With the controversial R200bn Karpowership energy deal increasingly unlikely, the new government of national unity (GNU) has doubled down on its nuclear plan and aims to secure approval from the Treasury by next month for a 2,500MW power plant.
Energy & electricity minister Kgosientsho Ramokgopa told the Sunday Times a team working on the deal is “finalising the procurement structure” of the new build project. He said work was at an advanced stage.
“The procurement structure ... will require National Treasury approvals on the financing, you can imagine the magnitude of that deal,” he said.
In January, the government announced plans through the then department of mineral resources & energy to implement a new nuclear build initiative, which it billed as a “strategic national project” to “ensure security of energy supply and contribute to the government’s economic reconstruction and recovery plan”.
Ramokgopa said some of the internal conversations relate to what type of nuclear technology should be considered.
“There’s latest [nuclear] technology that is very rapid to deploy, relatively cheaper and more efficient. We must resolve the issues of who will operate the plant, but I think I can say before we even conclude that it will be Eskom, as Eskom has the experience, having done that at Koeberg,” he said.
The new build will be larger than Koeberg, South Africa’s only nuclear power plant so far, which generates 1,940MW. Generation of 2,500MW equates to 2½ stages of load-shedding.
A preferred site for the plant and is still to be confirmed. A nuclear power plant generally takes between five and eight years to build.
The department has previously indicated that Thyspunt near Jeffreys Bay in the Eastern Cape was among the sites being considered for the project. This was the proposed site for a nuclear power station more than a decade ago.
Ramokgopa said the team was still crunching numbers, looking at the possible cost implications, and that the public would be briefed once conversations had been concluded and approval granted by the Treasury.
“Before the end of August, we will come out and say this is how we want to do it,” he said.
The National Energy Regulator of South Africa (Nersa) has already approved the process to secure additional generating capacity from nuclear.
Ramakgopa was appointed by President Cyril Ramaphosa in March last year to oversee electricity generation amid worsening load-shedding. This week his portfolio was expanded to include energy. He will now deal with independent power producers and has already taken over work to procure 2,500MW of nuclear power.
He has been widely credited as playing a crucial role in keeping the lights on. This week South Africa celebrated 100 days of no load-shedding.
The renewed nuclear focus follows the collapse of the Karpowership deal due to delays and legal battles between its holding company and South African partners, which led to it missing deadlines to obtain access to the grid.
Ramokgopa confirmed that the deal for ship-based power plants was off the table. “That has collapsed, they have lost their rights to the grid because they had three years to conclude the deal,” Ramokgopa said.
He said the government could not create a “special dispensation for [Karpowership] otherwise you are going to open a can of worms because there are many others that lost [bids for the deal].”
Karpowership South Africa (KPSA) was awarded a 20-year contract worth more than R200bn to provide a little over 1,200MW of electricity from five power ships that would have been docked at Saldanha, Coega and Richards Bay.
While KPSA could still bid for the renewable energy IPP programme bid window 7, the deadline for which has been extended from May 30 to August 15, this is unlikely to happen as the impasse between the Turkish company and its local partners is still to be resolved.
In December retired Constitutional Court justice Sandile Ngcobo, who presided over arbitration between the two parties, reversed the Turkish company’s decision to take back its 49% stake from its local partners, whom it accused of failing to contribute financially to the deal. In a scathing judgment Ngcobo castigated the company over an “oppressive” and “biased” shareholder agreement governing its relationship with Powergroup South Africa — the local partner.
From a personal experience, you also had to navigate a number of hurdles [due to] the fact that the parameters of the ministry were not clearly articulated
— Kgosientsho Ramokgopa, energy & electricity minister
Powergroup was kicked out after failing to contribute to an initial sum of $5m (R90m) that was required to fund early aspects of the deal. Karadeniz Holdings, the Turkish owners of power ships, cannot submit a bid without first reaching agreement with the local partners due to a restraint-of-trade clause, the Sunday Times understands.
The deal is also being challenged by environmental justice group The Green Connection and lobby group Organisation Undoing Tax Abuse (Outa), who want Nersa to provide a complete, unredacted record of its decision to grant Karpowership generation licences.
The collapse of the Karpowership project means Ramokgopa has to now look for other much-needed “emergency solutions”.
He said the advantages of the Karpowership project would have been “its rapid deployment”. There was now an urgent need for an emergency solution; if just four Eskom energy generating units tripped simultaneously, South Africans could face load-shedding again.
Ramakgopa also spoke of the need for government intervention to deal with “energy poverty” — where millions of households go for days without electricity as they have to choose between buying electricity or food.
But he said his immediate priority was dealing with distribution challenges that have seen some communities left in the dark, despite the suspension of load-shedding.
City Power in Johannesburg has been forced to implement load reduction in parts of the city where infrastructure is struggling to cope with high energy usage areas.
Speaking frankly about his appointment as electricity minister last year, Ramokgopa admitted he had not got off to a smooth start. He found himself having to tread carefully to avoid overlap with the then minister of mineral resources & energy, Gwede Mantashe and former public enterprises minister Pravin Gordhan.
“First, it was a bold decision on the part of the president to introduce a ministry that has a more focused responsibility... From a personal experience, you also had to navigate a number of hurdles [due to] the fact that the parameters of the ministry were not clearly articulated,” Ramokgopa said.
This meant Ramakgopa could not hit the ground running as he had to first ensure that his department knew where its responsibilities started and ended.
Ramakgopa said “by its very nature it [new ministry] elicited some degree of tension because it could be interpreted or misinterpreted as overreach”.
He said the overlap into Mantashe and Gordhan’s departments required them to have a talk and came up with solutions.
“So we had to negotiate; myself and my counterparts and we even found each other outside of the president. We are the ones who went back to the president and said, 'We think the powers could be best configured this way,'” he said.
Ramokgopa said they drew up the parameters in “the best interest of the country and it was less about our own selfish interests”.
He said Eskom’s generation team, including general workers, indicated during his initial meetings with them that they had what it would take to resolve the problems and spelt out what support they required.
“We started there and then the rest is history, of course we are not out of the woods yet. I cannot make a false claim and say we’ve resolved load-shedding but towards the end of the year we should be much closer to be making that statement,” Ramokgopa said.
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