Nuclear build project costs ‘underplayed’, report says

THE Department of Energy underplayed what it had been told the nuclear programme would cost, consultants’ reports distributed to MPs on Tuesday have revealed.

The details of government planning regarding the nuclear new build programme, which has been championed by President Jacob Zuma, have been kept secret by the department despite several access to information applications by Business Day and other groups.

The documents make nonsense of the argument used repeatedly by Department of Energy officials for the past three years that the reason they were kept secret was because they contained commercially sensitive information.

The department also intentionally underplayed the cost of nuclear energy, choosing a ballpark number in its public engagements that was lower than was estimated by consultancy Ingerop.

The Ingerop study, compiled in 2013, looked at comparative prices of building nuclear plants based on information provided by vendors.

The average capital cost was about $4 918/kWe (R68 718). But in July last year, Department of Energy deputy directorZizamele Mbambo, put the estimated costs at R500-billion, which at the time was $4 200/kWe (R58 685).

The consultants’ reports also make it clear that if SA were to build new nuclear plants, consumers would have to pay more for electricity.

A study by Deloitte explores three financing models: 100% ownership by Eskom; 51% ownership by Eskom in a joint venture with other investors or the creation of a special purpose vehicle that would include Koeberg, a 75% Eskom ownership and new investors.

In all three scenarios, the debt and equity required would be substantial.

In the second two models, where private investors would be involved, a commitment from Eskom for a power purchase agreement at a rate of R1.20/kWhR1.40/kWh would be required, says the study. This is double what Eskom presently pays independent power producers of renewable energy.

Although the department spent more than R62-million on consultants’ reports on various aspects of the nuclear build since 2012, most of these are now out of date and too hypothetical to be of use.

The government has also since scaled down its vision for the nuclear programme and is unlikely to pursue the full 9.6GW procurement that was first intended.

The department’s summary of contracts it has signed so far includes the disclosure that of the R200-million budget that it received from Treasury in 2015 for preparatory work, R171-million was spent on an information management system with Empire Technology owned by Shantan Reddy, the son of Zuma’s friend Vivian Reddy. — BDLive