Nuclear New Build: briefing by Minister and Department of Energy

Energy

11 October 2016
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The meeting intended to have three presentations. Due to time constraints, only the first presentation by the Department of Energy (DOE) was heard. 

The DOE briefing looked at the historic background and gave an update on plans for the nuclear new build programme. It explain the following recommendations that the DOE intended to make to Cabinet:
• Eskom should be designated as procurer of the Nuclear Power Plants (NPPs) involved in the nuclear new build programme.
• The South African Nuclear Energy Corporation (NECSA) should be designated procurer for the fuel cycle and multi-purpose reactor for the nuclear build programme.
• The Department of Energy should be designated as the Programme Coordinator for the nuclear new build programme.

DOE made the following arguments in support of Eskom as the designated procurer for NPPs: Eskom is uniquely positioned due to its skills and experience in supplying nuclear power. Eskom has turned a corner in the recent past, improving its financial position and its ability to meet power demand. While renewable energy sources are crucial for the development path of the country, it is necessary to include new nuclear build to meet expectations of baseline demand. The DOE is not technically equipped to handle nuclear procurement. On points 2 and 3, DOE argued that this relationship will create a well-managed, environmentally and financially sound programme with proper oversight mechanisms.

The EFF asked if, given the current political climate, the money that is proposed to be spent on the nuclear build should not rather be given to students to resolve the higher education crisis.

The DA said the presentation served as sleight of hand by suggesting that procurement should be passed to Eskom due to good performance, when in reality the decision serves to remove the oversight function of Parliament over the energy build. It stressed that previous builds had been very costly and subject to corrupt practices. It would drive up the cost of electricity. It questioned whether the new nuclear builds were necessary or appropriate for the South African energy mix. Certain experts thought the build would lead to the over-supply of electricity, and be replaced by more competitive forms of supply. 

It criticized the leadership of Mr Brian Molefe, CEO of Eskom, and felt that this was another reason that Eskom should not be in charge of the procurement process. Eskom’s procurement board has been paid salaries for 11 years despite the fact that there has been no active procurement over this period. This board was found to be corrupt by the Supreme Court of Appeal. It stressed concern over the knock-on effects that uncompetitive supply will have on the economy, especially given that electricity is an input cost.

The IFP was disappointed by the low level detail in the presentation. The level of spending for nuclear was unjustified, especially given the economic situation of the country. Part of the reason Eskom has been able to avoid load shedding is not due to good management but simply because demand has decreased sharply following the economic downturn. This view was shared by other committee members.

Overall the Committee was somewhat divided on whether or not Eskom should be designated NPP procurer, with some ANC members showing a more favorable response. The Chairperson identified the most important questions of the meeting: What this development would mean for parliamentary oversight in the future? The second was the possibility of over-supply given the drop in demand.

The meeting ended with the decision to have the remaining presentations heard in subsequent meetings. Further questions by Members could be addressed in writing to the DOE and Eskom.
 

Meeting report

The Chairperson noted that he had written to the DOE requesting a list of documents to be made available. The documents have subsequently been received, and are listed with a summary of their contents in the presentation. However, owev it is still up to the committee to decide on their status and if and how the documents will be divulged to the public.

The Chairperson asked the Minister to explain the differences between the presentation received the previous Saturday and the presentation to be given in the meeting. Any additional information in the new presentation must be explained.

Mr M Dlamini (EFF) stated that given the current political climate if the money that is proposed to be spent on the nuclear build should not rather be given to students to resolve the higher education crisis.

The Chairperson suggested that this was not a constructive comment and handed over the floor to the Minister of Energy.

Nuclear New Build: comments by Minister of Energy
Minister of Energy, Tina Joemat-Pettersson, explained that in terms of project delivery, the upcoming phase of the programme is to establish key national positions and strategies. As such, she agreed with Mr Dlamini in that parliament needs to unify the country and respect its responsibilities as per its mandate. The DOE will ensure that the nuclear build programme is transparent and free of corruption. The programme will protect the sovereignty of the nation and the integrity of the programme itself. The Committee will play a key role in overseeing the Department of Trade and Industry (DTI), the DOE and the prescripts of the laws including procurement processes and the Public Finance Management Act (PFMA).

Minister Joemat-Pettersson explained that the necessary legislative and regulatory frameworks have been followed in line with international best practice, but the essential element which has been missing in the program has been communication with and the participation of stakeholders and communities. This was the motive behind her decision not publish a Request for Proposal (RFP) as was expected by October. There have been a range of consultations with other government departments and Cabinet, and with Eskom in particular. Eskom has been considered because of their experience in nuclear operations and the mega-build programme. This experience has placed them in a key position to participate in the nuclear build programme. She stressed that there is no basket of money waiting to be used on this project. Rather, the balance sheets of existing entities will be leveraged to create funds. National Treasury will be doing corporate finance enhancement.

Minister Joemat-Pettersson said large projects of a considerable price must be administered with a high degree of control and optimization. Control must be achieved through the free passage of information. However, there are certain documents that the Minister cannot release without consensus from Cabinet. The Integrated Resource Plan (IRP) and the Integrated Energy Plan (IEP) were supposed to go to the Cabinet committee on 12 October, but Cabinet requested a postponement. These documents have gone through extensive consultation. There is a Ministerial Advisory Council on Energy, which includes Dr Anton Eberhard and other experts. Once Cabinet has approved the documents produced by the committee, they are to be provided to the public for stakeholder consultation. This is the next phase to be initiated.

It is the Minister’s belief that Eskom has the experience and resources necessary to run the nuclear build programme. She stressed again that the funding does not come from the fiscus but from Eskom’s balance sheet.

Minister Joemat-Pettersson added that the Renewable Energy Independent Power Producer Programme in South Africa has been a success. The procurement of energy and gas contracts has been arranged according to the 2010 IRP. There has been no newer IRB which allowed the DOE to procure gas and renewable energy. The procurement of more than 5000 MegaWatts came under the 2010 IRP.

Minister Joemat-Pettersson responded to Mr Dlamini by stating that there is no trade-off in spending between the nuclear build and the higher education. This is because the money for the nuclear build will come from global markets as done before, as in the case of the Medupi plant for example. So it is not coming from the fiscus and does not compete with higher education spending. Eskom will elaborate on where the money will come from. She closed with a reminder to the youth that the future needs to have a low carbon footprint.

Mr Thabane Zulu, Director General, DOE, noted that there have been many submissions and requests from stakeholders. The content of this presentation has been enhanced to increase transparency.  Strategic partners of the department were present in the meeting. The technical team present included Eskom staff members Mr Matshela Koko, Group Executive, and Mr David Nicholls, Chief Nuclear Officer. Also present were members of the Nuclear Energy Corporation of South Africa (NECSA), Mr Bismark Tyobeka, CEO of the National Nuclear Regulator, Wolsey Barnard, CEO of the National Radioactive Waste Disposal Institute (NRWDI), and other specialists. DOE research concluded that Eskom is the correct body to hand the procurement process to.

Presentation 1: DOE update on the nuclear new build programme
Mr Zizamele Mbambo, Deputy Director-General, DOE, explained that the presentation would justify the following three recommendations that the DEO will make to Cabinet:
• Eskom should be designated as procurer of the Nuclear Power Plants (NPPs) involved in the nuclear new build programme.
• The South African Nuclear Energy Corporation (NECSA) should be designated procurer for the fuel cycle and multi-purpose reactor for the nuclear build programme.
• The Department of Energy should be designated as the Programme Coordinator for the nuclear new build programme.

Background
In 1985 Koeberg became fully operational, becoming South Africa’s first and only operating nuclear power plant (NPP). In 1995 a cooperation agreement was signed on peaceful uses of Nuclear Energy between USA and South Africa. In 1998 the National Energy White Paper was approved by Cabinet, signaling that the nuclear option was open going forwards. In 1999 Nuclear Energy Act and the National Nuclear Regulator Act were enacted. In 2004 a cooperation agreement was signed on peaceful uses of Nuclear Energy between Russia and South Africa. In 2005 Cabinet approved the Radioactive Waste Management Strategy and Policy. In 2006 Eskom stated procuring and creating sites for new NPPs, in its role as the national utility. In 2008 Cabinet endorsed a Nuclear Energy Policy following public consultation. This created an institutional framework and a commitment for a future nuclear programme in SA. In the same year Eskom stopped the bidding process for new NPPs. In 2009 The Inter-Departmental Task Team on Energy (IDTTE) was established under the Inter-Ministerial Committee on Energy, to decide on the way forward for the nuclear programme.

Mr Mbambo said that in 2010 a cooperation agreement was signed on peaceful uses of nuclear energy between South Korea and South Africa. In 2011 the Integrated Resource Plan (IRP) was endorsed by Cabinet. The plan intended to create 9.6 GW of nuclear power by 2030 with the first new plant built in 2023. In the same year a Ministerial National Nuclear Energy Executive Coordination Committee (NNEECC) was established with Cabinet endorsement. In 2012 the phased decision making approach towards the nuclear programme was endorsed, and Cabinet further approved Eskom as owner-operator of NPPs. In 2013 the Integrated Nuclear Infrastructure Review Mission was completed. The DOE was designated as the procuring agency by the NNEECC, and study tours were undertaken in potential vendor countries. In 2014 the International Atomic Energy Agency (IAEA) Emergency Preparedness Review Mission was completed and the National Radioactive Waste Disposal Institute was launched. The NNEECC became the Energy Security Cabinet Subcommittee with a mandate over the entire energy mix. Intergovernmental Agreements were signed and nuclear vendor parades were held. In 2015 Cabinet endorsed NECSA as the Implementing Agent and the Department as the Procuring Agency. Finally, Cabinet approved that the DOE issue the RFP for the Nuclear Programme.

 Updated procurement process
After Cabinet approved the RFP, the Department appointed Transactional Advisors who would undertake the following tasks:
- Review Procurement Strategy
- Review Pre-Procurement Activities
- Review Request for Proposals
- Procurement of a Programme Management System.

The advisors have completed the following work: Part one of the RFP was complete with consultation from stakeholders. A revised procurement strategy is complete, as is a draft economic development strategy specific to the build programme.  Again this has been done with consultation from stakeholders such as the Department of Trade and Industry, Treasury, Eskom, NECSA, and so on.

Preliminary procurement process
The Committee needs to appreciate the logic of the DOE currently, which is also evolving over time. Currently, the procurement process will have three stages: A, B and C. Stage A will comprise the procurement of two NPPs with a fabrication commitment. The balance of 9.6 GW will form part of the implementation framework which will be agreed upon with a successful bidder. The multi-purpose research reactor (MPR) will form part of the procurement package for stage one [Stage A]. The MPR is led by NECSA. NECSA already has reactor, but it will be replaced by a new, more versatile and multi-faceted reactor. NECSA is the procurer of the MPR.  Eskom will procure the NPP.

Stage B will look into the front-end of the nuclear fuel cycle. As a country our policy is to become self-sufficient at every stage of the process. The front-end will be undertaken by NECSA as designed procurer. Stage C, the back end, is the management of radioactive waste. This will be executed by the Radioactive Waste Disposal Institute. This is the envisioned staggered approach to the new build programme.

Request for Proposal (RFP) process
This will be split into two phases/parts. Part 1 involves qualifying potential bidders for the program. Part 2 involves selecting a preferred bidder and a reserve bidder. This is a common practice which tries to mitigate risk in the case that the preferred bidder does not perform. Following these two parts there will be negotiations, contracting, the appointment of the preferred bidder, and finally execution and monitoring. He noted that this is still a programme that is subject to change. At present, key milestones in the plan are aligned with the IRP. The first unit is planned to be commissioned by 2023 but this could change especially depending on market response following the RFP. The same approach has been taken for the MPR project timelines. The plan is to commission the MPR by 2020.

Progress report
The Procurement Strategy and the Economic Development Policy had been completed, along with RFP part 1. Preparation for exemption applications and risk assessment for the tender process were near competition. DOE had begun a process of establishing a Nuclear Programme Management Office to coordinate processes.

Developments regarding Eskom as the owner operator of NPPs
In November 2012, Cabinet endorsed Eskom as owner operator of nuclear power plants in line with the nuclear energy policy of 2008. This is the policy position of government. However, in light of funding constraints and load shedding at Eskom, in June 2014 the Eskom board indicated that it would not be prudent for them to provide funding for any new build beyond the Medupi, Kusile and Ingula Projects. The subsequent focus on existing projects has been beneficial and some are already generating electricity. Following this however a decision had to be made to continue with the critical work on planning the new builds.  To mitigate the chance of delay, in June 2015, Cabinet approved the South African Nuclear Energy Corporation (NECSA) as an implementing agency for Nuclear New Build Programme.

Changes at Eskom since 2014
Mr Matshela Koko, Group Executive: Generation, said Eskom believes that it has turned a corner. Operations have been improved and the liquidity position has improved. Eskom has met the highest peak in winter at over 35 GW. Eskom is able to keep up with plant maintenance. Eskom has reduced spending on diesel from R1 billion per month to zero. Energy availability improved from 71% to 79%. As a result, the country now has an additional 3700 MW. This is directly from improving operational performance.

The new programme is exceeding the baseline schedule and is ahead of schedule. Medupi Unit 6 has been in commercial operation since 23 August 2015, adding 720 MW of generation capacity. Ingula Unit 4 has been in commercial operation since 10 June 2016, adding 333 MW peaking capacity. Ingula Units 3, 4, 2 and 1 were synchronized to the grid on 3 March, 25 March, 21 May and 16 June 2016 respectively. Ingula units 1 and 2 are currently in commercial operation. Medupi unit 5 has been synchronized to the grid. So there is a far brighter energy outlook for the country - supply is sufficient until 2021/2022. Load shedding is a thing of the past. There is a plan for a coal IPP which aims to address the capacity crunch which will begin to be felt in 2022. He agreed that while renewables are important to add to the mix, Eskom also has to use non-renewables to meet peak demand especially as the country approaches 2026/2028. This is why nuclear is necessary. Profit has increased from R200 million to R4.6 billion since March 2015. Eskom now has R39 billion in cash reserves.

Koeberg NPP
Mr Koko said Koeberg is a world-class plant that has recently been without interruption for 18 months, the longest uninterrupted period in its history. This is due to the competence of the staff currently running Eskom. The program called the “Nuclear-1 procurement project” has been put on hold. It is true that the procurement team has not been demobilized. The reason is that Eskom is aware that the country will need nuclear power going forward. Two sites have been identified – one in the Western Cape and one in the Eastern Cape. Eskom has acquired ownership of the land required for the construction of nuclear power plants at Thyspunt as well as next to Eskom’s existing Koeberg nuclear power plant.

Eskom has submitted the environment impact report to the Department of Environmental Affairs and expects feedback in the first quarter of 2017. One of the biggest delays of Medupi was because Eskom did not plan properly and investigate the site properly. Eskom has since learned from that, and has completed a full geotechnical analysis of both sites.

Finances
Mr Koko said investor sentiment in respect to Eskom has improved significantly enabling the execution of its borrowing program of approximately R70 billion per annum. Half of the funding goes towards funding the current builds which are close to completion. If Medupi, Kusile and Ingula are completed on time, Eskom will end the 10-year window with cash balances in excess of R150 billion. These cash resources could be deployed to fund any other capital projects such as the nuclear build program. The Corporate Plan has significantly increased the borrowing program of Eskom to R327 billion from R237 billion. Eskom is confident in the current build programme and has space to pick up additional builds in the future. A nuclear build program by its nature will have a significant portion of the costs relating to imported content. This lends itself to the use of export credit agency guarantees to enable access to debt capital markets.

Eskom’s government guarantees
Mr Koko explained that in executing the borrowing program Eskom utilised a R350 billion government guarantee support package. Eskom currently has access to approximately R30 billion of unutilised guarantees and this figure could grow as loans are repaid over the medium to long term and as additional cash becomes available. This creates a space after the RFP to design a funding plan for the new build programme. It is also common practice for the Original Equipment Manufacturer (OEM) to have an equity stake in a nuclear build program, providing an alternative source of funding for the project. This should not exceed 50% ownership. In addition, OEM ownership of the project will ensure that the OEM mitigates against cost overruns, schedule delays and quality concerns which is a significant consideration in any nuclear build program.

Mr Mbambo reiterated that the presentation made it clear that Eskom has turned a corner. This was the justification for the recommendations to Cabinet detailed before. If the recommendations are approved by Cabinet, the way forward would be as follows:
• The Procurers (Eskom and NECSA) and the Programme Coordinator (Department of Energy) would develop a governance framework for the procurement and implementation of the Nuclear New Build Programme, including any transfer of pre-procurement, procurement activities and commitments to date to ensure proper transfer and execution of roles and responsibilities. 
• The Minister of Energy amends the Section 34 Determination in terms of Electricity Regulation Act, to seek concurrence with National Energy Regulator of South Africa (NERSA).

Minister of Energy Joemat-Pettersson spoke on behalf of her team and told MPs that a recommendation would be made to Cabinet that Eskom be designated as the procurer for the envisaged 9 600 megawatts of nuclear energy from power plants to be situated at sites in the Western and Eastern Cape.

Before the second presentation could begin, Mr Mackay requested that members be allowed to ask questions, as time might otherwise run out without a question period. Mr Dlamini seconded this suggested and questions were taken.

Questions
Mr G Mackay (DA) commented that the presentation is very overdue given that the nuclear build was announced two years prior. He stated that the contents of the presentation served as sleight of hand [a distraction], by suggesting that procurement was passed to Eskom as it has been “wonderfully transformed”. The real effect of this decision is remove the oversight function of parliament over the energy build. In the same fashion that Kusile and Medupi have been subject to corruption and high costs, the nuclear deal will be more problematic if it is not subject to parliamentary oversight.

Mr Mackay also asked why nuclear was being preferred over other forms of energy such as gas. 97% of nuclear builds end up having cost over-runs. He could not find a reason why South Africa is going nuclear, and felt that no one had addressed this question. Experts expect that over-capacity and over-building are very likely outcomes if the country goes ahead with this plan. In addition, the Department of Energy is talking about procuring nuclear before we have a proper energy plan. There may be other power sources that are more appropriate. It is more important that an updated IRP is created before going ahead with nuclear. It is not clear that South Africa needs more nuclear in the energy mix.

Mr Mackay questioned the appropriateness of having Eskom take over the procurement process, especially given the poor leadership of Mr Brian Molefe, CEO of Eskom. Mr Molefe has aggressively interfered with energy policy outside of his capacity as CEO. His comments on the independent power producers programme (IPP) have been highly inappropriate. He has tried to usurp the authority of the Minister and the Department on multiple occasions. He should not be interfering with energy policy as it is not his role or function.

Mr Mackay wanted to understand the new split and the proposed relationship between the DOE, NECSA and Eskom. What real role will the department have going forward? He reminded members that Eskom’s tender committee was found to be corrupt by the Supreme Court of Appeal.  Will this same board be responsible for RFP’s? Overall there was far too little information which is problematic in terms of transparency.

Mr Mackay found it “laughable” that the salaries have been paid for eleven years to a procurement board that has had no work over this period.  They have been paid since 2007 even though there has not been an active procurement process. This is a huge waste of taxpayers’ money.

Mr Mackay was also concerned about the effect the nuclear build will have on the independent power producer (IPP) and IPP bidders. What will be the impact on the IPP’s for coal and gas for example? There has already been a reluctance from Eskom to connect competitor IPP’s to the grid. This is despite the fact that they can supply electricity at lower rates. It is important to remember that although the country will not pay for the nuclear build directly through a tax, it still costs us in terms of higher rates. 

Mr Mackay stated that Eskom can recover all electricity generation costs from the consumer, which is a problem as it does not need to make prudent choices. This is why we are seeing the nuclear build – Eskom is not responsible for the cost. The effect on the economy is significant given that electricity is an input cost. It will raise costs across the economy, badly harming various sectors and ultimately harming growth and employment. Cost projects are completely absent from the presentation. But high costs will kill industry, manufacturing and mining, which will ultimately lead to further mass unemployment. It will make the economy uncompetitive.

Mr Mackay pointed out that Intergovernmental Framework Agreement (IGFA) is still subject to a court case between civil society groups and the Minister. If the court rules that the agreement must be set aside, what is the impact on the programme? What happens in terms of costs if you start a process of procurement, and then the court sets aside the IGFA? Costs will be incurred. The recommendation going to Cabinet should be that no RFP should be issued before the court ruling is heard in regard to the IGFA. He finished by stressing that answers are needed regarding the composition of the RFP adjudication committee and how it will adjudicate.

Mr J Esterhuizen (IFP) felt disappointed by the lack of detail in the presentation. There has been a lack of communication about the build and the international agreement. He wanted to know how international best practices for safety and security will be dealt with. How are we going to ensure that nothing goes wrong? How binding is radioactive waste management? Will nuclear fuel such as uranium be part of the deal? He stated that Gupta family already bought the uranium mines so presumably they will be excluded from the international deal. Are environmental impact reports complete? When will these be made available to the committee?

Mr Esterhuizen pointed out that Russia is going through financial turmoil. He suggested that it may not be wise to trust them to build safe plants. Another risk is further economic recession in South Africa. It would already be difficult to justify this level of spending in a normal economic environment. He added that the unions have opposed the nuclear energy build as part of the energy mix. South Africa’s experience with nuclear builds is that they run over cost and are late on delivery.  

Mr Esterhuizen stated that Mr Molefe has indicated that the nuclear programme will be far more expensive that in the past, providing energy at over R1.00 per hour. The Minister herself indicated that the IPP programme must completely cover the energy supply of South Africa. He pointed out that while the presentation suggested that Eskom has turned a corner and become successful, the only real reason they have been able to meet demand is because of the low growth of the country which has resulted in unexpectedly low demand for electricity. This is why there has been no load-shedding. The real problem is the complete absence of complete and up-to-date energy planning at the national level.

Mr Dlamini wanted to clarity if the figure of R1 billion give in the DOE presentation, which was suggested to be indicative of financial stability of Eskom, necessarily indicates long-term financial stability. The slides suggest that the plan will run smoothly and be on time because of a phased approach – but the Medupi plant also was phased. It swelled in terms of its costs. If the DOE uses the same approach it needs to create spending cut-offs. He seconded the view that the demand drop has driven the improvement in Eskom’s performance.

Mr Dliamini stated that the term ‘assumption’ in the presentation presumes that we can afford the build but look what happened at Medupi. The Minister has said that the money will not come from treasury. So Eskom will find the money. The Minister said that Eskom can find the money to afford the build though certain means. But if Eskom has turned a corner and is financially stable, then surely we can use these same fund-generating mechanisms to create money for higher-education?

Mr M Matlala (ANC) called a point of order saying that Mr Dlamini’s comments are not appropriate as they do not represent a question relating to the presentation but rather a speech.

Ms T Mahambehlala (ANC) criticized Mr Dlamini for his absence in previous meetings. She suggested that the EFF is creating a false narrative in the media. They are suggesting it is government to blame for the fact that the “country is burning” yet it is the objective of the EFF party to burn the country.

Mr Dlamini called a point of order stating that Mr Mahambehlala cannot state the EFF is burning the country.

Ms Mahambehlala continued. She stated that Eskom is rightfully placed as the owner of the nuclear build. It is not Eskom alone that will work on the programme as the department will serve as a coordinator. Regarding the higher-fees debate, there is a separate department which deals with that as a separate issue. There has been a feasibility and costing of this but it is not the responsibility of this committee. The report is at the Higher Education officers -this is the committee of energy.

Ms Mahambehlala requested that Eskom elaborate on the nuclear build programme plan. She asked Mr Mbambo to remind the committee as to where the bulk of funding for these builds come from? How much will it really cost? It is incredibly important to the National narrative.

The Chairperson identified the most important questions that had arisen. The first was the question of what the developments would mean for parliamentary oversight in the future. The second is regarding the possibility of over-supply given the drop in demand.

Mr Mackay made a point of clarity about his previous comments. He stated that the concerns for the appropriateness of the nuclear build for the South African economy were not the DA stance but were informed by the position of Dr Anton Eberhard. He felt that a verbal answer to this question is insufficient as it must be based on evidence, data and modelling.

Response
Minister Joemat-Pettersson stated that Dr Anton Eberhard was part of consultations. She would not let the decision making process become over-politicized. The carbon footprint is an important consideration in the energy mix. 90% of South Africa’s energy is currently produced by coal. The gas information is released based on the 2010 IRP. She stated that if a surplus of energy is projected, the DOE will have to slow down or stop the renewable programme. This applies to gas and other programmes. The updated IRP and IEP of 2013 did not anticipate the load-shedding which happened in 2013/2014.  She has withheld the request [RFP] for nuclear energy because of the concerns raised by stakeholders.

Minister Joemat Pettersson stressed that the department is committed to renewable energy and will bring the project to full closure. The renewable energy programme in South Africa is world-class and it has taken hard work from the DOE. The project will bring more than 17 800 MW of renewable energy power by 2030. It is projected that renewable energy will cost us over a trillion Rand, which is paid in tariffs. The assumptions and scenarios given in the IRP and IEP are subject to review. The Minister has paid attention to several stakeholders and is performing a thorough analysis with expert advice on the matter. The preliminary phases of the project for gas will also be funded off the tariffs and balance sheet of Eskom, through power-purchase agreements. She stated that if she announces IPP’s that Eskom cannot afford she will be personally responsible for compromising the IPP programme. She added that the CEO of Eskom is not making policy decisions but business decisions that need to ensure the country has sustainable and cost-related tariffs.

Minister Joemat-Pettersson felt that her most immediate goal is to have a better arrangement between Eskom and the National Energy Regulator (NERSA). These bodies need to be closer.  The DOE is a policy-making department. The procurement method being announced should demystify the myth that the Minister has signed a nuclear deal. She reiterated that she has not signed any nuclear deals. She has no [personal/financial] interest in who the procuring body is. The reality is that Eskom currently is the only owner-operation of nuclear plants, and that all laws currently designate Eskom as such. It would be a travesty of justice for the Department to procure the plant themselves as the DOE is not a technical expert in nuclear energy and it does not have the necessary skills. She added that the plan will not remove oversight – Eskom reports to a portfolio committee, the committee of public enterprises.

Minister Joemat-Pettersson explained that the ongoing funding of the programmes is done through tariffs and by Eskom. South Africa is not the sole funder of the renewable energy programme. Part of the investment comes from other countries such as Japan, China, Spain and Italy. The largest portion comes from the Industrial Development Corporation (IDC), which is a state-owned entity.  The funding also comes from the Development Bank of Southern Africa (DBSA), the Public Investment Corporation (PIC), the African Development Bank, the China Development bank and from banks locally. So, in response to Mr Dlamini, it does not come directly from the fiscus. 

Minister Joemat-Pettersson responded to the question of demand starting that Mr Ompi Aphane is working on the assumptions regarding projections for growth and demand.

Minister Joemat-Pettersson concluded with the following remarks. The DOE does not have the capacity to procure nuclear or renewable energy without Eskom. The plan will be elaborated upon when more time is available. The documents and certain reports have been taken to Cabinet and cannot be released until approved by Cabinet. Government cannot fund higher education off the balance sheet of Eskom. But it can fund renewable energy and gas of the balance sheet of Eskom.

Mr Koko, Group Executive, Eskom, stated that “we [government] should not throw the baby out with the water”. Renewables are becoming cheaper. Currently renewables alone cannot meet demand and the base load. Coal is currently 100c per kilowatt-hour, where renewables are still 240c per kilowatt-hour for renewables. He does not know of a court order that suggests Eskom’s procurement process is corrupt. Perhaps the chair can respond to this.

Mr Koko explained that when country was load shedding in 2014, Eskom could not meet demand with a capacity of 31 gigawatts at the time. Over the winter of this past year, Eskom met peak demand at 35 Gigawatts. Finances have turned around not because demand is low but because we have improved efficiency. It is difficult to interpret this story as not showing a successful turn-around.

Mr Koko conceded that in the Medupi case a mistake was made by Eskom, as they underestimated the time required for engineering. This time Eskom will not start construction until the designs are complete and frozen. Eskom will not be planning while execution is underway again. Eskom will construct a nuclear design that is approved by a competent regulator.

In response to Mr Dlamini and similar remarks, Mr Koko stated that it is not up to Eskom to pay school fees.

Mr R Nicholls, Chief Nuclear Officer, Eskom, noted that Cape Town has an unusually low carbon footprint. In response to queries about the environmental impact - the environmental impact report is already available on Eskom website. The funding packages are required as part of a bid submission. This largely involved loans organized by the vendors.

Agenda discussion amongst members
Mr Matlala wanted to close the meeting as it was 1.15 pm and past the scheduled end of the meeting of 1pm. He suggested that remaining questions be dealt with in writing.  

Mr Mackay felt that Mr Koko’s comments dismissing the corruption charges amounted to wordplay. The Supreme Court’s decision described the behavior of the board as unlawful. Therefore, it was illegal.

The Chairperson stated that Mr Mackay had a right to make this point, but at the right time. The Committee is discussing process.

Mr Mackay responded arguing that when a guest attends a meeting and undermines the integrity of a committee member [referring to Koko’s prior response denying the corruption charges and therefore suggesting Mr Mackay is wrong], it creates a false and negative representation of that Member to the public if they are not allowed to defend their position in a response. In terms of the agenda, Mr Mackay suggested that follow-up questions be allowed verbally before the meeting adjoins, and that further questions beyond that be addressed in writing.

Mr Esterhuizen brought up the question of the costs and whether it can be afforded but he was denied the floor by the chairperson as the comment was not on process.

Mr Dlamini agreed with Mr Mackay’s view, and suggested that the Committee extend the meeting, saying “we are here to do the work, let us do the work.”

The Chairperson decided that the meeting would adjourn and that follow-up must be done in writing and in subsequent meetings.

The meeting adjourned.  

 

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