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Background on the World Bank Inspection Panel's Review of the Eskom Investment Support Project

December 2, 2011

WASHINGTON, December 2, 2011—The World Bank’s Inspection Panel has completed its review of the Eskom Investment Support Project (EISP) and submitted it to the Bank's Board of Executive Directors and Management on November 22, 2011.

Consistent with the provisions governing the Inspection Panel process, Bank Management is now carefully reviewing the findings of this report and will prepare a detailed response to the issues raised, at which time we will be better able to provide further comment.

It is anticipated that the Board will consider both the Panel’s Report and Management’s Response during the first quarter of 2012. Both reports will be released to the public after Board consideration, along with a press release that summarizes the outcome of the Board meeting.

Why the Bank is supporting Eskom: South Africa is Africa's largest economy and, at the time when the EISP was approved by the Board in April 2010, was in the throes of its first recession. This was triggered in part by the global downturn and the severe energy crisis of 2008-2009 that had shuttered mines, closed factories, and led to job losses.

The risk was real that absent an increase in generation capacity, a protracted energy crisis would prolong the recession, threaten recovery and impede plans to increase energy access for all South Africans. It would also impact neighboring countries as Eskom widely exports energy to the southern Africa region.

The development objective of EISP is to enhance power supply and energy security in an efficient and sustainable manner to support economic growth and accelerate South Africa’s long-term carbon mitigation strategy, which pursues a mix of emission reduction, efficiency improvements, renewables, and clean coal technologies.

Bank support to Eskom covers US$3.75 billion for investments in thermal, wind and solar energy generation. This includes funding to support the completion of the Medupi Thermal Power Plant, to the northwest of Pretoria, which was already under construction when the Bank was requested to consider providing funding to Eskom.

As part of this program, on November 14, Eskom signed a R1.9-billion loan from the Bank to finance the building of South Africa's largest solar energy and wind power generation projects under the associated Eskom Renewables Support Project. The 40-year loan will help finance the building of a 100 megawatt solar power plant near Upington and the 100 megawatt Sere wind farm near Vredendal in the Western Cape.

The EISP is governed by the Bank’s Policy on the Use of Country Systems for environmental and social safeguard policies, where the Bank uses project-relevant national, sub-national and corporate standards provided that those are equivalent in their coverage and acceptable in their implementation to the provisions of the World Bank’s own safeguard policies. The World Bank has world-class safeguards to protect the environment and communities.