A NUCLEAR industry expert says the government and Eskom have not resolved where to get the R1-trillion needed for the nuclear build and may have to look at models using private capital.
Compounding this is doubt on whether South Africa’s construction industry is large enough to support a nuclear build programme, Nuclear Industry Association of South Africa president Rob Adam told an energy conference in Johannesburg on Tuesday.
Both President Jacob Zuma and Energy Minister Ben Martins have repeatedly committed South Africa to a nuclear build programme, which features prominently in the state’s Integrated Resource Plan (IRP).
Mr Zuma also committed South Africa to installing a nuclear fleet in his state of the nation address last month.
Mr Adam, the former head of the Nuclear Energy Corporation of South Africa (Necsa) and a director of construction group Aveng, said funding nuclear power would be likely to include options such as build, operate, own; engineering, procurement, construction and management; and engineering, procurement and construction.
These options create the possibility for the private sector to invest in the nuclear fleet.
The Department of Public Enterprises, Eskom’s shareholder ministry, has long said it was exploring models that would introduce much-needed private capital into the build programme.
A major constraint regarding the country’s nuclear build programme is cost — estimated at up to R1-trillion in capital expenditure if South Africa commits to three new power stations as intended in the IRP. Eskom has a funding gap on its coal power stations of about R191bn.
Mr Adam warned that the scale of the programme could also be a problem for South Africa. Project guarantees and bond requirements for a hypothetical R150bn project with 40% of local content would cost the industry R24bn, he said.
This is equivalent to half of the market capitalisation of the domestic listed construction sector.
Mr Adam said the local industry had spent “several hundred million” rand since 2007 preparing for the country’s new nuclear build.
“Will the government ask Eskom to reduce bond requirements for localisation in bids?” he asked. “This should be thought through before any (nuclear) procurement process starts.”
Mr Martins told Tuesday’s conference that “the government in due course will announce specific details of the nuclear build programme”.
He said the state was “finalising” its nuclear negotiations and it was important for foreign and domestic role players to engage with one another — “so when the roll-out is announced and commences, there is a vibrant partnership with these role players”.
He said the state’s localisation policy would result in “opportunities for domestic industry to manufacture various components used in the nuclear sector”.
The government was also finalising the nuclear procurement framework, and “all stakeholders” should participate. Mr Martins said South Africa’s “ultimate aim is to be self-sufficient in all aspects of the nuclear energy chain”.
His comments came as Transnet this week awarded contracts worth R50bn for 1,064 locomotives that would see about 16% local industry participation.
Mr Adam said nuclear energy was key to resolving climate change and energy security. Despite the promise of abundant offshore gas from Mozambique and possibly shale gas from the Karoo, the future looked “bright” for nuclear power, he said.
US Deputy Secretary of Energy Daniel Poneman told the conference South Africa was “still in consultations” over nuclear plans.
His comments came a day after he delivered a keynote speech at an energy conference in Cape Town, and ahead of “wide-ranging” talks with Mr Martins, that would cover “all forms” of energy generation.
Mr Poneman said his visit paved the way for US Energy Secretary Ernest Moniz’s co-hosting of the US-Africa Energy Ministerial conference in June in Addis Ababa, Ethiopia. This would support energy development on the continent and highlight progress on US President Barack Obama’s “Power Africa initiative”.
Mr Poneman said despite his country’s shale gas boom, nuclear energy was central to US plans to mitigate climate change and provide base-load energy security for the country. Despite the nuclear meltdown at Fukushima in Japan, dozens of new nuclear plants were being built around the world.
Rosatom director of international business Nikolay Drozdov said that Russia’s state-owned nuclear energy giant was engaged in a $20bn “build, own, operate” nuclear power project in Turkey that had a “fixed” 15-year payback.
Rosatom has recently opened an office in South Africa to serve as the group’s regional headquarters for sub-Saharan Africa.
The group had already signed an intergovernmental agreement with Nigeria to build a nuclear power plant in that country. It also had uranium exploration and mining operations in Namibia and Tanzania, and had signed a memorandum of understanding with Necsa.