May 18, 2020
The South African Nuclear Industry Association (NIASA) presented six potential options for financing new nuclear power plants in the country. Mineral Resources and Energy Minister Gwede Mantashe last week told a parliamentary committee he would be willing to consider innovative financing options as his ministry begins the process of developing a new 2,500 MWe nuclear capability.
Koeberg nuclear power plant (Image: Eskom)
“It is a fact that nuclear power plants require large initial investments, compared to other sources of energy,” NIASA said in an article published in Engineering News. “So it’s critical to know how these projects are funded because the cost of borrowing the money can be prohibitive. Considering the very high proportion of the cost of energy that the capital repayment element represents the overall cost of electricity of a nuclear power plant, the effective interest rate is fundamental for the viability of the project.
The six options identified by NIASA are: either public financing for the entire project, or loan guarantees backed by the State and using the reserves and cash flows of public enterprises; an intergovernmental loan; business financing; vendor financing of the plant; financing of projects using a special investment vehicle; and “build-own-operate”.
The association provided concrete examples of the application of five of the funding models in nuclear power plant projects. One option – project finance using a special purpose vehicle put in place only to finance the specific project and separating the project from other investments, has not yet been used to finance a nuclear power plant but it has been used for natural gas production plants, NIASA said.
Mantashe told the country’s Mineral Resources and Energy Portfolio Committee on May 7 that his department would begin preparations for the purchase of new nuclear power plants, as mandated in the country’s 2019 Integrated Resource Plan, and would review all options, including small modular reactor projects led by private companies. and consortia.
The ministry is also developing a monitoring plan for a program to enable the existing twin unit Koeberg nuclear power plan to operate for another 20 years after 2024. Koeberg, operated by the state-owned Eskom, was commissioned in the mid-1980s and generates around 5% of South Africa electricity.
Research and writing by World Nuclear News