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S-Africa: Eskom: record loss; PBMR "indefinitely postponed"

Nuclear Monitor Issue: 
WISE Amsterdam

Eskom, South Africa's state-owned utility, has reported a record annual loss and has warned of a funding gap for an expansion program needed to prevent a repeat of the blackouts the country experienced in 2008. The company, which supplies about 95% of South Africa's electricity and more than 60% of Africa's, reported a loss of 9.7 billion rand (US$ 1.25 billion) for the year that ended 31 March. In the previous year, Eskom made a loss of 210 million rand (US$ 27 million).

The utility foresees a funding shortage of some 80 billion rand (US$ 10 billion) for its expansion program aimed at reducing the risk of power shortages. In January 2008, as domestic supply reached its limit, South Africa suffered crippling blackouts and electricity exports to neighbouring Botswana and Zimbabwe were stopped. This led to a wider grid failure affecting Zambia.

In August 2009, Bobby Godsell, chair of the utility, noted, "We need to mobilize greater equity resources to fund the build program. The government has already provided 60 billion rand (US$ 8 billion) in a loan with equity characteristics. Government revenues are likely to be severely constrained in the near future. We need to find other sources of expansion funding, perhaps in the form of a development bond that will enable South Africans to invest in the expansion of our country's energy system."

"The capital costs of our build program have escalated considerably," Godsell added.

"Prior to the recent global economic crisis, construction costs were escalating worldwide and across all industries. The global recession has created new market circumstances."

And the nuclear program?

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 the contribution of nuclear energy grow to 25% from the present 5%. The plan for the nuclear new-build program would kick-start with up to 4 GWe of pressurized 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 (Nuclear-1) would be that of Koeberg, the site of South Africa's only existing nuclear power plant. The Nuclear-1 project was established after the very ambitious scenario for development and construction of the Pebble Bed Modular Reactor (PBMR) failed to meet even the most modest time schedule.

Having already made "considerable progress" in the process to procure a PWR, Eskoms board of directors decided in December 2008 not to proceed with the project due to ‘the magnitude of the investment’; the companies own financial constraints and the global economic situation. The investment was increasingly impossible to justify, with a plunging rand, global lines of credit frozen, and a new government with potentially different priorities.

On September 11, addressing the World Nuclear Association Annual Symposium in London, UK, Jaco Kriek, CEO of the PBMR company, said that South Africa's pebble bed modular reactor (PBMR) Demonstration Power Plant (DPP) project has been indefinitely postponed due to financing constraints. He said the PBMR company has had to adopt a new business model "to reduce the funding obligations on the South African government."

Sources: World Nuclear News, 28 August 2009 / Nuclear Monitor 681, 16 December 2008: ‘Eskom cancels PWRs; major blow to nuclear expansion’ / World Nuclear News, 11 September 2009
Contact:  CANE, Coalition Against Nuclear Energy South-Africa, Tel: +27-72 628 5131, Email: