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Eskom stalling may harm nuclear ambitions
Brendan Ryan
Posted: Fri, 28 Nov 2008

[miningmx.com] -- ESKOM is running out of time to decide which consortium will build its next nuclear power station scheduled to come on line in 2016, in terms of the country’s draft nuclear energy policy released in June.

The decision must be made by the end of 2008 if that timetable is to be met. There is growing concern that Eskom may delay the decision, which could have severe consequences if the 2016 target is missed.

Should construction of the next nuclear power station be pushed back too far, South Africa could end up at the back of a queue for new nuclear power stations to be built in a number of countries targeting a 2020 completion date.

The concerns follow comments made by Tseliso Maqubela, acting deputy director-general in the Department of Minerals and Energy (DME), at the Energy in Southern Africa conference held recently in Johannesburg.

Maqubela told the conference that South Africa’s nuclear build plans had to be looked at again and the magnitude of the investment made the decision difficult, particularly in the light of the global economic downturn.

He said a decision on the nuclear station would be made by the end of the year either to award the construction contract to one of the two bidders, or to delay the plant altogether.

The two consortiums competing for the contract to build the next nuclear power station are Areva with partners Aveng, and construction group Bouygues and Westinghouse with partners the Shaw group and Murray & Roberts.

Addressing the same energy conference, Areva business development manager Yves Guenon said that, regardless of which bidder was selected, a quick decision would position South Africa as one of the first countries in the nuclear equipment queue.

That would, in turn, increase the prospects of attracting related investments which would stimulate the development of a domestic nuclear supply industry.

Guenon warned that if SA delayed, other countries entering the nuclear energy sector ahead of it would reap the benefits of having supplier factories built within their economies.

Guenon pointed out that South Africa was in competition with countries like India which was now ready to start the construction of nuclear power stations.

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The key issues are the extended periods required to get all the regulatory permits in place for the nuclear power station and then to build it, as well as the manufacturing “slots” which the bidders must negotiate with the suppliers of “long lead time” items required for the projects.

Estimates are that two years will be required in South Africa for the permitting process to reach the stage where construction of the nuclear plant can begin.

It will then take between five and six years to build the plant.This is why a decision is required from Eskom by the end of 2008 if the new nuclear station is to come on line during 2016.

It is understood the bidders hold reserved “slots” with manufacturers for the key long lead-time items such as the nuclear vessels.

If Eskom does not commit to the contract in time, those “slots” would be lost and taken up by other nuclear projects.

Once lost, the construction of the SA nuclear station would be pushed back about 18 months until the supplier could schedule the orders into its construction programme once more.

The high capital cost of a nuclear plant compared with a coal-fired plant has also been raised. Eskom’s 2008 annual report states: “The nuclear programme is subject to affordability and resource capacity.”

It is understood that up to 75% of the finance required for such a nuclear project is usually organised by the winning consortium.

Both Areva and Westinghouse are likely to have those financial arrangements in place already, meaning they were negotiated before the global financial crisis that hit from the beginning of September.

Should those financing packages fall away, any replacement funding is likely to be more difficult to organise and on more onerous terms given the subsequent deterioration in global financial markets.

Eskom did not reply to a number of questions e-mailed to its Media Desk by Miningmx concerning its nuclear build programme.