Friday, December 5, 2008

South Africa Scraps Plan to Build Nuclear Power Plant

South Africa Scraps Plan to Build Nuclear Power Plant
By Ron Derby and Carli Lourens

Dec. 5 (Bloomberg)

-- South Africa, suffering a power crisis that's limiting supplies to gold and platinum mines, canceled a plan to build a
nuclear plant for about 120 billion rand ($12 billion) as the credit freeze cuts financing.

State-owned Eskom Holdings Ltd's decision won't undermine "national security of supply" as economic growth will slow and other plants are being built, the government communications office said in an e-mailed statement today.

Groups led by Areva SA, the world's largest supplier of nuclear reactors, and Toshiba Corp.'s Westinghouse Electric Co. were vying for the order. A global recession and an expected drop energy demand is halting spending on projects from Canada to the Middle East and Africa.

"It's too big, we can't do it," Johannesburg-based Eskom spokesman Fani Zulu said. "The bidders were informed after we took the decision at a board meeting yesterday."

Eskom, looking to borrow about 150 billion rand, is in talks with the World Bank for a loan of as much as $5 billion and its credit rating was cut by Moody's Investors Services this year after regulators allowed a 27 percent increase in electricity prices rather than 61 percent.


"We're disappointed because we put a lot of work into the process, but we're hopeful the South African government will remain committed to developing nuclear power," Jacques-Emmanuel Saulnier, spokesman for Areva in Paris, said by telephone. "If South Africa comes back to us, we'll be there."

Eskom hasn't kept pace with electricity demand in Africa's biggest economy and restricted supply to companies including Anglo American Plc and Xstrata Plc.

The economy will probably grow at a slower pace than forecast by Eskom over the next five years, reducing power needs, said Jac Laubscher, group economist of Sanlam Ltd., the biggest South African-owned life insurer. "It's not a train smash that they've canceled the nuclear plan."

The global recession and rising interest rates in South Africa have reduced government projections, with the economy now expected to expand 3 percent next year and 4 percent in 2010.

The plan was also canceled also to ensure Eskom's ability to "provide the economy with competitively priced energy is not jeopardized," the government said.

Demand Increase

South Africa had planned to generate 20,000 megawatts from nuclear reactors by 2025, more than 10 times the current output. Power demand has risen by 50 percent since apartheid ended in 1994, while government indecision postponed Eskom's expansion.

The reasons for the "pause" are specific to South Africa, and don't reflect the general state in the nuclear industry, as shown by efforts by utilities in the U.K. and the U.S. to build nuclear power plants, Areva's Saulnier said.

Areva proposed two 1,650-megawatt reactors, while Westinghouse offered to build three 1,140-megawatt reactors. South African construction groups Aveng Ltd. and Murray & Roberts Ltd. formed part of the groups bidding for the contract.

Janine Claber, a spokeswoman for Westinghouse, wasn't immediately available to comment on the decision.

Electricite de France SA, the world's biggest operator of atomic reactors, has South Africa among its priorities for nuclear expansion. The utility wants to operate about 10 so- called Evolutionary Power Reactors by 2020 and yesterday at an investor day in London included two in South Africa.

South Africa remains "committed to nuclear power," to lessen thenation's carbon footprint, said Department of Public
Enterprises Director General Portia Molefe today.

To contact the reporters on this story: Ron Derby in Johannesburg at; Carli Lourens in Johannesburg at

No comments: