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TWIXT CUP AND LIP — SOUTH AFRICAN REGULATOR CHANGES ROSATOM’S CHANCES TO WIN REACTOR BID

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By John Helmer, Moscow

Two months after South Africa’s (SA) President Jacob Zuma appeared to drop Russia in favour of a Chinese-American combination for the country’s $50 billion nuclear reactor programme, the head of the SA National Nuclear Regulator, Bismark Tyobeka, appeared in Moscow last week to be favouring the Russian bid over the competition.

Tyobeka, who was attending a nuclear industry convention, AtomExpo-2014, was reported in the Russian press as saying that now that South Africa’s May 7 parliamentary elections are out of the way, Zuma intends to announce his choice for the first two reactors from among the competing bids of China, Russia, South Korea, and France. Tyobeka reportedly [1] was negative towards the Chinese bid, which is coordinated with Westinghouse of the US. “All these countries also have a chance to become the contractor, but the main thing is whether they have sufficient experience of building nuclear power plants abroad. In that sense Russia has the best experience, and its chances [for the procurement award] are very high.”

There has been no subsequent report in the South African media. Tyobeka continues to travel away from his office.

Tyobeka is a nuclear power engineer [2] with advanced degrees from US and Scottish universities. Before his appointment [3] to run the NNR last September, he was head of the gas-cooled reactors unit at the International Atomic Energy Agency (IAEA) in Vienna.

South Africa’s National Nuclear Regulator (NNR) was established in 1999 as the successor to the Council for Nuclear Safety. Its powers [4] include “ the protection of persons, property and the environment against nuclear damage through the establishment of safety standards and regulatory practices” and “regulatory control related to safety over the siting, design, construction, operation, manufacture of component parts… and decontamination, decommissioning and closure of nuclear installations.” The statute makes the head of the NNR and the board of directors of the NNR subordinate to the Minister of Energy, who controls both appointments and decision-making. In practice, Tyobeka can recommend, but the Minister of Energy can ignore or overrule him.

For eight months the Energy Ministry has created a contradictory record on the terms of its agreement with Russia’s nuclear power agency, Rosatom. After the visit to South Africa by Sergei Kirienko, Rosatom’s head, last November, the then Minister Ben Martins appeared to endorse the initials on their draft agreement, and to promise a final pact by February 15. “The agreement is initalled at the technical level,” Martins announced [5], “and it is now necessary to complete the legal process. We will do this by completing all the necessary approvals at the beginning of next year. We have set ourselves the goal of signing by February 15.”

martinsWhen nothing materialized by the deadline, Martins (right) stopped speaking in public, and refused to answer questions. Rosatom spokesman, Vladislav Bochkov, claimed [6] the deadline was slipping because of the SA elections. “In a situation where the country faces a general election, the ruling elites prefer to wait for the results… Since there is no official information, we adhere to the previously announced deadline.”

Zuma’s campaign to protect his second term as president with a majority in the new parliament ended on May 7. The African National Congress, to which Zuma belongs, won a majority of 62%. But on March 4 Martins signed [7] a new deal with the China National Energy Administration. He hasn’t wanted to talk about that. Russian sources say they suspect the US Government agreed to let Westinghouse participate in the Chinese bidding for the SA reactor programme by licensing the reactor design and related technology. Without that, the sources believe the Chinese could not offer the South Africans a well-tested system.

A Rosatom source claims the Chinese are offering a “clone” of the Westinghouse reactor technology called AP 1000. The Chinese variant has so far not become fully operational in China, and has never been exported abroad. When Tyobeka said in Moscow last week that the procurement criterion that will govern Minister Martins’ selection should be “sufficient experience of building nuclear power plants abroad”, the hint was that the Chinese do not qualify.

On May 25 Zuma dismissed Martins and appointed in his place Tina Joemat-Pettersson. Reportedly much closer to Zuma than Martins, she has been promoted from the Ministry of Forestry, Fisheries and Agriculture. “She has been a regular source of embarrassment to the government,” commented [8] the Mail & Guardian after her appointment was announced.

As the energy minister Joemat-Pettersson is not the only SA decision-maker for the reactor programme. Officially in charge is the National Nuclear Executive Coordinating Committee (NNEECC). Since April of last year, this has been chaired by Zuma. He has also reorganized the committee, reducing its membership to himself as chairman, plus the ministers of energy, public enterprises, finance, state security, defence, and international relations. Tybeka’s NNR doesn’t have a seat or a vote on the NNEECC.

Instead, as an NNR source explains, “the NNR, like other nuclear energy stakeholders in the country, participates in a number of sub-working groups of the NNEECC. Among those are the ones concerned with Nuclear Safety and Nuclear Security & Non-Proliferation. The NNR CEO [Tyobeka] is appointed by the Minister of Energy, through the Board of Directors. Therefore, the CEO reports to the Board of the NNR. The NNR is a public entity answerable to Parliarment through the Minister of Energy.”

In November last, an independent South African report charged Zuma with burying nuclear power policy in private ambition and public secrecy. According [9] to the Counter-Proliferation Unit of Consultancy Africa Intelligence (CAI), “the Zuma Government has continuously marginalised oversight bodies such as Parliament, the National Conventional Arms Control Committee (NCACC) and the South African Council for the Non-Proliferation of Weapons of Mass Destruction (NPC). A lack of public debate on the country’s nuclear future and, for example, the upgrading of its missile launch facilities has fuelled concerns. These concerns are amplified by the country’s controversial and increasingly non-transparent regulation of the defence industry, and an increasing trend toward secretive government behaviour.”

The CAI isn’t pro-Russian. Its report favours postponement of reactor procurement. It claims Zuma wants to override the economic case for delay with a personal scheme to dominate Africa, both as a nuclear power and as a source of surplus electricity. Zuma, according to CAI, is pursuing “nuclear diplomacy of South Africa as a nuclear power, both globally and on the African continent… it is probable that Zuma’s nuclear agenda is aimed at entrenching South Africa as a regional powerhouse with sway over its dependent neighbours while enhancing his stature continentally and internationally as a global nuclear power.”

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Source: http://www.consultancyafrica.com/ [9]

Russian officials haven’t waited for Zuma’s election victory to concede, albeit implicitly, that he had been persuaded to drop the Rosatom offer, and replace it with a US Government scheme. In the wake of US sanctions for the Ukraine conflict, Kirienko said [10] on March 27: “Some international contracts of Rosatom may fall under restrictions due to possible economic sanctions of the West. Taking into account a number of comments about the possible limitations of economic relations, we understand that some of the [international] contracts may be under political constraints.”

A reinforcing link has also failed between the Rosatom offer and SA Government acceptance. This has been the attempt by Russian steelmaker Evraz to sell its South African subsidiary, Highveld Steel & Vanadium, for $320 million – more than double the market value of the asset. Since Evraz made its deal announcement in March 2013, that story can be followed here [11]. Last week in London, Evraz executives acknowledged they are still trying to find a buyer at a price that can be financed, and repayment guaranteed, by the Russian and SA governments.

Tyobeka’s intervention on Rosatom’s side was first publicized [12] in an interview with ESI, a specialist publication on the African energy sector. “There are several financing options,” Tyobeka said, “available for new nuclear projects which include full financing by the state; however this is not very feasible for most developing countries. Then there is the possibility for loans by utilities, where the state may have to provide some loan guarantees, and as you would know, that is also a difficult undertaking by the state because of a relatively high risk in nuclear projects. The most interesting financing model is the one that the Russians have just completed with the Turkish, where they will carry the entire cost of the nuclear power plant and the Turkish government has to provide the land and provide guarantees for power purchase from these plants. Over a number of years the Russians will own and operate these plants and then get paid back through selling electricity, but the Turks will get a certain percentage of the electricity sales. Eventually, the plants can be bought by the Turkish government. This is an adjusted Build-Operate-Own (BOO) turnkey financing model. I am of the opinion that this model is the most attractive to many newcomer countries.”

On Monday Tyobeka was asked to clarify his Moscow remarks, and to say if he favours Rosatom’s bid. He replied that “my response to the question regarding Russian chances for the contract in [South Africa’s] nuclear new build was not correctly reported. My correct response to the question is as follows: The Russian’s chances to getting the nuclear build contract in South Africa are as good as any of the other five other countries visited by the Minister and South African experts last November/December, precisely because most of these countries are already building nuclear power plants abroad, which I think is a very important consideration, in my opinion.”

In an additional comment, Tyobeka drops his earlier claim that the Chinese bid, which Martins endorsed in March, is independent of the US.

“As you would know, South Korea is already building in the UAE, Russia is building in Belarus, Turkey, etc, and has built plants in China and India, Westinghouse (USA) is building in China, France (AREVA) is building in China and Finland, etc. So, all these these countries have what it takes to win the South African bid. It may well boil down to who presents an attractive financing model. Indeed, it is still my opinion that the “adjusted BOO” as we see with the Russian-Turkish deal may actually be an attractive option for new-comer countries, but South Africa is not a newcomer country.”

For Rosatom, Bochkov was asked how Tyobeka’s remarks were interpreted, and whether Rosatom believes it is still in the running. He refused to reply.