Cabinet to consider three options for new nuclear projects, including private funding

At a portfolio committee meeting on Wednesday, the Department of Mineral Resources and Energy (DMRE) said it would recommend for consideration to the Cabinet three possible ownership models to acquire and fund more nuclear projects in SA under the Nuclear New Build Programme (NNBP).

DMRE Deputy Director-General Zizamele Mbambo told the committee the department had investigated the three most preferred funding and ownership models for the NNBP.

The three models are:

• Public-private partnerships (PPPs), where the government would be a non-controlling shareholder;


• Majority government ownership (51% or more); and


• Full government ownership of the new nuclear projects.

Mbambo noted the December pronouncement by the Minister of Electricity, Kgosientsho Ramokgopa, that SA would start procuring 2,500MW of nuclear power, and the subsequent withdrawal of this in August “owing to openness and transparency”.

A boundary sign on Melkbosstrand beach outside Eskom’s Koeberg Nuclear Power Station near Cape Town. (Photo: Dwayne Senior / Bloomberg via Getty Images)

Ramokgopa temporarily withdrew the plan after a legal challenge by the Southern African Faith Communities’ Environment Institute and Earthlife Africa Johannesburg.

They argued that Ramokgopa’s plan to procure new nuclear energy was “unlawful and unconstitutional because the process has, thus far, been procedurally unfair”.

Read more: Minister Ramokgopa, citing legal challenges, hits brakes on nuclear plans – for now

Ownership models

The three possible ownership models were chosen after a procurement framework study, which was completed in October 2022.

The study looked at the procurement framework and the optimal approach to implement the NNBP, taking into consideration the fiscal constraints, Eskom’s constrained balance sheet, the power utility’s unbundling and the debt relief conditions imposed on it by the National Treasury.

Mbambo said that the major factor influencing the choice of ownership was the ability to leverage Eskom’s “nuclear mandate privileges and intellectual property” in a minority shareholding, thus minimising the potential financial impact on Eskom.

Another factor was the ability to avoid new and protracted site licence application processes — which are not transferable — by allowing Eskom to remain an operator, even as a minority owner of the nuclear plants.

The assets Eskom would leverage in these scenarios are its licence to operate nuclear plants; sites on which to build and operate nuclear assets; permits to build and operate nuclear assets; environmental impact assessment approvals for targeted sites; and development work.

All of these, Mbambo said, needed to be leveraged for Eskom to retain its ownership and operator status.

Put/call agreement

If PPPs were considered through a special purpose vehicle, with Eskom as a minority, a vendor company would retain ownership without the right of use.

Mbambo said the new company would enter into a put/call agreement or a memorandum of understanding with Eskom, so that Eskom was the operator of the nuclear power plant.

“The biggest point is that in this option, the asset [the nuclear power plant or project] will be transferred back to the state with an opportunity to run the asset… These new designs have a life of 60 years and can be extended to an additional 20 years after they have demonstrated that it is still safe to operate the plant,” said Mbambo.

DMRE Director-General Jacob Mbele said the PPP option could include a scenario where “government does not have to put a cent on the table”.

As with the DMRE’s renewable energy programme, the government would facilitate the procurement, but the companies appointed would then sell the energy to Eskom, which could recover the cost from consumers.

The second model, the majority government ownership option, is dependent on backing by the South African national fiscus and the balance sheet of Eskom.

The projects would be implemented through a joint venture company, with Eskom having at least a 51% stake.

The full government ownership model implies that Eskom holds 100% equity and is the sole investor in nuclear projects.

Mbambo said this option guaranteed that the government retained total ownership, control and operation of the nuclear asset.

“The model requires National Treasury support that the government injects 100% equity through Eskom as a sole investor,” said Mbambo.

Nuclear policy

The DMRE also laid out the government’s policy position on nuclear energy.

Mbambo said this was anchored in the Nuclear Energy Policy of 2008, which directed that the government would like to become self-sufficient in the nuclear value chain, and looked at the nuclear contribution to SA’s economic growth, technology development, job creation and infrastructure investment.

Read more: Ramokgopa commits to transparent procurement process for new nuclear build plans

Then there is the National Development Plan, which recognises the role nuclear energy plays in providing low-carbon baseload electricity.

“There is now an acceptance that nuclear is part of the solution in terms of providing baseload electricity to make sure that we achieve the carbon emission target,” said Mbambo.

The Integrated Resource Plan of 2019 directed that 2,500MW of nuclear be implemented at a pace and scale the country can afford, “because it’s a no-regret option in the long-term”.

The last policy ruling is the Economic Reconstruction and Recovery Plan 2020, which includes nuclear power in the recovery plan for SA, saying it could create jobs and help secure the energy supply.

“There is sufficient market appetite to develop the Nuclear New Build Programme in South Africa,” said Mbambo. DM

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