Nu­clear plan ‘needs cost-ben­e­fit anal­y­sis first’

CityPress - - Busi­ness - PIETER-LOUIS MY­BURGH and FIN24 busi­ness@city­

The gov­ern­ment nu­clear plan should cost South Africans as lit­tle as R250 bil­lion and not more than R500 bil­lion.

Any­thing more than that should raise con­cerns for tax­pay­ers, says en­ergy an­a­lyst Ted Blom.

After do­ing a com­par­i­son with France’s re­cent nu­clear pro­gramme, Blom said even if we were to pro­cure the abil­ity to pro­duce 9 600 megawatts of power, it would not cost close to R1 tril­lion – the es­ti­mate for the nu­clear pro­gramme mooted since 2011, when gov­ern­ment an­nounced the In­te­grated Re­source Plan (IRP) for Elec­tric­ity 2010-2030, which in­cludes 9 600MW of nu­clear power.

A Govern­ment Gazette no­tice, re­leased by the de­part­ment of en­ergy on Mon­day, con­firmed Cabi­net’s de­ci­sion to move ahead with the 9 600MW nu­clear pro­cure­ment pro­gramme. This means the de­part­ment can now call for quotes for the ten­der process to be­gin.

But Blom said even R250 bil­lion would be un­af­ford­able for the fis­cus. “We will have to bor­row that money, but our econ­omy is sim­ply not grow­ing fast enough to pay for it.”

En­ergy ex­pert Chris Yel­land called for calm, say­ing the an­nounce­ment is just the for­mal­i­sa­tion of a process that started a while ago. “It doesn’t mean we will def­i­nitely go ahead with the pro­cure­ment process.”

The process is far from com­plete, Yel­land said. “I be­lieve there is still a long road ahead be­fore com­mit­ments can be or are made in the form of con­tract awards for a nu­clear new­build,” he tweeted.

He said the process re­quired a de­tailed cost-ben­e­fit anal­y­sis by the fi­nance de­part­ment, as well as an up­date to the IRP 2010-2030. “Re­quest for pro­pos­als must still com­mence; short­list­ing of ven­dors and fi­nal bids from short­listed ven­dors must be recorded.”

Rus­sia, China, France, South Korea, Canada and Ja­pan are all vy­ing to win the main nu­clear con­tract, while there are also op­por­tu­ni­ties for lo­cal com­pa­nies to win con­tracts for var­i­ous in­fra­struc­ture and con­struc­tion ten­ders.

The above coun­tries, ex­clud­ing Ja­pan and Canada, signed in­ter­gov­ern­men­tal agree­ments this year ahead of the ten­der process. The two out­stand­ing coun­tries were plan­ning on sign­ing these agree­ments too.

There has been no of­fi­cial word from gov­ern­ment that it has de­cided to move ahead with the pro­gramme. But Fi­nance Min­is­ter Pravin Gord­han in­di­cated in his re­cent open­ing ad­dress that gov­ern­ment would pro­ceed with a for­mal pro­cure­ment process only if it was af­ford­able.

On De­cem­ber 14, Busi­ness Day re­ported that Cabi­net ap­proved the de­ci­sion to go ahead hours be­fore Nh­lanhla Nene was re­moved from his po­si­tion as fi­nance min­is­ter on De­cem­ber 9. An­a­lysts be­lieve Nene was ousted for stalling the nu­clear build pro­gramme, say­ing it was too costly in the cur­rent eco­nomic cli­mate.

He had al­lo­cated R200 mil­lion in his mini bud­get this year for the de­part­ments of en­ergy and fi­nance to in­ves­ti­gate the cost­ing of the pro­gramme. There were no in­di­ca­tions of this hav­ing pro­duced any re­sults.

Mean­while, an en­vi­ron­men­tal im­pact as­sess­ment re­port by Eskom rec­om­mend­ing Thyspunt, in the Eastern Cape, as the pre­ferred site on which to build a 4 000MW nu­clear power sta­tion was al­most com­plete and would be sub­mit­ted to the de­part­ment of en­vi­ron­men­tal af­fairs in Fe­bru­ary 2016, said Dei­dre Herbst, Eskom’s en­vi­ron­men­tal man­ager.

The Gazette no­tice re­leased by En­ergy Min­is­ter Tina Joe­matPet­ters­son, in con­sul­ta­tion with the Na­tional En­ergy Reg­u­la­tor of SA, said her de­part­ment would be the pro­cure­ment agency. This was ini­tially go­ing to be Eskom’s re­spon­si­bil­ity, but was moved to the en­ergy de­part­ment ear­lier this year.

The pro­cure­ment agency will “con­duct the pro­cure­ment process, in­clud­ing pre­par­ing re­quests for qual­i­fi­ca­tion ... pro­pos­als and all re­lated ... doc­u­men­ta­tion, ne­go­ti­at­ing power pur­chase agree­ments, fa­cil­i­tat­ing the con­clu­sion of the other project agree­ments, and fa­cil­i­tat­ing the sat­is­fac­tion of any con­di­tions prece­dent to fi­nan­cial close which are within its con­trol,” says the Gazette.

It goes on to say the elec­tric­ity must be pur­chased by Eskom “or by any suc­ces­sor en­tity to be des­ig­nated by the min­is­ter of en­ergy, as buyer [off-taker]”, adding that it must be pur­chased from the “spe­cial pur­pose ve­hi­cle(s) set up for the pur­pose of de­vel­op­ing the nu­clear pro­gramme”.

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