Rus­sia of­fers soft loan to fund nu­clear

CityPress - - Business - YOLANDI GROE­NEWALD busi­ness@city­press.co.za

Rus­sian state nu­clear cor­po­ra­tion Rosatom this week punted a favourable for­eign loan as a way for South Africa to fund its nu­clear am­bi­tions.

Rosatom has con­cluded a deal in Hungary, where it will build a new R200 bil­lion, 2 400MW nu­clear plant with the help of a gen­er­ous loan from Rus­sia.

How­ever, Pro­fes­sor Jan­nie Ros­souw, head of the School of Eco­nomic and Busi­ness Sciences at the Uni­ver­sity of the Wit­wa­ter­srand, said that com­mit­ting to a large in­crease in debt as a re­sult of the nu­clear deal would be dis­as­trous.

“South Africa should not in­crease for­eign ex­po­sure at this time be­cause it might con­trib­ute to a credit down­grade,” he added.

Rosatom will build and fi­nance Hungary’s new fleet of re­ac­tors at the Paks Nu­clear Power Plant, lo­cated along the banks of the Danube River.

The deal was not put out to ten­der, as Hungary opted to stick with Rus­sia, which built their ex­ist­ing fleet in the 1980s.

The sweet­ener to the deal is that Rus­sia will pro­vide an 80% loan to fi­nance the ex­pan­sion, with ex­tremely favourable lend­ing con­di­tions.

South Africa’s en­vi­sioned 9 600MW nu­clear deal has been priced at be­tween R500 bil­lion and R1 tril­lion.

At present, our gov­ern­ment debt amounts to some R1.8 tril­lion, 10% of which is for­eign debt. How­ever, state debt is set to rise above R2 tril­lion dur­ing the cur­rent fis­cal year, end­ing in Fe­bru­ary 2017. South Africa’s debt would soar if gov­ern­ment re­ceived a loan for R750 bil­lion from Rus­sia, or even China, to fund the nu­clear build.

How­ever, Pro­fes­sor At­tila Aszódi, gov­ern­ment com­mis­sioner of the Paks project, warned that the cost could be much more if South Africa did not in­vest in nu­clear. In Hungary, nu­clear pro­vides al­most 40% of the coun­try’s en­ergy needs.

Dubbed Hungary’s nu­clear “tsar”, Aszódi said Hungary des­per­ately needed cheap, re­li­able baseload power. Rus­sian gas played a big role in the past, but the gas pipe­lines had be­come a li­a­bil­ity.

Af­ter in­ves­ti­gat­ing sev­eral sce­nar­ios, the gov­ern­ment de­cided nu­clear was its only vi­able op­tion.

Aszódi cal­cu­lated that the new fleet could pro­vide elec­tric­ity for be­tween €50 (R808) and €57 per megawatt hour – or es­ti­mated at be­tween 81 South African cents and 92c per kilo­watt-hour.

Wind en­ergy from the lat­est round of bids in South Africa’s re­new­able pro­gramme now costs 61c/kWh – roughly half the ex­pected en­ergy cost from new coal power sta­tions.

“Fi­nanc­ing is key for the eco­nomics of the new power plant,” Aszódi ex­plained.

He said a sep­a­rate Hun­gar­ian-Rus­sian in­ter­gov­ern­men­tal agree­ment was signed on fi­nanc­ing, whereby Rus­sia pro­vided a state loan of €10 bil­lion for fi­nanc­ing 80% of the plant’s con­struc­tion costs. Hungary would raise funds for the re­main­ing 20%.

The loan is avail­able for a pe­riod be­tween 2014 and 2025. Pay­back will be­gin at the start of the plant’s com­mer­cial op­er­a­tion and take place over 21 years. The in­ter­est rate is be­tween 3.95% and 4.95%, de­pend­ing on the pe­riod.

Lo­cal­i­sa­tion for Hungary was a key fac­tor in the deal.

Of­fi­cially, the Hun­gar­ian loan is to fi­nance nu­clear, but crit­ics be­lieve Rus­sia is buy­ing favour with an EU gov­ern­ment. Ros­souw said South Africa should be wary on this score too.

Lo­cal job cre­ation is a key part of Rosatom’s sales pitch to South Africa. Us­ing Paks city as an ex­am­ple, Vik­tor Po­likar­pov, Rosatom’s vice-pres­i­dent for sub-Sa­ha­ran Africa, said the city showed how in­vest­ing in nu­clear en­ergy could ben­e­fit a lo­cal com­mu­nity and power up a town.

Rosatom’s ini­tial es­ti­mates in­di­cate that, dur­ing the peak of con­struc­tion, up to 15 000 di­rect jobs and 150 000 in­di­rect jobs will be cre­ated as a re­sult of the nu­clear build in South Africa.

How­ever, the coun­try’s nu­clear fu­ture is un­cer­tain at this stage, as Trea­sury has grave con­cerns about the af­ford­abil­ity of the project.

Op­po­si­tion par­ties have openly voiced their dis­sent about the new nu­clear build. The DA’s deputy shadow min­is­ter of en­ergy, Gor­don Mackay, said that, with the econ­omy in cri­sis, the coun­try could not al­low a deal that placed the al­ready strained fis­cus at fur­ther risk.

Eskom’s group ex­ec­u­tive for gen­er­a­tion, Mat­shela Koko, has ar­gued that nu­clear is the only af­ford­able al­ter­na­tive to pro­vide South Africa with base-load power.

“Nu­clear does have high ini­tial con­struc­tion costs,” he wrote ear­lier this month. “How­ever, op­er­a­tionally, nu­clear of­fers one of the cheap­est sources of elec­tric­ity.” Groe­newald vis­ited Hungary

as a guest of Rosatom

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