Nuclear bid document won’t call for costs now

Eskom will not issue the much-anticipated nuclear “Request for Proposals” (RFP) on Thursday as stated by acting Eskom CEO Matshela Koko on the sidelines of a court hearing in the Western Cape High Court on Tuesday.

Instead it will issue a “Request for Information” (RFI) that Moneyweb has learnt will not address the cost of nuclear procurement at all.

Moneyweb learnt on Wednesday night that the full 1 000-odd-page document won’t be released on Thursday as planned, due to National Treasury pointing out that all the requirements for requesting cost estimates have not been met.

National Treasury said last night it was not in a position to comment.

South African Nuclear Energy Corporation (Necsa) chair Dr Kelvin Kemm confirmed to Moneyweb on Wednesday night that the document to be issued on Wednesday would not call for cost estimates.

He said vendors would be requested to give an undertaking that they will comply with a minimum of 30% localisation as well as South Africa’s requirements regarding intellectual property, training, quality assurance and international standards among other things. These requirements would be set out in the document.

Necsa has been tasked with Eskom to act as procurement agents for government and representatives of the two entities have drafted the RFP together over the past few weeks.

Kemm said the document to be issued on Wednesday will be “twenty or thirty pages with appendices” and won’t call for cost estimates.

This follows after Necsa CEO Phumzile Tshelane told Moneyweb on November 25 that the RFP is ready to be issued, pending approval by the Eskom and Necsa boards. The document, he said, consists of “reams of paper”.

He said the bidders would need to provide a detailed technical solution indicating the price and process they will follow, including the proposed schedule. They would also need to address skills development and localisation, including who they would partner with locally, he said.

At a media briefing on November 22 where the draft Integrated Resource Plan (IRP) base case was released for public comment, Koko emphasised the value of issuing the non-binding RFP before the IRP is finalised. He argued that the cost estimates gathered during the process should inform the final IRP.

This position has been widely criticised by commentators stating that the country has to first determine its energy needs before embarking on a procurement process.

Kemm told Moneyweb that the RFI would call on vendors to submit their responses at the end of January. Shortly thereafter the RFP would be issued, possibly in more than one stage, with short timelines for responses. It is only at that stage that vendors would be required to provide the price for the nuclear solution they propose.

He emphasised that South Africa is not embarking on a process “to buy something”, but rather on a “collaborative exercise with foreign suppliers” to establish new nuclear generation capacity. This he says, means that different components could be procured from different vendors, instead of a “winner-takes-all” approach.

The cost of procuring the 9 600MW nuclear generation capacity provided for in the country’s current energy plan has been a major concern with numbers of more than R1 trillion being quoted. Nuclear proponents have argued that the cost would be much lower, and president Jacob Zuma in his State of the Nation Address in February gave the assurance that the country would only procure it at a pace and cost that it could afford.

The draft IRP 2016 base case scenario provides for new nuclear capacity to be operational only in 2037. If the amount of new renewable energy generation to be connected to the grid every year is limited and a carbon budget is adopted, it would be needed by 2024 however.

Decisions about this will only be finalised during the IRP process, which has only just started and is due to be completed in the first half of next year.

Koko has argued that it takes at least ten years to procure, construct and commission a nuclear power plant and therefore there is no time to waste. He said in 2008 government called for tenders and abandoned the process when the quotes were too high. If the results of the RFP proves to be unaffordable, government could again walk away, he said.

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