Nuke power too pricy for France

2014-10-19 15:00

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Russia and China will remain at the front of the queuewhen the bidding starts, though others are part of the process

Financing packages for the nuclear procurement process have come under the spotlight, with a French nuclear expert indicating that French contenders will struggle against other bidders.

Government signed an agreement with France this week following an earlier agreement with Russia’s Rosatom. A third with China is in the pipeline, according to Xolisa Mabhongo, the corporate services executive at the SA Nuclear Energy Corporation.

Japanese, South Korean, Chinese and Russian reactor builders provide better financing packages than the French industry can match, Philippe Pradel, the head of nuclear development at French utility GDF Suez, told Reuters.

This puts the Russians and Chinese in the front of the queue when bidding begins. Another apparent disadvantage for the French is that the announcement issued by the department of energy does not mention building reactors, while the Russian one does.

The Russian agreement laid the foundation for large-scale nuclear power plant procurement and development based on the construction of new Russian 9.6?gigawatt capacity VVER reactors.

“The agreement with France has the same intent as the one with Russia,” Mabhongo told City Press.

“It articulates what France would be able to offer were they to be the country that supports South Africa in the new nuclear build programme.”

He said the two agreements could not be the same “word for word” because the countries were in a competitive process.

“The South African government, as a matter of policy, has announced that we seek to generate an additional 9?600?megawatts from nuclear. Therefore, anyone who wants to participate in the South African process will be cognisant of that, and that will be the basis of their participation.”

With a price tag of about R1?trillion, a small tax base and government hinting at selling state assets to support Eskom, it has become clear that the nuclear power procurement process is not going to be funded from the fiscus.

Speculation is rising that construction will be vendor-financed, or have its funding arranged by the vendor, in return for guarantees from government it will buy the power that is generated.

National Treasury guarantees are currently at R466.2?billion. Officials recently told Parliament that these guarantees had reached their level of prudence, making it unlikely government would provide vendor finance guarantees any time soon.

Mabhongo said the financing model for the nuclear procurement process had not yet been determined, and technical assessments were still being conducted.

“The ‘build-own-operate’ is only one model among many,” he said.

According to him, these included export credit guarantees, debt and equity schemes, own financing by electricity utilities, investment in nuclear power plants by large users of electricity, and support from regional and multilateral financing institutions.

Where will the money come from?

ROSATOM

The Russian state-owned company has previously said it was willing to finance construction, as it has already done elsewhere in the world, using its “build-own-operate” model.

Boris Kopeykin, an analyst for rating agency Standard & Poor’s, said: “There are various financing schemes applied, including various forms of government support in a few cases.”

In Finland, there is supposed to be shareholder financing, with support by a loan from the Russian National Welfare Fund.

Elsewhere, Russia ponies up intergovernmental loans or provides direct financing from the budget.

AREVA

French state-owned multinational Areva will most likely bid for any nuclear power plants built in South Africa, as it has its roots in Framatome, which built the Koeberg plant in the Western Cape.

It recently won a contract from Eskom to provide six replacement steam generators at the plant, a decision US company Westinghouse, the losing bidder, is contesting in court because of irregularities relating to the awarding of the contract.

“The government has yet to define the tender process and the type of contract for future nuclear new build projects,” said an Areva spokesperson.

“It is therefore too early to provide any specifics.”

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