The Portfolio Committee received presentations from the South African National Energy Corporation (NECSA), National Nuclear Regulator (NNR), National Energy Regulator of South Africa (NERSA), South African National Energy Development Institute (SANEDI), Central Energy Fund (CEF) and PetroSA on their strategic plans.
The Committee was told that the NECSA Group forecast for income from revenue was R1.8 billion in 2013/14; R2.2 billion in 2014/15; R2.3 billion in 2015/16; R2.6 billion in 2016/17; and R2.9 billion in 2017/18. The NNR was said to derive its revenue stream from government grants and fees from licence holders. The grant from government for 2014/15 was R33.6 million and revenue from licence fees was estimated to be R136 million, with total revenue for 2014/15 estimated to be R170 million. Overall, the NNR was projecting an average growth of 9% in total revenue over the MTEF period from R149 million (2012/13) to R176 million in 2015/16. NNR had already started to bill Eskom for the steam generator replacement and was busy acquiring request capacity to deal with the project regulation.
SANEDI’s income for 2014/15 was said to be R247 million, up from R194 million the previous year, due to increase in contributions from donors for the Carbon Storage Project.
The Central Energy Fund told the Committee that the challenges to its performance included: constrained feedstock at PetroSA; provision of feedstock to the Mossel Bay complex after 2019, when Ikhwezi gas would be depleted; financial closure of the purchase of the downstream assets; refurbishment of the Milnerton tank farm required a solid business case; implications of the Mineral Petroleum Resources Development Act are that PASA will be dissolved and its functions split between Regional Managers and the Council for Geoscience; and funding of large projects in light of depleting cash reserves as these reserves had halved over the past two years.
Due to time constraints, brief overviews of the strategic plans and budgets for 2014/15 were presented, and would be presented in more detail when each entity met with the Portfolio Committee in its follow up meeting. The Deputy Minister of Energy, Ms Thembisile Majola, and the Acting Director General, were present at the meeting. Questions would be presented in writing and responded to before the 8th July.
Presentation by NECSA
Mr Phumzile Tshelane, NECSA Chief Executive Officer, presented an introduction to NECSA’s legislative and policy mandate, alignment with government policy, and achievements. One of the key objectives of the NECSA Group was promotion of the NECSA brand and to inform the public about nuclear energy. NECSA was the custodian of nuclear research & development and other nuclear related initiatives, at national, regional and international levels. Promotion of Flourochemical products was also a priority, as an increasing number of new drugs to treat cancer, HIV/AIDs, malaria and other illnesses had fluorine in their make-up. Pelchem (SOC) Ltd (Pelchem), a 100% subsidiary of NECSA was the only flourochemical production, sales and distribution company in the Southern hemisphere. The company had a proud record of more than 25 years’ experience in locally produced fluorspar beneficiation and supplied flourochemical products to local and international markets.
NECSA’s current key projects were the Neutron Research Facility Development scheduled for completion in 2015, a R33 million project funded by the Department of Energy (DoE); the Security Upgrade project scheduled for completion in 2014; R190 million 2014 MTEF period site infrastructure upgrade including SAFARI-1 upgrade for processing enriched and depleted Uranium; security of supply of LEU (low enriched uranium) fuel and target plates and security of supply of feed products for Mo-99 production; and a business case for SARARI-2.
Mr Zakes Myeza, NECSA Chief Financial Officer, reported on NECSA’s financials. The MTEF allocation over the 2015-17 period for critical priority investment in site infrastructure projects were for the following projects: liquid effluent management system upgrades, analytical and calibration services upgrades, MTR (material testing reactor) fuel and target plates manufacturing facility upgrades and site infrastructure upgrades.
The government grants committed over the MTEF totalled R 667 million for 2014/15, R518 million for 2015/16, R545 million for 2016/17, and R576 million (unconfirmed) for 2017/18. The baseline allocation approved in December 2013 included an additional once-off allocation of R167 million (excl vat) in the 2014/15.
The NECSA Group forecast for income from revenue was R1.8 billion in 2013/14; R2.2 billion in 2014/15; R2.3 billion in 2015/16; R2.6 billion in 2016/17; and R2.9 billion in 2017/18. Detailed information on NECSA Group capital and corporate finances and subsidiary incomes can be found in the attached document.
Mr Tshelane added that in terms of KPI’s, NECSA Corporate’s external sales (including Group sales) totalled R332 million in 2013/14. The target for 2014/15 was R451 million. The NTP (Nuclear Technology Products) Group achieved R75 million in net profit after tax in 2013/14, and the target for 2014/15 was R80 million. Pelchem Group’s net loss after tax in 2013/14 was R33.8 million. The target for 2014/15 was R4.2 million and R0.2 million in 2016/17.
Research publications as KPI for research output, was 33 in 2013/14 and the target for 2014/15 was 31. The focus would be development of IP and products and reduction of publications for teaching purposes.
The Innovation Value Chain had progressed well in 2013/14, with 17 innovation disclosures and the KPI remained 17 for 2014/15.
In 2013/14 the Nuclear Fuel Cycle (NFC) business case had been completed and issued and in 2014/15 NECSA would negotiate with selected NFC vendors.
SAFARI-1 had operated successfully according to its KPI of operational availability over 300 days.
In terms of transformation, black technical staff composition was 48% and growing.
Presentation by the National Nuclear Regulator (NNR)
Mr Jeffrey Lever, Director: National Nuclear Regulator (NNR) outlined the NNR history and Act, its mandate, and legislative framework.
The NNR CEO, Dr Bismark Tyobeka, described NNR’s key enacted functions and goals.
The seven strategic goals were:
1. Effective regulatory oversight and framework to assure Nuclear Safety and Security - since 9/11/2001 nuclear terrorism had become a real possibility and NNR had to provide for nuclear safety and security. NNR was still in the process of amending the Act for improved regulatory security.
2. Strengthen stakeholder relations and enhance the corporate image.
3. Create and maintain a high performance culture through effective performance systems and people management.
4. Ensure financial viability and sustainability of the organisation through prudent financial management.
5. Develop and maintain sound organisational infrastructure with ICT solutions that supported business processes; and adequate infrastructure that created a conducive working environment.
6. Good governance with effective internal controls, risk management, compliance with legislation and policy frameworks, effective governance structures and internal audit system.
7. Ensure effective human capital management to retain human capital.
Mr Tyobeka outlined the priority initiatives of the NNR which included: the Steam Generator Replacement program at Koeberg Nuclear Power Station - a huge in-house project; participation in government structures and international forums in preparation for Nuclear New build – the NNR had signed bilateral agreement with the US, France, Republic of Korea, Russian Federation and Canada and was now in talks with the People’s Republic of China and Finland; securing resources related to nuclear expansion; completion of the Independent Environmental Radio Analytical Laboratory; independent verification through the use of computer codes; ICT infrastructure maintenance; physical infrastructure expansion; integrated management systems; and establishment of the Nuclear and Radiation Safety Centre of Excellence.
Other developments impacting on NNR were: engagement with Eskom/ or other potential licensee of the new plant to ensure that resources were in place for the Nuclear New Build; preparatory discussions with NECSA licensing for SAFARI-2; National Radioactive Waste Disposal Institute licensing transfer from NECSA to the Institute, ie re-licensing of their facility; and preparation for the Integrated Regulatory Review mission by the IAEA (International Atomic Energy Agency) which will look at NNR as a regulatory entity for Nuclear New Build. This is planned for December 2016.
Regarding financial information, NNR derived its revenue stream from government grants and fees from licence holders. The grant from government for 2014/15 was R33.6 million and revenue from licence fees was estimated to be R136 million, with total revenue for 2014/15 estimated to be R170 million. Overall, the NNR is projecting an average growth of 9% in total revenue over the MTEF period from R149 million (2012/13) to R176 million in 2015/16. NNR has already started to bill Eskom for the steam generator replacement and is busy acquiring request capacity to deal with the project regulation.
Notably, on analytical review, non-current assets had increased by 7% due to R128 million worth of acquisition of equipment for Radio Activity Analysis Laboratory during the year. Cash and cash equivalent increased by 32% to R84 million due to special Capex (R31 million) and invoices issued at the last quarter of the year due to late authorisation and collection (R14 million).
Presentation by the National Energy Regulator of South Africa (NERSA)
Mr Joe Modise, Chairman: NERSA said the presentation would briefly highlight the strategic plan and that more detail on NERSA’s performance would be presented at the follow up meeting. He covered the overview, institutional structure, mandate and legislative principles.
Ms Phendile Baleni, Chief Executive Officer, NERSA presented the strategic outcome oriented goals - to facilitate Security of Supply to support sustainable socio-economic development in South Africa; to facilitate investment in and access to infrastructure in the energy industry and promote competitive and efficient functioning; to facilitate affordability of and accessibility to the energy industry to balance economic interests of all stakeholders in support of socio-economic development; and to position and establish NERSA as a credible and reliable regulator. The structured programmes to achieve the above goals involved: setting and/or approving tariffs and prices; licensing and registration; compliance monitoring and enforcement; dispute resolution; setting of rules, guidelines and codes for the regulation for the three industries – electricity, piped-gas and petroleum pipelines. The document attached shows the detail of the KPI’s per industry and would be discussed in the following presentation to the Committee.
Budget and Funding for 2014/15
Accounts for each of the three industries were ring-fenced so that one industry did not impact on another. The common costs allocation ratio for electricity, piped-gas and petroleum pipelines industries were 58%: 21%: 21% respectively. Total income from levies from the three industries was R324 million. NERSA owned the building from which it operated, the Kulawula House in Pretoria, which had a value of R43 million.
Performance against pre-determined objectives for 2013/14 would be discussed when NERSA presented its Annual Report. In conclusion, NERSA was striving for regulatory certainty to contribute to an environment conducive for attracting and ensuring orderly investment. Legislative gaps posed some challenges, some of which had been responded to by the DoE in the Amendment Bill.
Presentation by South African National Energy Development Institute (SANEDI)
Mr Kevin Nassiep, Chief Executive Officer, SANEDI, outlined SANEDI’s management structure, its linkages with the Integrated Development Plans (IDP), National Development Plans (NDP) and Integrated Resource Plan (IRP), and Green industrialisation, particularly Solar. SANEDI’s role and goals had been defined in direct support of the energy policy and climate mitigation landscape.
Plans for the 2014/15 MTEF period included: Advanced Fossil Fuels and Carbon Capture and Storage; Smartgrids; Working for Energy Programme; Green Transport Programme; Clean Energy Solutions; Centre for Energy Systems and Research; and Energy Efficiency.
SANEDI was working together with the other interested departments led by the Department of Mineral Resources to introduce appropriate research as there were environmental concerns around shale gas exploration and recovery. The USA and Australia were willing to share a research relationship with South Africa.
The Working for Energy Programme was part of the Expanded Public Works Programme and was a key area where SANEDI engaged directly with communities to show them how to use energy more effectively.
Means of reducing carbon intensity in South Africa were: post-combustion capture and storage of CO2, where for example, burnt coal was trapped and stored; Steam Augmentation/Hybridisation of fossil-fuelled power plants through use of large scale solar to raise steam and displace use of coal; waste to energy conversion - tyres, landfill, sewerage and invasive vegetation; community driven energisation projects such as Working for Energy - designed to teach people how to reduce energy consumption, improve their lifestyles, create jobs, increase skills, and create small enterprise opportunities; Wind Atlas and turbine technology as renewable energy source and Cool Roofs (or walls) to save on electricity for air-conditioners – where the surface was coated with a solar reflecting paint, and a white roof, for example, reflected 80% of sunlight (and a black roof trapped heat) and made a difference of 2 to 4 degrees Celsius; and the Green Transport Programme, through convergence of the Departments of Transport, Energy and Science & Technology. Various SANEDI centres of research and development had been established which linked the main players for research and development. SANEDIs RECORD centre worked with other research and development institutes for clean energy solutions.
Mr Nassiep reiterated that there had to be a move away from the use of coal to more sustainable sources such as nuclear and renewable energy. He described the process of carbon capture and the expensive storage process. Carbon capture and storage could reduce South Africa’s carbon emissions by 14% by 2015. The Pilot CO2 Storage Project would start on-shore rather than off-shore, due to cost and the DoE had provided R197 million and the World Bank had pledged $75 million in support to the project. This climate change strategy had been endorsed by cabinet and involved collaboration between government, stakeholders and the private sector. Encouragingly, government had introduced industry tax rebates for energy efficiency and SANEDI had set up a hub in Pretoria to help build skills for measurement and verification of energy efficiency.
Income for 2014/15 was R247 million, up from R194 million the previous year, due to increase in contributions from donors for the Carbon Storage Project.
Presentation by the Central Energy Fund (CEF)
Mr Sizwe Mncwango, Chief Executive Officer, CEF Group presented a historical evolution of CEF (SOC) Ltd, its activities and subsidiaries, which would be presented in detail at the future meeting. CEF Group had the following subsidiaries: CEF holding company; Clean Energy Division, PetroSA, SEE, PASA (Petroleum Agency South Africa), AEMFC (African Exploration Mining and Finance Corporation) and iGas (Gas Development Company).
Challenges to performance were: constrained feedstock at PetroSA; provision of feedstock to the Mossel Bay complex after 2019, when Ikhwezi gas would be depleted; financial closure of the purchase of the downstream assets; refurbishment of the Milnerton tank farm required a solid business case; implications of the Mineral Petroleum Resources Development Act are that PASA will be dissolved and its functions split between Regional Managers and the Council for Geoscience; and funding of large projects in light of depleting cash reserves – reserves have halved over the past two years.
To adopt the overall 2025 Group Vision, an overarching strategic roadmap had been adopted to guide strategy delivery under three distinct phases:
- Stabilise (2013/14-2014/15) phase. This involved immediate strategic objectives that include cost containment across the Group - Project Ikhwezi, Re-investments, Asset Development Plan, and Group Gas Strategy;
- Grow (2015/16-2019/20) phase. This involved medium term strategic objectives to grow and diversify the Group investments to ensure financial sustainability of CEF – Project Irene, ADP implementation, Re-investments, Gas Infrastructure, Vlakfontein coal mine extension; and
- Dominate (2020/21-2024/25) phase. This would involve the long term objective for CEF to become a market leader and provide leadership on security of energy supply on behalf of and to the DoE – Project Mthombo, Torbanite Coal Mine, Klippoortjie Coal Mine, Shale Gas Project, Oil storage.
CEF’s strategic objectives were to contribute to security of energy supply; develop a comprehensive funding plan; develop a high performance organisation supported by the HR policies; development of a gas strategy for the Group; improve safety health and environmental compliance and group alignment of entities.
Due to time constraints, Mr Mncwango did not discuss the financial results and budget (page 21 of the attached document). CEF Group’s Priority Framework consisted of: Group Strategic Financial Priorities for Sustainability; Group Operational Priorities for Sustainability; and Group Human Capital Priorities for Sustainability. Financial Priorities for Sustainability included cost estimation, improved oversight, investment selection and monitoring, shareholder compacts with subsidiaries, review of the incentive schemes, and culture change and harmonisation of policies across the Group.
Presentation by PetroSA
Ms Nosizwe Nokwe-Macamo, Group Chief Executive Officer: PetroSA, presented PetroSA’s progress since its last meeting with the last Portfolio Committee (see attached document).
The proposed strategic plan (2014-2018) supported government's development agenda and shareholders’ security of supply objectives, and it strengthened PetroSA’s role as a sustainable National Oil Company. It was a tough, capital-intensive plan. PetroSA’s 2020 vision was to be a sustainable, fully integrated commercially-competitive National Oil Company, supplying at least 25% of SA’s liquid fuel needs.
The strategic plan sustained the Mossel Bay GTL refinery; developed and beneficiated local hydrocarbon resources with consideration for long terms solutions for the Mossel Bay refinery; created presence in the downstream market, developed a Liquefied Natural Gas (LNG) import facility for power generation and high value petrochemicals creating long term value add, promoted addition of gas to the mix, helped move South Africa to a greener economy; and advanced national objectives from a transformation perspective, including empowerment of women and people living with disabilities.
The Chairperson asked Members to submit their questions to the respective entities in writing that day so that responses could be received by Monday. The next meeting with the DoE would be on Tuesday, the 8th July.
Mr L Greyling (DA) said to avoid time limitations in future, presentations should reach members three days prior to presentation date so that Members could maximise engagement with entities, sharpen debate and allow for full interrogation of the subject matter at the meeting.
The Chairperson said he would endeavour to ensure that presentations were received three days prior to date of the meeting.
The meeting was adjourned.
- National Nuclear Regulator Overview of Strategic Objectives
- CEF briefing to Energy Parliamentary Portfolio Committee
- NECSA briefing to Energy Parliamentary Portfolio Committee
- NERSA briefing to Energy Parliamentary Portfolio Committee
- SANEDI briefing to Energy Parliamentary Portfolio Committee
- PetroSA Strategic Plan 2014 –2018
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