CANE - Coalition Against Nuclear Energy South Africa

State to inject R6bn more into reactor project
September 12, 2007, BUSINESS REPORT

By Donwald Pressly

Cape Town - Contributions from foreign and local investors in the pebble bed modular reactor project have reached R4.2 billion since its inception eight years ago and the state will inject R6 billion more over the medium term, according to the project’s annual report for 2006/07.

The report was tabled in parliament at the same time as the special adjustment estimates bill, which covers unexpected expenditure not provided for in the 2007/08 national budget.

These items include R1.8 million to keep the reactor project on course until December.

According to the pebble bed report, the national treasury “plays an important role in funding the first-of-a-kind” reactor and fuel plant, which is yet to be built.

The report shows that Eskom has provided R818 million, or 20 percent, of the funding for the reactor since its inception in 1999.

The Industrial Development Corporation provided R457 million, or 11 percent, followed by US-based Westinghouse, which provided R450 million.

The government has so far injected R2.38 billion, or 58 percent of the funding, while US energy heavyweight Exelon provided close to R101 million.

Jaco Kriek, the chief executive of the pebble bed project, noted that final preparation for delivering the hardware was being carried out ahead of the commissioning of the demonstration power plant.

In parallel, the pilot fuel plant design “ought to be finalised” for construction to manufacture fuel for the reactor core by 2013.

“Commercialisation of the technology and the launch of production units will follow once the technology has been proven with the demonstration plant,” he reported.

The project, under development since 1993, entails the building of a demonstration reactor at Koeberg, near Cape Town, and a pilot fuel plant at Pelindaba, near Pretoria. The pebble bed technology involves a high-temperature reactor with a closed cycle gas turbine power conversion system.

The report notes that as part of Eskom’s long-term nuclear plans, the state power utility has issued the project with a letter of intent for an order of at least 24 commercial pebble bed modular reactor power units, “should the demonstration power plant be successfully commissioned, prove to be commercially viable and operate with defined parameters”.

Kriek reported that intricate negotiations with stakeholders, including Westinghouse and Toshiba, had delayed the signing of a shareholders agreement.

Westinghouse provides fuel services, technology, plant design and equipment for the commercial nuclear electric power industry. It is a leader in maintenance, ancillary services and fuel cycle services, according to the project report.

The Toshiba Group recently acquired a majority stake in Westinghouse from British Nuclear Fuels, an international nuclear energy business based in the UK.

Toshiba expects to introduce a number of minority investors in Westinghouse, but will retain more than a 51 percent interest to remain the majority and controlling shareholder, says the reactor report.

In the financial year to March 2007, the state contributed a little more than R1 billion to the reactor project. It achieved revenue of R1.7 billion, but the cost of sales and other expenses translated into a surplus after taxation of just R79 million. ENDS

On the same day as this report the following was minuted:

MINERALS AND ENERGY PORTFOLIO COMMITTEE
12 September 2007 Briefing by Department of Minerals and Energy by Mr Tseliso Maqubela (Chief Director: Nuclear, DME)

(Discussing the PBMR project)

Mr Maqubela pointed out that the PBMR project reported to the Department of Public Enterprises and he was unable to report on what progress had been made. He supported the need for timeframes and a mechanism to ensure that timeframes were adhered to and were not allowed to be extended without adequate explanation. He mentioned that the PBMR project was constrained by a lack of adequate funding in the past and was unable to plan for periods of longer than a few months. The industry also suffered a loss of skills to the UK and other countries.

He said that immediate challenges included the lack of fabrication space, particularly for the manufacture of heavy equipment. At present, large components were manufactured in Japan but there were lengthy lead times that resulted in increasing costs. Manufacturing costs were further increased by the increase in the price of steel. Although cost remained the main challenge, consideration had to be given to the generation of base load electricity by means of nuclear energy and coal.

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