DA calls for full disclosure of procurement process for R1 trillion nuclear deal

5 July 2015

In a reply to a parliamentary question the Minister of Energy, Tina Joemat–Pettersson, indicated that government would begin the nuclear build programme procurement process this month, regardless of the fact that they have been unable to explain how it will be financed, or whether it is even feasible.

The deal’s secretiveness and lack of transparency leaves it vulnerable to undue political influence of Arms Deal proportions. We cannot allow this to continue.

I will therefore today write to the Minister requesting that she fully disclose and make public the details of the procurement process to be followed in this deal, before it begins. 

The process is seemingly backward as the Department of Energy will first select the preferred bidder, and only then begin the actual procurement process which assesses suitability and affordability. 

This is in direct contradiction to international best practice, as per the International Atomic Energy Agency (IAEA), which states that all bids should be thoroughly evaluated by a country’s national nuclear regulator before the actual procurement begins. This evaluation should consider various factors including the technology offered and its safety, the applicability to that country, and the cost. The regulator then ought to make recommendations to the Energy Department. 

There is reason to believe that thorough assessment of bidders is being sacrificed and the procurement process is being rushed in order to suit the timetables of certain bidders. Funding arrangements, such as the Russians promising to fund the build and operation themselves, cannot be the basis for procurement. The basis must primarily be about suitability and affordability.

In addition to this, South Africa’s National Nuclear Regulator (NNR), unlike its counterpart NERSA, is toothless, lowly-skilled and open to political manipulation. The NNR lacks the necessary vigour to play the required meaningful role required of it in any robust nuclear procurement process. Therefore it is the DA's considered opinion that the NNR be substantially reformed and strengthened before any nuclear procurement process can be allowed to commence.

The DA is primarily concerned with the impact of the proposed Nuclear Build Programme on SA’s potential economic growth as well as the impact on the long-term electricity pricing path. It is for this reason that the suitability, affordability and cost implications of each bidder must be thoroughly assessed before the procurement process can commence.  

Moreover, it will take years for new power stations to effect any changes to electricity production in South Africa and address our electricity crisis. Rather, we need to focus on other energy producing sectors and on opening up the grid to immediately address the crisis. 

Since its inception, this deal has been shrouded in secrecy, with both the Minister and DOE officials obfuscating and avoiding direct questions at every turn.

Both the President and the Minister have promised a transparent process - yet neither the Portfolio Committee on Energy nor stakeholder groups have been briefed. 

What is required is clarity before the procurement process begins. Minister Joemat–Pettersson cannot put the cart before the horse in this matter by going ahead with the bidding process while stakeholders and the public remain in the dark as to what the process will be, how the deal will be funded and where the funding will come from.

The DA believes in fairness, which requires government to act honestly, transparently and in the best interests of all South Africans. Until the vital information regarding the nuclear deal is disclosed, we cannot be assured of this.

Text of the reply:

MINISTRY OF ENERGY

REPUBLIC OF SOUTH AFRICA

National Assembly : 146

Mr G Mackay (DA) to ask the Minister of Energy:

With reference to her recent comments during her Budget Vote speech debate that her department will continue with the nuclear new build programme, (a) when will she make pronouncements regarding the expected costs of this project and (b) what steps does the Government intend to take to finance this project?        NO2355E

Reply:

(a)  The Department of Energy has commissioned a study aiming at updating the cost of nuclear power to gain an indication of cost of the nuclear new build programme. In addition the Department of Energy also commissioned the Financing Options and Solutions.  The purpose of this study was to determine the financing cost and tariff impact on the various power plants ownership models. Although these costs and financing studies provide some benchmark on the feasibility of the nuclear programme, the true test of affordability for nuclear power will be in the price and financial offering provided by technology suppliers (nuclear vendor countries) during the procurement process.  This will be a true test of affordability of nuclear power, and hence it is crucial to start the actual nuclear procurement as soon as possible.

The exact mechanism of financing is dependent on the market response. The market can only be tested during the procurement process. Therefore the Department of Energy will commence the procurement process in the second quarter of this year (in July 2015). The procurement process will be completed by end of this year to select a Strategic Partner or Strategic Partners.  Therefore the expected cost of the project will be announced once procurement process has been finalized.

(b)  The Department of Energy has taken several steps to investigate financing of the nuclear programme working with other departments including National Treasury, Department of Public Enterprises, Department of Mineral Resources, Department of Trade and Industry, Department of Science and Technology as well as Eskom in as part of Energy Security Cabinet Subcommittee structure. Through this process Department commissioned independent Consultants to conduct the following studies:

i.  Cost of Nuclear Power

ii.  Owner Operator Financing structure

iii.  Financing Options, Models and Solutions

These studies have indicated that the programme is financeable. However, it is crucial to start the procurement process and call for the bids in order to receive price and financing offerings from nuclear vendors.

ENDS

Statement issued by Gordon Mackay, DA Shadow Minister of Energy, July 5 2015