Category Archives: South Africa

South Africa tries again to expand its nuclear program

This time, Eskom wants vendors to self-finance

By Dan Yurman

Dipuo Peters

South Africa wants to capitalize a nuclear energy manufacturing industry on top of a 9 GWe program to build new reactors. Energy Minister Dipuo Peters wants to achieve both objectives with funding from reactor vendors.

Her business model is likely to be one that guarantees rates for at least 15 years and will pay back the cost of the plants and position them for local investor ownership.

She told wire services on June 4 that South Africa will make decisions on reactor technologies, a short list of suppliers, and the procurement process by the end of the year.

To get there, Peters wants to “localize” manufacturing of the complex components of building a new nuclear reactor and beef up South Africa’s role in the nuclear fuel cycle. Peters told a nuclear energy conference held in Sandton, S.A., in late May that the nation’s ambitions are for a bigger share of the pie than just “digging trenches and pouring concrete.”

Serious about fuel

While the nation has uranium mines, it would need to build front-end uranium enrichment facilities and back-end spent fuel reprocessing centers. South Africa has made it clear in previous nuclear energy tenders, which were not executed, that it values the energy potential in spent fuel and has every intention of capturing it for domestic use.

This suggests that in addition to uranium enrichment, South Africa might also build a mixed oxide (MOX) fuel fabrication plant with some of the output slated for export. The possibility of the execution of these plans represents a significant step up in the country’s role in global nuclear fuel markets.

South Africa shut down its nuclear weapons development program in 1989. It signed the Nuclear Nonproliferation Treaty in 1991. An estimate prepared at about the same time indicated that South Africa had about 700 Kg (1,500 lbs) of highly enriched uranium (HEU) at 80-90 percent U235.  In theory, this material could be blended down to make commercial nuclear fuel. It is believed to be stored at South Africa’s Pelindaba site. In 2007, there was an attempted break-in to steal HEU, but it failed.

Second at bat for Eskom

In 2007 Eskom, the state-owned utility that controls most electricity generation and distribution in South Africa, released a 20-GWe tender for conventional light-water nuclear reactors. After receiving bids from Areva and Westinghouse, Eskom cancelled the deal because it didn’t have the money to pay for the plants. Efforts to attract investors or international banking support failed to produce results.

This time, South Africa ambitions appear to rest on leveraging the resources of reactor vendors themselves. Eskom wants to build three separate power stations—Thyspunt, Bantamsklip, and Duynfontien—which would be composed of two to three reactors each of about 3 Gwe each.

That’s not all. South Africa’s outsized ambitions dwarf its previous thinking even though the new plan is half the size of the one it cancelled four years ago. It wants the vendors to “localize” the production components of the plants and to help the nation develop an export program to compete in global markets.

The government wants at least a third of the components built locally, and more if possible. Limiting factors will be manufacturing capacity in South Africa and the need to train a new generation of nuclear engineers.

Bidders line up

Energy Minister Peters has wasted no time drumming up support for the plan. She traveled to a nuclear energy conference in Moscow the first week in June to solicit support for it.

Her expected business model could mirror the deal the Russians inked with Turkey for a 5-GWe project on the country’s Mediterranean coast. In return for guaranteed rates, the Russians will build the reactors and operate them for 15 years, after which the paid-off plants would be sold to Turkish investors.

Areva and Westinghouse would be hard pressed to match that offer. Areva is starved for working capital. Last December, it cancelled a raft of new uranium facilities, including the high profile Eagle Rock enrichment plant in the United States.

Westinghouse has four reactors under construction in China and another four just getting started in the United States. Whether Toshiba, its parent firm, would want to sink a huge pile of cash capitalizing a South African venture is a strategic issue for the firm.

This leaves the Chinese, who have expressed interest in financing new reactors in South Africa, possibly in collaboration with French firms. Last February, it was revealed that the China Guangdong Nuclear Power Group was in talks with France’s EDF to build Areva EPRs in South Africa. The combination of French reactor expertise and Chinese financial power would be a potent competitive threat to Russia’s Rosatom.

The possibility of a South Korean bid has been aired, but with commitments to build four reactors in the United Arab Emirates, there is a question of whether Korea Electric Power Corporation has the capacity to take on new work at this scale.

New lamps for old

In addition to electricity, South Africa may also use its new reactors, if built, for coal gasification. Even with a plan for 9 GWe of nuclear power, South Africa by 2030 could still be relying on coal for up to half of its power needs. Currently, the country gets 40 percent of its needs for oil and gasoline from coal gasification.

Even so, the primary need is for power. In early 2008, Eskom had to engage in load shedding resulting in the intermittent shutdown of heavy industries, including mining operations. The power interruptions eventually led to a decline on South Africa’s overall gross domestic product.

One of the causes of the power shortages was that the government had kept a lid on rate increases for Eskom that throttled funding for capital improvements and that led to cancellation of the 2007 tender.

Thinking 60 years at a time

It appears that the South African government has learned its lesson since it knows vendors will not self-finance without rate guarantees over the operational life of the plants, which could be up to 60 years.

Not only do the vendors need to know that rates will be high enough to pay off the plants, but local investors will have to know that in buying the units, they won’t be left holding the bag.

Given the size of the tender, it is likely that more than one vendor will win some of the business. If it is successful, South Africa could become a new hub in the global nuclear market.

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Dan Yurman publishes Idaho Samizdat, a blog about nuclear energy and is a frequent contributor to ANS Nuclear Cafe.

Global nuclear markets regaining momentum

More starts than stops

By Dan Yurman

Futuristic nuclear plant Image World Nuclear news

The global nuclear energy market is not a monolith. The truth of this assertion is seen in several recent developments taking place during March. While there were some setbacks, including two German utilities pulling out of the U.K. new build, there are more new starts and even a faster pace at one high profile project.

U.K. takes a step back

Two of Germany’s biggest nuclear utilities slated to build Westinghouse 1100-MW AP1000 nuclear reactors at several sites in the United Kingdom have packed up and gone home. E.ON and RWE announced on March 29 that they will not be carrying out business plans worth an estimated $24 billion to build nuclear power stations in the U.K.

The companies said in a joint statement that the “accelerated nuclear phase-out” in Germany has led to a decision to pull back from a number of international investments.

Last year Germany closed eight of its oldest nuclear reactors and scheduled to close the remaining nine by 2022. The two utilities are hard hit by these moves as the reactors were essentially depreciated cash cows that would have provided money for international expansion projects. E.On said in its financial statements that it suffered a 50-percent decrease in profits due to the closure of the older reactors.

UAE nuclear project speeds up

The South Korean consortium building the first of four new nuclear reactors in the United Arab Emirates has trimmed four months off the construction schedule. Assuming all goes well with the regulatory agencies, it plans to pour its first concrete in July 2012 and complete the unit in January 2017.

The speed up in schedule is being facilitated by the pre-positioning of equipment, supplies, and people at the site, which is a remote desert location some 186 miles west of Abu Dhabi. Korea Electric Power Corp. (KEPCO) is leading the $30 billion effort. The Emirates Nuclear Energy Corp. (ENEC) manages it for the UAE government.

Of interest is that the original contract was for $20 billion, but the price has shot up by a third. Financing will involve a mix of cash, and bonds sold to investors, from the UAE, and export credits from South Korea.

In a domestic development in South Korea, Kim Joong-Kyum, chief executive officer of KEPCO, was quoted in late March by wire services as saying that his firm was in talks with ENEC for a new deal to build four additional reactors. ENEC said on April 5, however, in response to these press reports that it is ruling out any new contracts beyond what it already has in place, which are four 1400-MW units.

Saudi Arabia plans electricity exports

The Kingdom of Saudi Arabia (KSA) plans to build 16 nuclear reactors over the next 20 years, spending an estimated $7 billion on each plant. The $112-billion investment, which includes capacity to become a regional exporter of electricity, will provide one-fifth of the Kingdom’s electricity for industrial and residential use and, critically, for desalinization of sea water.

In February, top energy officials in KSA told the Bloomberg wire service that domestic needs for electricity are growing at the rate of 2 Gwe/year. State-owned Saudi Electricity Co. sees seven percent growth, but with the construction of new nuclear reactors, it will be able to export electricity to its neighbors as part of the multi-year development cycle.

The plan is to bring the first two reactors by 2020 and then two more a year until the plan is complete. KSA has nuclear cooperation agreements with a number of countries, but has not yet signed a 1-2-3 agreement with the United States.

Despite the pending nature of the significant and sensitive diplomatic relationship, The Shaw Group and Exelon have signed on to a joint initiative through Japan’s Toshiba to build two nuclear power plants. It is likely that KSA will select several types of reactors and designs to avoid putting all its eggs in one basket.

India fast tracks next round of reactors

With the Kudankulam twin VVERs back on track, India’s NPCIL is clearing the decks to begin development of what eventually will be a 10-GWe power station at Kovvada Matsyalesam. The first stage is to develop a baseline of environmental data for the site. Land acquisition will begin later this year and earth will be moved by the end of 2012.

NPCIL says that each of the reactors planned for the site will be in the range of 1300-1500 MW. The first plant will be completed within 54 months of breaking ground or by mid-2017.

Also, NPCIL is working on a joint venture with the state-owned aluminum company Nalco to set up a second nuclear reactor at one of three potential sites. Nalco would have a 49-percent equity stake in the 1500-MW project, which would supply electricity for its metal smelters and also make it an independent power producer in the region.

South Africa gets ready for nuclear

The South African government is conducting an “Integrated Nuclear Infrastructure Review” as a parallel process to its announcement of an upcoming tender for 9.6 Gwe of new reactors. It is assessing the government’s capacity to conduct oversight of construction and regulatory control of safe operations of the new plants.

Energy minister Dipuo Peters said that the exercise has the objective, among other things, to communicate clear signals about the government’s intent to proceed with the new build.

At the same time, the government is considering rebuilding its uranium enrichment and conversion facilities that were dismantled 40 years ago. According to a Reuters report for March 2, the country wants to use its domestic uranium deposits to supply an estimated 465 metric tonnes of enriched uranium a year to fuel the new reactors.

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Dan Yurman publishes Idaho Samizdat, a blog about nuclear energy, and is a frequent contributor to ANS Nuclear Cafe.