Nuclear over-reaction? Funders are lining up to pay for build – Eskom CEO

Environmental activists and analysts warn that a nuclear power deal with Russia – negotiated in secret – will be disastrous for South Africa, largely because it will ultimately consume vast sums of money at taxpayers’ expense for generations to come. (For a quick overview, watch this video.) But Eskom CEO Brian Molefe seems to think that the concerns are greatly exaggerated. What’s more, he reckons financiers are ready to pour cash into the project, apparently seeing it as an investment opportunity. In an interview with senior Fin24 journalist Liesl Peyper, Molefe said that asking the National Treasury for money to fund the project is “going overboard” and that Eskom should be able to “arrange some kind of funding” for the nuclear deal. The nuclear build programme is one of President Jacob Zuma’s pet projects and Molefe is in the Zuma camp of friends. The President managed to secure a long-term loan to fund repayments for his controversial Nkandla refurbishments through a little-known bank backed by the Public Investment Corporation (PIC) – the state’s investment arm. The PIC manages about R1.8 trillion in assets. Many taxpayers will be watching closely, with a healthy dose of cynicism, to see which financiers emerge from the wings to offer to rescue South Africa from going down the path to bankruptcy and whether there is a dotted line from the nuclear build programme back to South African state funds. – Jackie Cameron

By Liesl Peyper

Cape Town – A nuclear build programme for South Africa doesn’t need to be funded by the fiscus. There are enough potential financiers who would be willing to take the risk, said Brian Molefe, Eskom CEO on Wednesday.

Speaking to Fin24 on the sidelines of a parliamentary meeting, Molefe said he doesn’t believe a nuclear build programme would put a significant burden on the fiscus. Molefe said he had not asked National Treasury to consider making provision for any nuclear costs for the medium term.

Brian Molefe, chief executive officer of Eskom Holdings SOC Ltd., speaks at the headquarters of Eskom Holdings SOC Ltd. at Megawatt Park in Johannesburg, South Africa, on Friday, May 6, 2016. It appears to be just a matter of time before South Africas credit rating is cut to junk. Photographer: Waldo Swiegers/Bloomberg *** Local Caption *** Brian Molefe
Brian Molefe, chief executive officer of Eskom Holdings SOC Ltd., speaks at the headquarters of Eskom Holdings SOC Ltd. at Megawatt Park in Johannesburg, South Africa, on Friday, May 6, 2016. Photographer: Waldo Swiegers/Bloomberg

“It’s possible for nuclear to finance itself. Asking the fiscus for money is going overboard. We should be able to arrange some kind of funding for nuclear energy.”

According to Molefe, a nuclear plant has a life of 80 years – “even if it costs R1 trillion it will have the capability to repay the cost in 15 to 20 years. So you can take the revenues generated from nuclear, ring-fence it and use it for future nuclear activities.”

Molefe was part of an Eskom delegation that briefed Parliament’s Select Committee on Communications and Public Enterprises on the power utility’s tariff increases for 2016 and 2017, as well as the amended pricing structure for municipalities with effect from July this year.

He was asked to elaborate why he thought that nuclear energy is the best route for South Africa’s power generation capacity. Molefe responded that nuclear energy in the first instance cleaner than coal-fired power stations and secondly it’s ideal for base load electricity generation.

Read also: Yelland crunches the nuclear numbers

“The current renewable energy programme has a 30% availability factor. You have to wait for the sun to shine or the wind to blow if you want to make use of wind or solar power.”

Molefe cited Koeberg’s reliability as a base load power station as one of the reasons why nuclear is the route to follow. “The best performing power station this winter was Koeberg. It had the least breakdowns and had the best power reliability. It broke the record in South Africa – it operated non-stop for 470 days.”

He reiterated calls for urgency about making decisions about nuclear energy. “At the moment we have a surplus in electricity generation and we won’t need extra electricity until 2022. But we need it for 2028 and 2030.

“Remember, five to six years of a nuclear build programme is required solely for planning purposes. Another five years are required for implementation.”

Meanwhile, Liesl Peyper reports: If South Africa doesn’t have nuclear power by 2035, the country will be in the same position as in 2008 when there was a serious shortage of power supply, Eskom CEO Brian Molefe said on Wednesday.

Molefe was part of an Eskom delegation who briefed Parliament on the power utility’s tariff increase for 2016/17 and its amended pricing structure for municipalities.

He was responding to a question from an MP, who asked him to elaborate on the cost slippage and delays of Eskom’s build programmes.

Molefe said one of the biggest reasons for the Medupi delays was because Eskom hadn’t heed warnings in 1998 that the country would need new power stations by 2008. “So ten years later, we had that knee-jerk reaction where we very quickly had to make plans for new power stations.

“We took plans from other power stations and adapted it, and changes were happening all the time that led to cost runaways and delays,” Molefe said.

He emphasised that South Africa will need nuclear energy to supply electricity beyond 2030. “If we continue with the bickering instead of doing something, we’ll be in the same position in 2035 as we were in 2008. I say this because of bitter experience.”

Read alos: Eskom’s white elephants: Medupi, Kusile

Regarding Medupi, Molefe said “tremendous progress” has been made with the build programme at the power station. Unit 6 has already been in operation for some time, and unit 5 has been synchronised to the electricity grid.

“It’s currently not for commercial use, but we’re confident it will be in commercial operation by February of 2017 – so we’re running ahead of our deadline of the end of 2017.” – Fin24


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