South Africa signed a partnership agreement with Russia’s state-owned nuclear company that may see Rosatom Corp. build reactors in Africa’s second-biggest economy.
“The agreement lays the foundation for the large-scale nuclear power plants procurement and development program” using Russian VVER reactors with installed capacity of about 9,600 megawatts, or as many as eight nuclear units, Rosatom and the South African government said in an e-mailed statement today.
South Africa’s integrated resources plan envisions 9,600 megawatts of nuclear energy being added to the national grid to help reduce reliance on coal, which utility Eskom Holdings SOC Ltd. uses to generate 80 percent of the country’s electricity. The state-owned company is struggling to meet power demand.
The National Treasury said in February 2013 that a 300 billion-rand ($27 billion) nuclear program was in the final stages of study.
Areva SA (AREVA), EDF SA (EDF), Toshiba Corp. (6502)’s Westinghouse Electric Corp., China Guangdong Nuclear Power Holding Corp., Rosatom and Korea Electric Power Corp.
(015760) have expressed interest in building the plants.
“This agreement opens up the door for South Africa to access Russian technologies, funding, infrastructure, and provides a proper and solid platform for future extensive collaboration,” South African Energy Minister Tina Joemat-Pettersson said in the statement. It will allow the country to implement its plan to create more nuclear capacity by 2030, she said.
The collaboration will result in orders worth at least $10 billion to local industrial companies, Rosatom Director General Sergei Kirienko said in the statement.
In addition to building the nuclear units, the agreement provides for partnerships including the construction of a Russian technology-based research reactor, assistance in the development of South African nuclear infrastructure and education of specialists at Russian universities, the parties said in the statement.
Rosatom currently holds projects for the construction of 29 nuclear power plants, including 19 foreign commissions in countries including India, China, Turkey, Vietnam, Finland and Hungary.
Eskom operates a 1,800-megawatt nuclear facility at Koeberg, near Cape Town. In December, the Energy Ministry published a revised 20-year energy plan, which projected that new nuclear power won’t be required until at least 2025.
If finalized, the deal may have significant financial risks and implications for electricity prices in South Africa, said Anne Fruhauf, an analyst at New York-based consultants Teneo Intelligence.
South Africa’s energy regulator last month approved a power-tariff increase that could amount to 5 percentage points on top of the above-inflation 8 percent previously agreed, and prices may have to rise even further for Eskom, which supplies 95 percent of the country’s electricity needs, to plug a 225 billion-rand funding gap.
“The million-dollar question will be the financing details and equity ownership,” Fruhauf said in an e-mailed response to questions. “We don’t have the details yet but it could be one of the biggest public procurement programs on which South Africa has ever embarked.”
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