Eskom may have R150bn war chest to spend on nuclear

Johannesburg - Power utility Eskom forecasts it will have more than R150bn in 10 years’ time, money it could use to fund the country’s proposed plan to build nuclear power plants.

Eskom's stronger financial and operating performance will continue improving, culminating in the excess cash resources by the 10th year of the company’s 2016-17 operating plan, group generation executive Matshela Koko wrote in an opinion piece in Business Day newspaper on Friday. It has also increased its borrowing programme by R90bn to R327bn, he said.

South Africa last year approved a plan for the country to develop as much as 9.6 gigawatts of nuclear capacity by 2030. Critics of the nuclear power plan, which could cost as much as $100bn, say it’s unaffordable. Eskom’s revenue has increased every year since 2006 as the nation’s energy regulator allowed it to raise prices by an average 16% annually, or more than double the mean inflation rate of 6.1% over the 10-year period.

The utility is building new electricity stations to end the power cuts that were imposed for about 100 days last year, curbing growth in Africa’s most industrialised nation. Its Medupi and Kusile coal-fired plants under construction will cost a total of R306bn; both have run over budget and are years behind schedule.

Lessons learnt

“Eskom believes it has learnt a wealth of lessons from its current new-build programme, which it can put to use in the nuclear programme to reduce the risk of schedule delays and cost overruns,” Koko wrote.

The nuclear programme “will be delivered at a pace and a price that South Africa can afford”, Koko said, adding that the programme will be “designed to cost.” The so-called targeted levelised cost will be R1 per kilowatt-hour, which would make it an affordable option for continuous power supply “even compared to the best estimates for renewables and gas”, he said.

The algorithm that was used to build Koeberg, South Africa’s only nuclear power plant, will be used to ensure that the new facilities are designed “to cost”, he said. Construction of Koeberg, outside Cape Town, started in 1976 and it was operational in 1984.