Rosatom is fired up

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Johannesburg - Russia’s state nuclear energy corporation, Rosatom, is confident that if South Africa opts for the nuclear route, the Russians will be given the contract for the full 9 600 megawatts of new capacity envisioned by the South African government by 2030.

“It just makes the most sense,” a high-ranking international Rosatom official told City Press on its visit to Russia last week.

“We offer the best technology at the most affordable rates. It is not about political pressure. In 2015, we simply are the best option.”

The Russians are champing at the bit to deliver eight units of 1 200MW each after signing a comprehensive memorandum of agreement (MOU) with South Africa a year ago.

Similar, but less detailed, agreements were signed with other nuclear vendors.

But Rosatom believes its biggest competitors – a major European competitor and a US-based company – simply don’t possess the resources to compete.

Rosatom’s competitors were the selected bidders in 2008 before Eskom cancelled its nuclear-procurement process due to financial concerns.

“[The European company] is bankrupt. It has its own problems to sort out. With such high stakes, would South Africa entrust such a big project to a company with huge financial issues?” asked the official.

The company, of which its government owns 87%, certainly appears to be in turmoil. Its original game plan was to sell as many as 16 of its massive European pressurised reactors (EPRs) internationally. But it has not sold one of them since 2007.

The four it did sell before 2007 have been hounded by delays and mounting costs. A plant in France was supposed to be a flagship for the company’s new nuclear power, but it is already running five years late and costs have tripled.

Then in April this year, it emerged that excessive amounts of carbon in the steel in the top and bottom of the EPR reactor vessel could cause fatal cracks. This, many believe, could finally sink the European competitor

Touted as one of the best reactors of its time when it was designed 20 years ago, not a single EPR is in operation today. Added to its technology problems is that four years of losses have left the company virtually bankrupt, protected only by its main shareholder, the French government.

This month it announced it would be cutting 2 700 jobs in France by 2017 as part of its restructuring.

The Rosatom official said another major competitor was tightening its belt and shifting its focus to other areas while selling power plants and nuclear reactors.

Nuclear simply was not its first line of business any more, the official said.

It also seems that the Americans, who have invested millions in South Africa, have little appetite left for their African adventure after losing out to a competitor to replace Koeberg’s steam generators.

As Rosatom sees it, the only two serious competitors that remain in the running for the South African contract are the Chinese and the South Koreans.

Yet the Russians are confident South Africa’s strict nuclear regulator will find the Asian companies’ reactors are not up to standard.

“They are selling old technology,” said the official.

The Russians’ nuclear industry is 70 years old, but has had its fair share of drama.

South Africans’ thoughts might first wander to visions of Ukraine’s Chernobyl in the former Soviet Union when Russia and nuclear are mentioned, but even its competitors view Rosatom as the number one nuclear company in the world today.

With 360 companies that train nuclear engineers and technicians, design and build power plants and provide fuel for nuclear plants, the Russians understand the industry best.

Rosatom employs 262 000 employees and even has its own university, MEPhI, which has 38 000 students and more than 1 500 professors. Rosatom operates 10 nuclear plants in Russia, with more capacity on the way.

Though Russia and many of the former Soviet-aligned countries have traditionally been Rosatom’s stomping ground for business, the company is making major inroads into international markets.

It has 29 units under construction and an international order book of R1.36 trillion.

In Africa, Rosatom is negotiating with Nigeria about the final details to supply that nation with its first two nuclear reactors.

Yet South Africa’s biggest concern is affordability if it opts for a nuclear future. Treasury has balked at the price tag, estimated to cost between R500 billion and perhaps more than R1 trillion.

Although skittish about pricing, the Russians are confident they can align the costs with government’s integrated resource plan. And Russian officials are hoping the new Brics (Brazil, Russia, India, China, South Africa) bank might ultimately be the saviour when it comes to financing. Rosatom will also quote in rubles, not dollars.

But in South Africa, enthusiasm for the project is waning with an eager department of energy curtailed not only by Treasury’s concerns, but a court challenge by environmental groups.

Last week, environmental group Earthlife Africa and the SA Faith Communities’ Environment Institute lodged an application against Energy Minister Tina Joemat-Pettersson and President Jacob Zuma aimed at stopping the country’s nuclear-procurement programme.

The groups argued that the necessary processes were not put in place to ensure that nuclear procurement was conducted lawfully and met the requirements of the Constitution for a fair, equitable, transparent, competitive and cost-effective process.

The Russian MOU, especially, came under fire.

The energy department wanted to conclude the nuclear-procurement process by the end of the year, but that timeline is becoming more improbable with each passing day.

* Groenewald was on a trip to Moscow sponsored by Rosatom

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