (7) years after June 30, 2023, or such later date as the World Bank may establish following consultation with the Recipient and the Proposed NYD Project Implementing Entity, annually to furnish the World Bank with such progress reports as the Project Implementing Entity may prepare in respect of Stage 7 . ... The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) . Results framework COUNTRY: South Africa Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa Project Development Objectives(s) The Project Development Objective (PDO) is to assess the feasibility of, and build expert capacity for, carbon capture and storage in South Africa. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 Completion of the assessment of the feasibility of CO2 storage in the Govan Mbeki area in SA (Action: This Objective has been Revised) Completion of the assessment of the feasibility of CO2 storage in the Govan Mbeki Local No Yes Yes Municipality in South Africa (Yes/No) Action: This indicator has been Revised Cumulative South African professionals trained and hired/contracted to work on the PCSP Cumulative South African professionals trained and hired/contracted to work on the PCSP 10.00 20.00 30.00 (Number) Action: This indicator has been Revised Of which women (Number) 5.00 10.00 15.00 Action: This indicator is New Completion and approval of the CCPP FEED (Yes/No) Completion and approval of the CCPP FEED No Yes Yes (Yes/No) (Yes/No) Action: This indicator has been Revised The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Cumulative PCSP seismic surveys completed (Action: This Component has been Marked for Deletion) Cumulative PCSP seismic surveys completed 0.00 0.00 1.00 2.00 2.00 2.00 (Amount(USD)) Action: This indicator has been Marked for Deletion Cumulative PCSP wells logged (Action: This Component has been Revised) Cumulative PCSP boreholes 0.00 10.00 15.00 logged (Number) Action: This indicator has been Revised PCSP site confirmed PCSP site confirmed (Yes/No) No Yes Yes Action: This indicator has been Revised Cumulative annual public engagement summaries disclosed Cumulative annual public engagement summaries 0.00 10.00 20.00 disclosed (Number) Action: This indicator has been Revised Cumulative CCPP FEED progress reports completed The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 Cumulative CCPP FEED progress reports completed 0.00 4.00 8.00 (Number) Action: This indicator has been Revised Cumulative PSCP geological profiles constructed (Action: This Component is New) Cumulative PSCP geological 0.00 3.00 5.00 profiles constructed (Number) Action: This indicator is New IO Table SPACE Annex I: Project Procurement Strategy for Development PROJECT PROCUREMENT STRATEGY FOR DEVELOPMENT (PPSD) FOR TECHNICAL ASSISTANCE PROJECT FOR THE DEVELOPMENT OF CARBON CAPTURE AND STORAGE IN SOUTH AFRICA 1. Project Overview Project Description The proposed TAP will include the implementation of two independent components: (1) the preparation and implementation of the PCSP; and (2) the preparation of the CCPP FEED. The PCSP constitutes the majority of the project activities and costs because the priority is to demonstrate that CO2 can be stored in the South African geological formations. Component 1: Pilot CO2 Storage Project (US$21.5 million CCS TF, US$15.0 million GoSA). for the investigation and characterization of a suitable CO2 storage site and the subsequent injection, storage and monitoring of CO2 at the identified site. It is planned for between 10,000 to 50,000 metric tons of CO2 to be injected at a depth of at least 800m. At project appraisal, the location considered for storage investigation was within the Zululand geological basin at a site located in the uMkhanyakude District Municipality of the Kwa-Zulu Natal Province, with a theoretical storage capacity of 500 million metric tons of CO2. Component 2: CO2 Capture Pilot Project (CCPP) Front-End Engineering Design (FEED) (US$1.5million); for the preparation of a FEED study for a capture pilot plant at the Kusile Power Station. It is intended for the CCPP to become a learning facility on CO2 capture for industry and academia, and a capacity building hub on CO2 capture technologies for South Africa and the region. Country: South Africa Full Project Name: Technical Assistance Project for the Development of Carbon Capture and Storage in South Africa Total Finance ($): 23 Million CCS Trust Fund Grant No: TF0A3137 Project Development Objectives (PDO): To assess the feasibility of, and build expert capacity, carbon capture, utilization and storage in South Africa. The PDO indicators are:  Completion of the assessment of the feasibility of CO2 storage in South Africa (Yes/No)  Cumulative South African professionals trained and hired/contracted to work on the PCSP (Number/Number of Women)  Completion and approval of the CCPP FEED (Yes/No) High Level Statement of requirement: The main requirements of the project that will be delivered by suppliers, contractors or consultants are as follows: • Goods – include equipment procured for various data collection activities in support of the CCUS project; • Works – include services and associated infrastructure procured in support of the development and characterization of the proposed CCUS pilot plant; 17 • Non-Consulting Services – include services procured in support of site characterization and the development of the CCUS pilot plant; • Consulting Services – include services procured toward providing technical and FEED support toward the development of the proposed CCUS pilot plant. Table 1 – Identified procurement risks and proposed mitigations Summary of Contract Categories Aggregate Estimated Duration of each Category Description Comments Cost (USD) package Equipment procured for Approximately 9 various data collection Between 1 - 24 contract packages Goods 1 000 000 activities in support of the months estimated between CCUS project USD1K - USD5M Services and associated infrastructure procured in Approximately 4 support of the Between 1 - 24 contract packages Works 9 000 000 development and months estimated between characterisation of the USD1K - USD5M proposed CCUS pilot plant Non-consulting services Approximately 4 procured in support of site Non-consulting Between 1 - 24 contract packages characterisation and the 7 000 000 services months estimated between development the CCUS USD1K - USD5M pilot plant Consulting services procured toward providing Approximately 6 Consulting technical and FEED Between 1 - 24 contract packages 6 000 000 services support toward the months estimated between development of the USD1K - USD5M proposed CCUS pilot plant OPERATIONAL CONTEXT: The implementing agency responsibility will be transferred from the South African National Energy Development Institute (SANEDI) to the Council for Geoscience (CGS); The site of the Pilot Carbon Dioxide (CO2) Storage Project (PCSP) will change from the uMkhanyakude Municipality in the Kwa Zulu Natal Province to the Govan Mbeki Municipality in the Mpumalanga Province; and the governance and implementation arrangements for the project will be streamlined by providing clear delineation between decision-making and day-to-day project management. 18 CGS is one of the ten national science councils in South Africa5 and is successor of the Geological Survey of South Africa that was formed in 1912. The CGS is mandated to promote research and the extension of knowledge in the field of geoscience as well as the provision of specialized geoscientific services. CGS provides the following professional services: (i) Geophysical airborne and ground surveys; (ii) Geophysical data acquisition, processing and interpretation; (iii) Engineering geosciences; (iv) Mineral resources development; (v) Water geosciences/hydrological services; (vi) Environmental management and rehabilitation; (vii) Marine geology including port surveys; (viii) Spatial data and GIS services; and (ix) Regional geological surveys and map compilations including core drilling. Based on its mandate, CGS has the technical capabilities and required resources to implement the project. The Deputy Director General (DDG) staff within the Ministry of Energy will have overall responsibility for the implementation and delivery of the Project. The DDG will also provide guidance and input on aspects of project implementation that relate to GoSA policy and legislation. CGS will have project implementation responsibility and the Board of CGS will have overall responsibility for the Project. For the day-to-day implementation of the Project, CGS has established a Project Implementation Unit (PIU) (Figure 2) that will report to the CGS Board through the Chief Executive Officer (CEO). Figure 2. Project Implementation Structure 5The other nine science councils are: Council for Scientific and Industrial Research (CSIR), Agricultural Research Council (SRC), Human Sciences Research Council (HSRC), South African Medical Research Council (MRC), National Research Foundation (NRF), National Health Laboratory Service (NHLS), South African Council for National Scientific Professions (SACNASP), Mine Health and Safety Council and Coaltech Research Association. 19 The CGS has developed a Procurement Policy which will be used for procurement for operational activities. Public procurement in South Africa has been recognised as a key enabler of social and economic transformation. The main legal instruments governing public procurement in South Africa include : Section 217 of the South African Constitution ; the Public Finance Management Act-51 (1) (a) ; Preferential Procurement Policy Framework Act- 2(1) (d) and ; Broad Based Black Economic Empowerment Act No. 46 of 2013. In addition to these instruments, over the years the government has launched various schemes to support local economic development such as:  Accelerated Shared Growth Initiative (ASGI-SA).  National Industrial Policy Framework (NIPF)  Industrial Policy Action Plan (IPAP).  Competitive Supplier Development Programme (CSDP).  National Industrial Participation Programme (NIPP).  New Growth Path (NGP).  National Development Plan (NDP). As emphasized in South Africa’s National Development Plan (NDP, p. 139), the Black Economic Empowerment agenda largely focuses on broadening ownership, enhancement of economic opportunities to previously disadvantaged groups and control of capital accumulation within capital intensive sectors; it aims to re-balance gender and racial ownership structures as well as the top echelons of the business community. The B-BBEE Act (sec. 1(c)(e) itself expressly states that the Broad-Based Black Economic Empowerment strategies include “preferential procurement from enterprises owned or managed by black individuals”. Moreover, the NDP refers to preferential procurement legislation as one of the main tools for accomplishing Black Economic Empowerment objectives. Other aims of the preferential procurement program are targeted at job creation and increasing the skill level of the workforce, with a view to redressing the ongoing effects of apartheid-era discrimination and exclusion. As noted in Overcoming Poverty and Inequality in South Africa (World Bank, March 2018, p. xiv), “racial and gender disparities are still predominant in South Africa’s labor market, an enduring legacy of apartheid. Race still affects the ability to find a job, as well as the wages received once employed.” Instruments such as the CPF and the Systematic Country Diagnosis (SCD), prepared by the Bank and in defining the objectives of the Bank’s operations in South Africa, repeatedly refer to the priority need for inclusive job creation and economic development. In line with those documents, the preferential procurement policy in South Africa requires taking specific steps to actualize inclusion, with a view concretely to remedy the inequities left by the apartheid system in terms of allocation of public services, land, wealth, opportunity and development in the society. These sustainability requirements, mandated by and pursuant to the Constitution and related legislation, are intended to implement the inclusion that the CPF and the NDP promote, again, with the overarching purpose of addressing the exclusion, inequality and poverty that are the ongoing legacy of apartheid. As noted in the NDP (p. 472), “Preferential 20 procurement, as well as BEE [Black Economic Empowerment] charters, the codes and the BEE scorecard, drive the empowerment of the historically disadvantaged.” Acceptance by the Bank of sustainable procurement requirements is important for building its relationship and trust in South Africa. The CLR (p. 52) notes that the Bank is not yet a reference partner for South Africa, which has made limited use of WB products despite sustained efforts by the Bank. Changing that ‘will require nurturing of gain made in the partnership with the Government of SA and focusing on building trust as a key dimension in the design of development programs well aligned with country priorities”. Furthermore, the CLR underscores the importance of alignment with the Government’s NDP, which refers repeatedly to the role of public procurement in overcoming the poverty and inequality that is the ongoing legacy of apartheid and racial discrimination. Acceptance of those requirements can be seen as generally consistent with the Bank’s core procurement principles, as illustrated below: i. Value for money: “functionality” evaluation criteria are assessed on a pass/fail basis; part of the “value for money” paradigm of a procurement expenditure includes how it contributes to addressing the effects of apartheid; ii. Economy: predominant weight in the evaluation and comparison of bids is given to price (either 80% or 90%, depending upon the value of the procurement); iii. Integrity: misrepresentation to get B-BBEE preferential procurement benefits is a criminal offence; iv. Fitness for purpose: as one of the Constitutionally mandated objectives of public procurement in South Africa is to address the effects of apartheid, the preferential procurement policy and practices can be seen as fit for purpose; v. Transparency: elaboration of detailed, quantified scoring and weighting matrix for the award of B-BBEE benefits in public procurement; disclosure of B-BBEE requirements and weighting of price and preference scores in solicitation documents. vi. Fairness: B-BBEE provisions do not exclude participation by foreign bidders; bidders that do not have B-BBEE status points are not disqualified (but earn no B-BBEE points in the evaluation of bids). The WB SP Guidance (p. 18, Table IV) states that the specifications for a procurement should not include discrimination on the basis of country, state or local companies. Summary of Recipient Institution The project will be implemented by CGS, being a state-owned entity, follow the applicable national procurement policies that meet the World Bank Group core procurement policy objectives of value for money, economy, efficiency, effectiveness, integrity, transparency and fairness and accountability. CGS will request a waiver from the Office of the Chief Procurement Officer at NT to enable the project to adhere to the World Bank Procurement Regulations as stipulated in the Financing Agreement. 21 The CGS has been assessed using the World Banks Procurement Risk Assessment Management System (PRAMS) to determine the project risks; risk mitigation measures, responsibilities, timing and monitoring process and procurement performance monitoring during implementation. The four elements assessed, and the preliminary results are as follows: (a) Procurement Regulatory Framework and Management Capability - CGS has a Procurement Policy in place and an active website that publicizes procurement opportunities. CGS produces annual work plans and procurement plans. A Procurement Officer will be assigned to manage procurement activities. CGS is deemed capable of executing the procurement activities under the proposed project, which may comprise works contracts, non-consulting services and consulting services. This capacity will be re-assessed when activities packages will have been finalized and procurement implementation arrangements concluded. Based on the preliminary risk assessment, the capacity of Procurement Officer may need reinforcement depending on activities to be financed. (b) Integrity and Oversight - CGS has adequately segregated the various procurement duties and is subject to an external audit. A review of management letters will also be carried out to determine if additional measures need to be put in place. Based on the preliminary risk assessment, oversight measures may need reinforcing depending on implementation arrangements. (c) Procurement Process and Market Readiness - CGS has put in place acceptable documentation to guide the procurement process. Under the project, procurement plans, opportunities, evaluation outcomes and award of contracts will be published on their website. Considering the types of activities planned, there is availability of vendors in South Africa, in the Region and international for the type of consultancy services required, civil works and non-consultancy services. (d) Procurement Complexity - Initial indications show that procurements will comprise a selection of consultant firms, procurement of civil works and non-consulting services. CGS has shown the capability to manage such procurements and the capability to have acceptable procurements templates in place. The Project Procurement Risk Rating at Appraisal is Substantial. Table 2 – Identified Procurement Risks and Proposed Mitigations Item Risk Mitigation By who Date 1 Scarcity of companies with specialized Market research CGS Ongoing goods and services 22 Market Risk: South Africa has a highly competitive domestic market which has capability to meet both domestic, regional and international demands. There are over 800,000 domestic firms listed on the Central Supplier Database with capacity and capability to provide these services. The project will also hire project implementation support personnel. This will include personnel hired to support office and field activities; procurement staff, financial management staff, ground water specialist, communication and knowledge management, project assistant, GIS/M&E, infrastructure, institutional development/governance, environment and social safeguards staff. According to paragraph 7.32 of the Procurement Regulations (2020), these staff will be hired using CGS’s human resource procedures that allow for advertising of positions, shortlisting of qualified candidates, interviews and selection of the best qualified staff. The project will also finance incremental Operating costs such as website maintenance, recruitment costs, and insurance services. Such operating activities will be procured using CGS’s procurement procedures for operational activities that have been found acceptable. Table 3 – Supplier Positioning Model High Estimated to Cost /Value = Above R 5 million Rands High Strategic Critical-Big ticket packages Strategic Core= Big ticket packages (Services) that must be closely (Goods) that must be closely monitored during a procurement monitored with a comprehensive process with a comprehensive service service level agreement to monitor level agreement to monitor supplier supplier performance. Risk or Vulnerability performance. Tactical Acquisition- The Tactical Advantage- The Procurement Procurement of short-term of short-term transactional packages transactional items procured from through a quotation procurement medium manufacturing companies. process. Low Estimated to Cost / Value = Less then R 5 million Rands Low Conclusion on Market risk to be included in Procurement Strategy Market risks are considered Moderate for this project. 23 Procurement Complexity The envisioned procurements are not complex, and the contract package values are low. All of the project requirements are readily available on the domestic market. Packaging for procurement is decided basically on following major criteria: a. Packages are decided in such a way that encourages adequate participation. b. Similar type of work is included in a package to the extent possible. c. Similar items that can be supplied together are group in one package. d. Size of Package: The size of package has been decided taking into consideration technical requirement, etc. Table 4 – Identified procurement risks and proposed mitigations Item Risk Mitigation By who Date 1 Scarcity of companies with Market research CGS Ongoing specialized goods and services CGS Market Analysis The CGS has identified different sourcing strategies for different the procurement packages, some commodities will be procured through request for quotations and some surveys will be procured as limited bidding to be reviewed by the Bank. Open competitive bidding will also be used as sourcing strategy. Sole suppliers will be explored for some specialized procurement packages. 2. Recommended Procurement Strategy for the Project Based on the project requirements, technical solutions and market base, the procurement strategy has been developed to (i) package requirements appropriately; (ii) have separate packages for consultancy services, non-consultancy services and civil works. Approaches to market for non-consulting services and civil works will include international, national, open, limited and direct. For consultant selection for firms the selection methods may be QCBS/CQS/LCS/DS/IC following international or national approach to the market including shortlisting. 24 Table 5 - Procurement Approach for Goods and Non-Consultant services Attribute Selected arrangement Justification Summary The non-consulting to be procured are Specifications Conformance/ Performance mostly site characterization The market approaches will include Sustainability Requirements Yes participation from the domestic market Contract Type Conformance/ Performance Traditional Contract Pricing and costing mechanism Schedule of Rates / Admeasurement Schedule of Rates The goods/services shall be delivered on the agreed schedule and comply Supplier Relationship Adversarial with the required technical specifications and agreed final price. Price Adjustments Fixed Price Fixed Price Form of Contract (Terms and Non-Specific, Once off or Fixed term Conditions) The services to be procured through Selection Method Request for Bids (RFB) RFB methods are appropriate. Selection Arrangement None Given the complexity of the non- consulting services to be procured Market Approach Open International, Limited, Direct Open international competition is deemed adequate Single Stage, Single Envelope Pre / Post Qualification Post Qualification The minimum requirements for qualification will be inserted in RFB Evaluation Selection Method Lowest Evaluated Method documents taking into account the nature of the non-consulting services to be procured Evaluation of Costs Adjusted Bid Price Lowest Evaluated Cost Domestic Preference No Rated Criteria No 25 Table 6 - Procurement Approach for Works Attribute Selected arrangement Justification Summary The works are complex in nature. The Works consists mainly exploration Specifications Conformance/ Performance drilling Complex works that will be procured through request for bids from the Sustainability Requirements Yes: international and domestic market Traditional Type contract is adequate Contract Type Traditional for the expected civil works. Pricing and costing mechanism Lump Sum or Lump Sum or Schedule of Rates Schedule of Rates. To ensure that the contractors will execute the works as per specification, within the agreed contract price, in accordance with the required standards Supplier Relationship Adversarial and on time. The contracts expected are to be Price Adjustments Fixed Price executed in relatively short time. May need to incorporate Environmental Form of Contract (Terms and and Social requirements for working in Conditions) None Specific, Once off or Fixed term protected areas. Request for Bids are appropriate for Selection Method Request for Bids (RFB) complex works contracts. Selection Arrangement None Open National/International competition Open /Limited National/International, will be appropriate for the complex Market Approach Single Stage, One Envelope nature of the works. Pre / Post Qualification Post The minimum requirements for qualification will be inserted in RFB documents taking into account the Evaluation Selection Method Qualifying Criteria nature of the works to be executed. Evaluation of Costs Adjusted Bid Price Domestic Preference No Rated Criteria No 26 Table 7 - Procurement Approach for Consultancy Services Attribute Selected arrangement Justification Summary Specifications Performance Consultancy Services to be procured will benefit from ability of firms to propose methodology and key staff to meet assignment objectives and qualified and experienced personnel in case of individual consultants. Sustainability Requirements Yes To give firms additional points for using local key staff. Contract Type Traditional Pricing and costing Lump Sum/Time Based Lump Sum or Time Based will be determined as mechanism appropriate based on the nature of each consulting assignment Supplier Relationship Collaborative Project Implementation Agencies and consultants must share interests and objectives. It is therefore expected that consultants and PIAs be in collaborative relationship to ensure the success of implementation Price Adjustments Fixed price/ Short term contract with no price adjustment. Contracts of Negotiated over 18 months duration would include a price adjustment formula Form of Contract (Terms Non-Specific, Once off or Fixed term and Conditions) Selection Arrangement None Market Approach Open International, Open National, Open International, Open National/regional approach will Multi-stage be used for most of consultancy contracts. Two Envelope, Single envelope Pre / Post Qualification Post-Qualification Evaluation Selection Quality and Cost Based Selection QCBS will be used for relatively large assignments (over Method (QCBS), Selection Based on US$ 300,000) while LCS will be used for smaller Consultant Selection (CQS) contracts. Least Cost Selection Method [LCS] Direct Selection will be used for identified assignments Individual Consultant (IC) that are justifiable. Direct Selection (Firms/Individuals) Evaluation of Costs Adjusted proposal Price Domestic Preference No Rated Criteria Most Advantageous Proposal 27 The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Table 8 - Procurement Plan Thresholds for Prior Review, Procurement Approaches and Methods A. Goods, Works and Non-Consulting Services: Moderate Risk Project Procurement Approaches and Methods (USD millions) Prior Review Category (USD millions) Open Open Request for Quotation (RfQ) International National Works ≥ 10 ≥ 20.0 < 20 ≤ 0.2 Goods, IT, and non- ≥2 ≥5.0 <5.0 ≤ 0.1 consulting services B. Consulting Services Category Prior Review Short List of National Consultants (USD million) (USD millions) Consulting Services Engineering and Construction Supervision Consultants (Firms) ≥1 ≤ 0.3 ≤ 0.3 Individual Consultants ≥ 0.3 NA. NA. (IC) The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Table 9 - Goods, Works, Consulting and Non-Consulting Services Review by Expected Description of Goods Estimated Procurement/Selectio Type Number bank bid opening and Services cost (USD) n method (post/prior) date Equipment for undertaking various Goods 1 50 000 Request for quotation Post Sep-21 mobile gaseous measurements Equipment for undertaking various Goods 2 50 000 Request for quotation Post Sep-21 static gaseous measurements Equipment for undertaking various Goods 3 50 000 Request for quotation Post Sep-21 mobile soil and rock measurements Equipment for undertaking various Goods 4 75 000 Request for quotation Post Sep-21 static soil and rock measurements Equipment for undertaking various Goods 5 mobile ground and 7 500 Request for quotation Post Sep-21 surface water measurements Equipment for undertaking various Goods 6 static ground and 7 500 Request for quotation Post Sep-21 surface water measurements Equipment for undertaking various Open national request Goods 7 750 000 Post Sep-21 seismic and subsurface for bids monitoring Equipment for various Goods 8 data collection and 5 000 Request for quotation Post Sep-21 storage Equipment for various Goods 9 5 000 Request for quotation Post Sep-21 data modelling activities Drilling activities for site Limited bidding due to Works 10 characterisation and 5 000 000 the existence of Prior Apr-22 development preferred services Drilling support activities Limited bidding due to Works 11 for site characterisation 1 000 000 the existence of Post Apr-22 and development preferred services Equipment for various Open national request Works 12 1 500 000 Post Sep-22 FEED development for bids The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Review by Expected Description of Goods Estimated Procurement/Selectio Type Number bank bid opening and Services cost (USD) n method (post/prior) date Support for various Open national request Works 13 1 500 000 Post Sep-22 FEED development for bids Non- Airborne site Limited bidding due to consulting 14 characterisation and 3 500 000 the existence of Prior Sep-21 services surveys preferred services Non- Ground-based site Open national request consulting 15 characterisation and 1 000 000 Post Sep-21 for bids services surveys Non- Limited bidding due to Air and surface consulting 16 1 250 000 the existence of Post Sep-21 monitoring surveys services preferred services Non- Limited bidding due to Air and surface consulting 17 1 250 000 the existence of Post Sep-21 characterisation surveys services preferred services Environmental and Consulting 18 social impact 2 000 000 QCBS Prior Sep-21 services assessments Consulting Economic impact 19 1 000 000 QCBS Prior Sep-21 services assessments Consulting FEED consultant 20 1 000 000 QCBS Prior Sep-22 services support and services Visual media Consulting 21 engagements and 1 000 000 QCBS Prior Sep-21 services consultations Print media Consulting 22 engagements and 500 000 QCBS Post Sep-21 services consultations Support for media Consulting 23 engagements and 500 000 QCBS Post Sep-21 services consultations The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Annex II: Eskom Re-Confirmation of Participation in CCPP The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Annex III: Implementation Arrangements The Council for Geoscience (CGS) has been determined by the Government of South Africa (GoSA) to be the implementing agency. CGS is responsible for the implementation of Components 1 and 2 of the Technical Assistance Project for the Development of Carbon Capture and Storage in South Africa (Project). The responsibilities of the main parties to the project are outlined below: National Treasury (NT) is the recipient of the grant from the World Bank Carbon Capture and Storage Trust Fund (CCS TF) to support implementation of the Project. NT has tasked CGS through a Subsidiary Agreement, to implement the Project The Department of Minerals and Energy (DMRE) has been tasked by the recipient to oversee the Project on behalf of GoSA. DMRE is responsible for the policy, legal and regulatory aspects of Carbon Capture and Storage (CCS) in South Africa and has mandated CGS to investigate the technical aspects of the technology and its potential deployment. The Deputy Director General responsible for minerals and petroleum regulation will be the official in DMRE that will oversee the Project. Eskom is the owner and operator of the Kusile coal-fired power plant which is the site for the prefeasibility study for the Carbon Dioxide Capture Pilot Project (CCPP). The Eskom lead for the CCPP activity will be the Senior Manager – Plant Performance and Optimization in the Research, Testing and Development Department. CGS is the implementing agency for the Project. CGS is one of the National Science Councils of South Africa and is the legal successor of the Geological Survey of South Africa, which was formed in 1912 by the amalgamation of 3 former Surveys, the oldest of which - the Geological Commission of the Cape of Good Hope - was founded in 1895. The Geoscience Act, Act 100 of 1993, established the CGS in its present form. The Act was later amended in 2010 to establish the Geoscience Amendment Act (Act No. 16 of 2010). As a scientific research council, the CGS is mandated to provide for the promotion of research and the extension of knowledge in the field of geoscience as well as the provision of specialized geoscientific services. The Council has a national footprint in the country, with the Head Office located in Silverton, Pretoria and various other Regional Offices located in Polokwane (Limpopo), Cape Town (Western Cape), Pietermaritzburg & Durban (Kwazulu Natal), Port Elizabeth (Eastern Cape) and Upington (Northern Cape). Today, the Council is a modern institution, boasting excellent facilities and expertise, ranking among the best in Africa. The CGS provides the following substantially different professional services:  Geophysical Airborne and Ground Surveys,  Geophysical data acquisition, processing and interpretation (Airborne and Ground),  Engineering Geosciences (including Geotechnical Services),  Mineral Resources Development including Mining and Minerals Services,  Water Geoscience/Hydrological Services,  Environmental Management and Rehabilitation, The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521)  Marine Geology including Port Surveys,  Spatial Data and GIS Services; and  Regional Geological Surveys and Map compilations including Core Drilling Services As the custodian of South Africa's geoscience data the Council for Geoscience has regional aeromagnetic, radiometric and gravity coverage of the country. For day-to-day implementation of the Project, CGS has established a Project Implementation Unit (PIU) as depicted in Figure 1. Figure 1. Project Implementation Unit The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Annex IV: Govan Mbeki Municipality Letter of Support The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) Annex V: Financial Management and Disbursement Arrangements 1. The overall responsibility for financial management matters for the project rests with the Project and job-costing accountant (P&JCA) under the guidance of the CFO. The finance division is adequately resourced to ensure sufficient capacity to financially manage the project. The project will use the CGS’s policies and procedures to ensure that funds of the project will be utilized for purposes intended. The project will use the CGS’s independent internal audit capacity where applicable to provide the necessary assurance as required. The CGS’s internal audit function uses a risk based approached and will apply this objectively when required. 2. Budgeting. The budget preparation for the project will be done by the P&JCA. An approved budget is uploaded onto SAGE 300 (financial system) which will enable the Council to process revenue (disbursements received) and expenditure incurred against the project. Expenses are approved in accordance with policies and procedures of the CGS before they are processed. The internal control procedures prevent any further expenditure processing if the budgeted amounts are exhausted. Monitoring of the budget and variance reports are produced quarterly and project expenditure reports are produced weekly. 3. Accounting. CGS’s system, SAGE 300 is able to produce necessary reports required to manage and monitor the financial operations. The system is also flexible to create specific project accounts for recording and reporting on project expenditures. The P&JCA will be responsible for accounting and reporting on the project operations. The system is largely automated only certain input is manual. Access to the system is restricted to authorized personnel only. Separate general ledger accounts or cost centers will be available to manage the recording of transactions specific to the project. 4. Financial Reporting. CGS will produce the required reports as per templates provided to manage and to monitor the project on regular basis and when required. Quarterly management accounts (QMA/IFR) will be produced on a quarterly basis. The contents of these reports will consist of financial reports, including statements of :(i) sources and uses of funds, (ii) uses of funds by project components and activities, (iii) Designated accounts Activity Statements, and (iv) statements of contracts subject to/ and not subject to the Bank’s prior review. The reports will be submitted to the Bank 45 days after the end of each quarter. 5. Funds Flow and Disbursement Arrangements. Funds will flow from the World Bank to the Designated Account (DA) opened and managed by CGS at the commercial bank. Funds in the DA will only be used to finance World Bank-supported eligible activities under the project components. There is adequate assurance that the funds will be ring fenced for the project use. Approval of the operating the Bank account has been obtained from National Treasury (NT). Disbursement of the funds will be completed based on quarterly interim unaudited financial reports (IFRs/QMA). These reports will include the reports and statements stated in paragraph 28 above. 6. An advance will be made to the Designated Account at the effectiveness of the grant and the request of the Recipient. The advance will be meant to cover project expenditures for 6 months as indicated in the initial six-month cash flow forecast. After every subsequent quarter, the project will submit QMAs, which will include a cash flow forecast for the following 6-month period. The cash request at the reporting date will be the amount required for the forecast period as shown in the approved QMA less the balance in the Designated Account at the end of the quarter. The World Bank Technical Assistance Project for the Development Carbon Capture and Storage in the Republic of South Africa (P149521) 7. Withdrawal applications for disbursement of funds for direct large payments is an option available from the grantor directly. Withdrawal applications for such payments will be accompanied by relevant supporting documents such as copies of the contract, contractors’ invoices and appropriate certifications. 8. Auditing. The project financial statements will be audited annually in accordance with International Standards on Auditing as promulgated by the International Federation of Accountants (IFAC). The audit report for the project specific activities will be submitted to the Bank within 6 months after the financial year-end 31 March. It will disclose the information on activities financed by the grant. A detailed management letter containing the auditor’s assessment of the internal controls, accounting system and compliance with financial covenants in the Grant Agreement, suggestions for improvement, and management response to the letter will be submitted to the Bank together with the audited financial statements. The Audit - Terms of Reference (TORs) will be developed, agreed between the CGS and prospective auditors, and cleared by the Bank prior to signing of the Grant-Agreement, to ensure adequacy of the scope of the audit.