Eskom Releases Nuclear Request for Information
The nuclear request for information (RFI) was released by Eskom Holdings SOC Ltd (Eskom) on 20 December 2016 in respect of South Africa’s Nuclear Build Programme (NNBP). The main points of the RFI are detailed below:
- THE RFI confirms that, in line with the Section 34 Determination under the Electricity Regulation Act, Eskom (and the South African Nuclear Energy Corporation SOC Ltd (NECSA) in respect of nuclear fuel cycle activities) will be the procurer of the NNBP.
- A "Fleet Approach" is to be adopted, which is believed to take advantage of economies of scale and to maximise localisation which remains a key driver of the NNBP together with funding solutions and technical capabilities.
- South Africa shall endeavour to implement or obtain interests in the complete nuclear fuel cycle for which NECSA is mandated.
- The envisaged processes and timelines as set out in the RFI may be subject to change.
Overview of the Nuclear Build Programme
- Power reactors to be used will be of the pressurised water reactor (PWR) type.
- Code and standards adopted shall be based on the vendor country, subject to any modifications to meet South African and Eskom regulatory requirements.
- The NNBP may include, but is not limited to:
- Engineering, Procurement and Construction of Nuclear Power Plant (NPP) units 1 and 2;
- Establishment of a framework agreement for orders of NPPs beyond the first 2 units;
- Fuel Supply contract for initial operations;
- Supply of the training and engineering simulators for the NPPs;
- EPC and licensing support of the nuclear fuel cycle facilities and commercial production reactor (CPR);
- Intellectual Property (IP) transfer of the NPP nuclear and conventional island design, licensing, manufacturing, construction, installation and commissioning;
- IP transfer for NPP fuel cycle facilities;
- IP transfer for nuclear fuel fabrication for the CPR; and
- IP transfer to local communities for the design, manufacturing, constructions, installation, commissioning and servicing of components and systems.
Information Requested for the Nuclear New Build Programme
- Experience in existing domestic and export PWR and NPP, including anticipated costs, contract price adjustments, scope and installed capacity.
- Detailed fleet and site learnings in terms of time and cost savings when following a Fleet Approach.
- The impact of a multi-unit site on Opex and Capex.
- Detail the impact of different sequencing of NPP construction in terms of the period between commissioning of units on the overall cost of construction.
- Detailed financing solutions including, examples of financing solutions, financing sources and ownership structures of previous NPP build projects including lessons learned, success, estimate of the levelised cost of ownership (with input parameters), failures, estimate of decommissioning provisions and sustaining capital, security and guarantees required.
- A localisation model which sets out the vendor’s previous implementation of localisation and a plan for deeper (greater) localization.
- Details of the contracting methodology envisaged for staged fleet contracting including the vendors view on forming joint ventures.
- Experience credentials in respect of the establishment of domestic nuclear fuel fabrication facilities and on the domestic fuel cycle participation within the vendor supply chain and the international market.
- Experience on the establishment of domestic nuclear fuel fabrication facilities
- Experience on the localisation of fabrication and systems for the establishment of CPRs.
Some Baker McKenzie Observations
- Whilst the RFI is a request for information from Eskom, it includes detailed participation in the RFI process by NECSA as related to NECSA’s responsibilities such as on the nuclear fuel cycle and the CPR. Eskom and NECSA are separate legal entities and are designated as Public Entities under the Public Finance Management Act. As such, Eskom and NECSA account separately to Government and have their own procurement procedures and processes developed in terms of statute. At RFI stage any misalignment between Eskom and NECSA’s procurement procedures and processes may not be cause for immediate concern, however the nature and roll-out of the procurement process will need to be closely monitored to assess the manner and form of such roll-out. Related risks will need to be managed/ mitigated.
- The RFI was premised on the 2010 Integrated Resource Plan (as updated) (IRP) which contains an earlier window for the pursuance by South Africa of a NNBP. The recently published draft 2016 IRP and Integrated Energy Plan indicates in the draft base case scenario that the first 1 359 MW of new nuclear capacity is only required and anticipated to come on stream in 2037. Should the draft 2016 IRP be concluded in its current form, the RFI by Eskom seems premature and the market has viewed the timing of the release of the RFI with some suspicion. The finalisation of the 2016 IRP will need to be monitored closely as it may well impact the current Eskom RFI.
- We understand that site licence applications are in process and have been submitted by Eskom to the National Nuclear Regulator (NNR). Formal licenses have not yet been granted by the NNR however the site licence application for the Thyspunt site is believed to have, in principle, been accepted by the NNR in principle.
The above note merely outlines some of the main points in the RFI. It does not constitute legal advice, and is merely intended as a high level summary of the RFI. The full text of the RFI can be accessed here