Eskom's nuclear plan hit by crises

Plans by South African utility Eskom to invest heavily in new nuclear generating capacity look uncertain. Political turmoil within the ruling African National Congress (ANC) and doubts about the utility's ability to secure international funding for the program have fuelled concerns that the country's energy woes are far from resolution.

In early 2007, Eskom's board approved a plan to boost electricity output to 80 GWe by 2025. This included the construction of 20 GWe of new nuclear capacity, which would see nuclear's contribution grow to 25% from the present 5%. The plan for the nuclear new-build program would kick-start with up to 4 GWe of pressurised water reactor (PWR) capacity, to be constructed from about 2010 with commissioning in 2016. Five sites in the Cape Province were under consideration, although the most likely initial site would be that of Koeberg, where South Africa's only nuclear power plant of some 1900 MWe has been in operation for the past 22 years.

Following the ANC decision that President Thabo Mbeki should step down on 21 September, a further eleven cabinet ministers and three deputy ministers have also resigned. Whilst the resignation of Mbeki had very little impact on market sentiment, bad planning and a lack of public information saw the business sector and the market react unfavourably to the announcement of the resignation of long-standing finance minister Trevor Manuel. Other high profile resignations included Deputy President Phumzile Mlambo-Ngcuka, minister of science and technology Mosibudi Mangena, and public enterprise minister Alec Erwin.

Mbeki resigned after accusations that he interfered in the prosecution of ANC president Jacob Zuma on corruption charges. The ANC - which is rupturing on what is commonly believed to be tribal differences of long-standing between the Zulu supporters of Zuma and those supporters of the original Xhosa leadership of Mandela and now Mbeki - has chosen ANC deputy president Kgalema Motlanthe as South Africa's President until next year's general election.

The resignations of Mbeki and the government ministers have raised investor concerns over political stability in South Africa. Zuma has pledged that the ANC would ensure a smooth transition and economic policy continuation. However, process so far has only raised question of whether this is possible. The political turmoil comes at exactly the time Eskom indicated, after the last decision was postponed, that it would make its announcement on the preferred supplier of its nuclear new build - or 'Nuclear 1' plans. Eskom initially indicated it would make public its decision during the first half of 2008, but this was postponed until September. The company is now saying there will be a 'decision before the end of the year'.

Eskom has shortlisted Areva's EPR and Westinghouse's AP1000 reactors for Nuclear-1. Areva heads up the EPR Consortium which includes South African engineering group Aveng, French construction group Bouygues and Electricité de France (EdF), which has submitted a bid to supply two EPR units of 1650 MWe. Toshiba's Westinghouse is matching this with a bid of three 1134 MWe AP1000 units. The Westinghouse-led N-Powerment consortium includes the Shaw Group and the South African engineering and construction firm Murray & Roberts.

Areva and Westinghouse have also offered to build the full 20 GWe - with a further ten large EPR units or 17 AP1000 units by 2025. This would be coupled with wider assistance for the local nuclear industry, in Westinghouse's case including development of the Pebble Bed Modular Reactor (Westinghouse is an investor in the PBMR company).

The question though on industry watchers' minds is whether Eskom, in the current climate, has the muscle or influence any longer to fund a nuclear expansion program. The utility has been downgraded by credit rating agency Moody's, with further downgrades also possible from Standard & Poor's and Fitch Ratings.

The current global economic crisis may also make foreign funding hard to come by. The country's National Treasury has committed to a mere 60 billion rand ($7 billion) over the next three years, leaving a very significant shortfall to reach Eskom's 343 billion rand ($42 billion) expansion plans.

(Source: World Nuclear News)