The speed at which Russia and Egypt signed a deal to build a four-reactor nuclear plant in November 2015 shows how quickly a nuclear procurement process can unfold, a Russian source said on Tuesday. By Matthew le Cordeur
The engineering, procurement and construction funding model developed by nuclear state-owned company Rosatom to secure the deal was the best solution for South Africa too, the source – who preferred to remain anonymous – explained.
He said it was a superior solution for technical, legal, political, economic and industrial reasons. “It’s the better solution,” he said. “It’s shorter. You can start the procurement programme very quickly. This is the best solution.
“The job in Egypt was done in less than one year,” he said. “We started negotiations in February and by the end of November it was signed.”
Zuma getting impatient?
Political analysts believe President Jacob Zuma fired Nhlanhla Nene as finance minister for allegedly stalling the 9 600 MW nuclear build process. Further reports have alleged that the Zuma-connected Gupta family “offered” the job to Deputy Minister Mcebisi Jonas to speed up the nuclear deal.
“In the meeting, Jonas was told that the job was his if he wanted it – but it would come with conditions: he would have to push for the approval of the nuclear procurement programme and clear certain men from the top echelons of the Treasury,” the Sunday Times reported.
Reports speculate that the Guptas and Zuma’s son Duduzane are pushing for nuclear procurement to unfold as they increase their stake in uranium mining. However, other reports explain that uranium fuel is cheap and South Africa will likely import the enriched nuclear fuel, bypassing these mines.
Attempts to obtain transparency on the nuclear procurement process have been difficult for media and organisations, but nuclear advocates and the government said this is because the process is still in an early stage.
However, Earthlife Africa (ELA) Jhb and the Southern African Faith Communities’ Environment Institute (Safcei), who have taken the government to court over the Department of Energy’s (DoE) nuclear programme, said last week that the government kept its nuclear section 34 determination secret for two years and deliberately withheld it, forcing ELA and Safcei to incur unnecessary expenditure by going to court to get the DoE to release it.
“The attitude of automatic secrecy adopted by the government is unacceptable,” said Dr Tristen Taylor of ELA. “Throughout this court action, the DoE has been uncooperative, obstructive and failed to behave transparently.
“There is an arrogant assumption that South Africans have no right to such critical information about nuclear projects that impact on our future until after it is too late to prevent the deal,” said Safcei executive director Ani Tsondru. “This raises grave concerns about the government’s commitment to constitutional rights, transparency and public participation.”
Russia ready to propose ‘the best solution for SA’
Russia is prepared to propose the best solution for South Africa’s 9 600 MW nuclear build programme, the source said on Tuesday.
Rosatom is gearing up for the release of the Request for Proposals (RFP) at the end of the month, which will officially kick off the race for the selected countries to propose a way forward for South Africa.
In the running are France, Russia, China, South Korea and the US, all of whom have signed inter-governmental agreements to join the bidding for the ambitious nuclear project.
A Russian source said Rosatom could submit its RFP anywhere between a few months and a year. “It normally takes about six months,” he said.
The source said the French funding proposal reported on Fin24 on Monday would work if a build, own and operate model was implemented. However, he said Eskom would have to vertically disintegrate first, separating its generation unit from its transmission and distribution units.
“This would take a minimum of five years,” he said. “That’s why we can’t have PPAs (power purchase agreements).”
Build, own, operate model necessitates Eskom tariff hike
The French president’s envoy for the nuclear partnership, Dr Pascal Colombani, told Fin24 last week in Paris that France will propose a funding model that seeks assistance from international and domestic financial partners.
France, through EDF and Areva, will likely propose seeking funding assistance from other countries like China, as well as Eskom and South Africa’s intensive energy users to fund the upfront costs of the programme. It would offer the energy users a competitive PPA to entice them into the funding model. This equity model would be in balance with a debt rate, which would remain close to OECD standards.
The Russian source said that the risk with a build, own, operate model was that Eskom would have to be prepared to raise electricity prices. “If a company builds nuclear on this business case, it will have to build profits into the price, which will increase prices,” he said.
Hybrid finance model
Rosatom is proposing a hybrid model funding solution and will likely look at creating a joint venture between itself and the main shareholder. The main shareholder could be Eskom, the South African Nuclear Energy Corporation or any “nuclear island” set up for the programme, he said.
He said South Africa would need to decide what it wants: just electricity or electricity with industrialised opportunities for growth, skills upliftment and employment opportunities.
A report released by Trusted Sources, an emerging markets research and consulting firm, said due to the localisation of a portion of the investment in the envisaged nuclear power plant programme, new builds would produce a positive shock for South African industry and economic growth.
“At the highest plausible localisation level of 45%, the multiplier effect of this industrial investment on GDP would be 3.4x, and the monetary value of the incremental value added in current US dollars would be over $77bn (about one-quarter of the country’s current GDP).”
Rosatom would ensure up to 30% localisation for the first four units and up to 60% localisation for the last four units, all of which are expected to be built between 2023 and 2030, the same source said last year.
“The SA government wants a high level of localisation and we are ready to execute this request and deliver a high level of participation of SA companies on our project,” the source said.
He said Rosatom would prefer the Thyspunt site to build the first reactors.
This week, Eskom submitted two nuclear installation site licence applications to the National Nuclear Regulator for Thyspunt in the Eastern Cape province and Duynefontein in the Western Cape province.
Eskom also submitted its environmental impact assessment to the Department of Environmental Affairs on February 24, which recommends Thyspunt. – Fin24