Nuclear ‘spring’?

10th June 2016 By: Terence Creamer - Creamer Media Editor

Nuclear ‘spring’?

During a recent visit to South Africa, French President Francois Hollande’s special envoy for the French-South Africa nuclear partnership expressed optimism that South Africa’s nuclear request for proposals (RFP) would be issued before the end of the year – probably during South Africa’s ‘spring’.

The RFP was initially expected for release before the end of March, after Cabinet had approved its issuance at its last meeting in December 2015, a month overshadowed by the firing of Finance Minister Nhlanhla Nene, which some have attributed, at least partly, to his nuclear resistance.

Dr Pascal Colombani draws his optimism from statements made by President Jacob Zuma in February and by Energy Minister Tina Joemat-Pettersson in May. Zuma said the controversial nuclear programme would proceed, but at a scale and pace that the country could afford, while in her Budget Vote address, Joemat-Pettersson said the RFP would inform the price, affordability, pace and scale of the programme. She also promised that the process would be “above board”.

Nevertheless, much scepticism remains, with critics of the programme questioning whether a 9 600 MW nuclear programme will pass a rigorous affordability test by the National Treasury, as well as whether the procurement will be fair, particularly in light of a Rosatom announcement in September 2014, which gave the impression that the Russian nuclear company had been awarded the contract.

However, both Rosatom and the Department of Energy continue to insist that no deal has been concluded, with government having signed, or planning to sign, intergovernmental agreements on nuclear with France, South Korea, Canada, Japan, China and the US.

Colombani is sanguine, though, indicating that delays are normal when it comes to nuclear programmes, which have massive upfront costs and back-end-loaded benefits. He is equally upbeat about France’s competitive position, despite the financial pressures being faced by both EDF and Areva and the perception that Rosatom has the inside track.

The French bid will be a combined EDF-Areva effort and could include other partners, should the South African bidding rules allow for such tie-ups. However, at this stage, it appears that South Africa will be seeking separate bids from each vendor country.

Colombani says it is premature to offer details on either the pricing or the financing of the bid, stressing that it could only make such assessments once the contents of the RFP are released. He would also not comment on the R1-trillion price tag typically quoted, saying only that South Africa was unlikely to procure the entire 9 600 MW in one go.

What he does confirm is that the bid will include a combination of debt and equity, with the debt portion likely to include export credit support from Coface as well as funds from public financing facilities.

The equity portion is a “work in progress”, but will be aligned to Eskom’s aspiration of being the owner and operator of the new nuclear plants. The French will also be canvassing energy-intensive businesses to assess their interest in participating in the project.

Besides financing and its 1 650 MW EPR reactor technology, the French bid will include commitments on localisation, operations and maintenance, research and development and skills development. “We are in a position where we expect the RFP to go forward – there will be an RFP,” Colombani says.

The key question, though, is whether South Africa really has the capability to fund and build what could be the largest single capital programme in its history.