Economy / 8 March 2012, 8:34pm / Agnieszka Flak and Jon Herskovitz
Johannesburg - South Africa will come to the rescue of a nuclear industry, still struggling for customers a year after Japan's Fukushima disaster, with a tender for one of the world's biggest atomic power deals.
Firms from France, the United States, Japan, South Korea, China and Russia have been lining up for years for a chance to win the contract worth between 400 billion rand ($52.3 billion) and a trillion rand($130.8 billion).
Chances to build reactors have grown fewer after the Fukushima accident, with many developed states trying to wean themselves off nuclear.
“It has become close to a buyers market and not a sellers market, which it was before Fukushima,” said H. Holger Rogner, section head of the International Atomic Energy Agency's planning and economic studies section.
South African officials expect to open the bidding in the next few months for 9,600 megawatts of nuclear power - or about the normal output of six reactors. Africa's largest economy is operating on razor thin electricity margins and needs the power to grow its energy-intensive mining sector and manufacturing.
Potential bidders are likely to include Areva, EDF, Toshiba's Westinghouse Electric Corp, China Guangdong Nuclear Power Group, South Korea's Korea Electric Power Corp (KEPCO) and Russia's Rosatom.
In a budget proposal released last month, South Africa penciled in 300 billion rand for the nuclear build, but the figure was just the start, energy minister Dipuo Peters said.
“It's not a thumb suck and we don't actually say that is the end amount, but we believe that it is the beginning,” she said.
Even though the amount is enormous for a country with an economy the size of South Africa's, analysts said financing should be readily available. The technology of the plants is established as well as the revenue they produce. South Africa, with a stable economy, is seen as a reliable borrower.
Factors that could increase cost competition include an export push by Japan's two major nuclear firms, Toshiba and Hitachi Ltd, who face a moratorium on new construction at home.
“(Fukushima) has made them more ambitious to go global. They have government support to go overseas. It is an export growth strategy for Japanese industry,” said Will Pearson, energy analyst at the Eurasia Group political risk consultancy.
South Korea has also emerged as a nuclear export power. The United Arab Emirates has awarded a deal for $20 billion, that could be worth up to $40 billion over its lifetime, to a South Korean consortium to build and operate four nuclear reactors.
South Africa, with an unemployment rate of about 25 percent, wants to see nuclear as a generator of job growth. as well as electricity. It is already home to the 1,800 MW Koeberg plant outside Cape Town, the continent's only nuclear station.
The government hopes it could produce specialised products that could be sold to reactor makers elsewhere.
It also wants to find jobs for the hundreds of employees at its prototype, experimental reactor that was closed down in 2010 due to funding and technology problems.
The government aims to develop a plant for uranium enrichment for nuclear fuel. It voluntarily dismantled its nuclear weapons programme in the early 1990s.
There are worries about how Johannesburg will manage the bid, which will be its largest overseas purchase since an arms deal about a decade ago that led to several of its officials being convicted of receiving bribes.
President Jacob Zuma, then in a different government post, was also charged but not convicted.
“Given that the shadow of arms deal corruption continues to darken our democracy, government should be extra careful about the nuclear build programme,” said Lance Greyling, a leading politician with the opposition Democratic Alliance.
South Africa will be pushing to have the first megawatts come online by 2024. Unlike Japan, it has few earthquakes and its plants are likely to be built well inland, away from coasts and any tsunami threat.
It hopes to avoid a repeat of a power crisis that brought industry to its knees in early 2008 and shut mines.
“The marching orders that we have from the minister is that (it should be done) by the end of this year,” Ditebogo Kgomo, the government's nuclear director, told Reuters.
The last attempt to build a new nuclear plant, led by state power utility Eskom, was scrapped in 2008 due to funding woes.
French utility EDF said in February it planned to bid in a possible partnership with Areva and China Guangdong Nuclear Power Corp. South Africa dismissed comments it told EDF to bid along with the Chinese. - Reuters