South African state utility Eskom has decided not to proceed with the first stage of its ambitious nuclear programme – the construction of the country’s second PWR – due to “the magnitude of the investment.”

As a result, on 5 December it terminated the process of selecting a preferred bidder for the construction of the proposed plant.

Consortia led by Westinghouse and Areva had both submitted bids to supply the units and had offered to build the full 20GWe of proposed new nuclear capacity. In a statement, chief executive of Eskom Holdings, Jacob Maroga, thanked the bidders for their professionalism and patience throughout the process – the announcement of Eskom’s preferred bidder was initially expected in April and had been long awaited since.

Despite Eskom’s decision, the South African government has said that it remains “committed to exploring the use of nuclear energy.” It does not anticipate that there will be problems with security of supply in the country due to the projects that are already underway and the projected slow-down in electricity demand resulting from the economic downturn.

Director-general for the Department of Public Enterprises (DPE), Portia Molefe said: “Particularly in the context of the global financial crisis, we must be vigilant to ensure that Eskom does not over extend its balance sheet.”

Eskom has been trying to raise funds recently with loans of 60 billion Rand ($6 billion) from the South African government and $500 million over 20 years from the African Development Bank agreed. The government is also in talks with the World Bank to arrange further funding for Eskom, however this is to finance the existing build programme to produce 18.5GWe by 2017, Molefe said.

As for South Africa’s other nuclear project – the Pebble Bed Modular Reactor (PBMR) – Molefe said: “it does not at all spell a death knell.” She explained that the reactor has both electricity and process heat applications. “In fact, it looks like we can fast track the process heat,” she said, suggesting however that Eskom’s changes to its time scale for nuclear may affect the commercialisation of the technology. At this stage no announcement has been made by PBMR (Pty).

In order to continue the introduction of nuclear generating capacity in South Africa, a Department of Minerals and Energy led task team will work with Eskom to develop and implement a framework for procuring a nuclear technology partner to support the build and industrialisation process.

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What is needed…is some form of more organised, longer-term contract market