Eskom can fund the nuclear build programme – Molefe

Talking to DoE about role in funding, construction, operations.

Eskom has appetite for the planned nuclear build programme. It believes it can fund it and sees a role for itself in the construction and operations of the nuclear power plants.

This is clear from an interview with Eskom CEO Brian Molefe on Monday. Molefe said the board and executives of Eskom are of the view that the power utility should contribute positively to the programme and are talking to the Department of Energy (DoE) about the role it should play.

Government’s 2008 Nuclear Policy Eskom acknowledges, “South Africa’s expertise with respect to the management, operation and maintenance of nuclear power plants resides with Eskom”.

With regard to institutional arrangements it is stated that “Eskom shall be the main owner and operator of nuclear power plants in South Africa.” It does provide for public private partnerships, “with Eskom retaining the controlling shareholding as the Public player”.

In July DoE deputy director general for nuclear energy Zizamele Mbambo however expressed doubt about Eskom’s capacity to undertake the huge nuclear programme. He said Eskom had its hands full with its new power stations Medupi and Kusile that are still under construction, and cited Eskom’s financial constraints.

Mbambo said cabinet was reviewing an earlier decision designating Eskom as owner and operator of the planned nuclear power plants and would review State- Owned Companies in terms of their mandates to determine which would be fit to execute the nuclear programme.

Molefe on Monday said Eskom needed something after completion of Medupi and Kusile and “nuclear is the next big thing”.

He said the DoE would play a critical role in selecting the successful bidder. Eskom sees a role for itself in building and operating the nuclear power plants. The original equipment manufacturer would however play the biggest role in the design and construction of the plant, he said.

Molefe acknowledged that Eskom experiences problems at Medupi and Kusile, but said the issues have been identified and are being dealt with. There will be an improvement in the next two years, with no further slippage in timelines and budgets, he said.

The funding of the project, which is the major concern in most quarters, is a simple matter, Molefe said. A nuclear power plant has a life of 60-80 years with big initial capital costs, but low running cost. He said the initial capital cost is typically repaid over the first 20 years, which means that the energy will thereafter be delivered at a very low cost.

Anything with that kind of financial profile is easy to fund, he said.

This is currently the situation with Koeberg, which delivers the cheapest electricity of the whole Eskom fleet and thereby contributing to a lower average cost of generation.

Eskom could fund the project from its balance sheet, Molefe said. Molefe has gained a lot of experience in capital markets in his earlier position as CEO of the Public Investment Corporation (PIC), which is the biggest asset manager on the continent and manages the portfolio of the Government Employees’ Pension Fund.

Eskom is currently finalising its financial statements for the six months ending September 30. CFO Anoj Singh told journalists at the Quarterly System Update on Monday that Eskom will be “comfortable” for the rest of the current financial year and hopes to end the year with R10 billion to R15 billion cash.

Molefe said Eskom has special skills and experience required for running the Koeberg nuclear power plant and the technology in new plants will be fairly similar.

Representatives of two of the vendor countries that will participate in the nuclear bidding process were positive about Eskom’s involvement, saying Eskom has the required expert knowledge. They asked not to be named.

Nuclear Africa CEO Dr Kelvin Kemm said after government earlier decided that Eskom would not run the nuclear procurement, the DoE took the role as the relevant legal entity on an interim basis. He said government might establish a new agency specifically for this purpose.

Investment Solutions economist Chris Hart is however sceptical about Eskom’s capacity for nuclear.

He said Eskom cannot build a nuclear power plant in the way it is building Medupi and Kusile. Eskom’s project management is disastrous, he said. “I will be very scared if Eskom gets involved,” he said. “Medupi is five years late and they are battling to keep their existing fleet (of power stations) together.”

Hart said the nuclear programme is unaffordable for South Africa as a country and asked how a much smaller entity like Eskom would be able to afford it.

“Theoretically I agree with him that it should be possible to fund it, but the sheer size of the project makes it difficult.” Eskom is not even able to fund Medupi and Kusile off its balance sheet and is pushing a large portion onto the State, he said.

Hart said the cost has been estimated at R1 trillion and the weakening rand can see it increase to R1.5 trillion. “Even a little mismanagement on a project of that size and result in huge cost overruns.”

To fund that from tariffs would cripple the economy, he said. The capital markets may provide out the funds, but it will have to be repaid from tariffs, which are already high, Hart said.

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Of course Brian will want to take this on, but does his customer want him to pass that cost on to them is the question, maybe he should speak to his customer base and find out? A little like any regular company would do? Oh yes, sorry Eskom is not like any other company! By the way Brian your balance sheet can’t even fund what you have on your plate, how do you think you will do a Trillion rand project? We as taxpayers are your balance sheet, don’t forget that!

Mmmmm all I see here is the under table kickbacks, no problem if the project runs to R2 trillion and never gets switched on lets make sure the wallets are bulging as we walk away from a nuclear plant foundation and 15000 workers on strike. Blow away the smoke SA see this for what it is.
If these guys had half a brain they would let private IPPs fund and build Eskom can then buy the power and distribute it.

What fee increase would Eskom require from Nersa, 200%?
Off course they can fund it, after all there are nice fat kickbacks at stake. What happens when there is no maintenance on a nuclear power plant? Maybe its just an expensive way to reduce our population size.

Battle of Chernobyl, documents terrifying declassified information about the thousands of volunteers who subsequently died of radiation at Chernobyl

The ecologist, has an article, written without access to the above information, estimating 9,000 to 93,000 deaths across Europe alone, based on collective radiation doses and risk estimates – and come up with estimates of the Chernobyl cancer death toll varying from 9,000 (in the most contaminated parts of the former Soviet Union) to 93,000 deaths (across Europe).

“UN reports from the IAEA and WHO (see also the ‘Chernobyl backgrounder’) in 2005-06 estimated up to 4,000 eventual deaths among the higher-exposed Chernobyl populations (emergency workers from 1986-1987, evacuees and residents of the most contaminated areas) and an additional 5,000 deaths among populations exposed to lower doses in Belarus, the Russian Federation and Ukraine.”

“The estimated death toll rises further when populations beyond those three countries are included. For example, a study by Cardis et al reported in the International Journal of Cancer estimates 16,000 deaths.”

Well for Brian and his bunch of merry men to say this is really nice, as he can bank on the good grace of the taxpayers paying their bills to fund his foray into nuclear!

He can’t get his existing construction process completed, how in heavens name can he think he can to the nuclear project?? One wonders, maybe it is the allure of money for personal gain?

Mr Molefe, no disrespect, but you are smoking your joggers dude.

Mr Molefe
Living in a dream world- He c cannot even complete the present projects In time on time within budget – Eskom has no clue on how to manage contractors who take them to the cleaners time and time again – In fact Eskom cannot even monitor the contractors progress and are led up the garden path all the time – Claims are paid -adjudicated by professionals who tend to the contractor -reason Eskom allow this to happen by the SOFT APPROACH to contractors -instead of laying down the law from start of contract -Furthermore Eskom may have the people with the necessary qualifications -but have no knowhow in the physical operations -believe me I worked for them

Is this a joke article? Eskimo can fund nuclear? Thats is a bad joke.

Eskom can fund it themselves? And with Tina Joemat-Petterson as the responsible (irresponsible?) minister at the DoE? I’m a great believer in nuclear, but it must be left to the professionals contracted to do the job, but I think it’s far too ambitious for SA anyway.

Ag shame, poor Brian. He really believes in the fairy-tale wonderland of nuclear power. Most experts go blue in the face pointing to cheaper, safer, more practical alternatives to nuclear power for SA, but he can’t, or doesn’t want to, know about them. Solar, wind, hydro, gas – ever heard those words Brian? Ag shame man.

You cannot fund Eskom now so how are you going to fund Eskom and the Nuclear deal? The Nuclear deal just adds to your problems. Considering you will be buying obsolete nuclear equipment from Russia at an inflated price.

How does Eskom have 10-15 billion in cash now? Was there a recent bailout injection?

Also, when is their financial year end? If it’s December, or even a couple months thereafter, it’s fairly alarming that the closest cash estimate they can come up with over this short time frame still has a R5billion range! I assume it was a throwaway off-the-top of his head number, but is still probably a fair reflection of the overall understanding of where their finances really are!

End of comments.





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