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South African nuclear group under financial stress, but optimistic about recovery

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South African nuclear group under financial stress, but optimistic about recovery

Photo by Duane Daws
Necsa CE Phumzile Tshelane

8th February 2018

By: Rebecca Campbell
Creamer Media Senior Deputy Editor

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The South African Nuclear Energy Corporation (Necsa) is currently facing financial pressures, the State-owned group’s chief executive, Phumzile Tshelane, has confirmed to Engineering News Online. “At the moment, Necsa is under financial stress, because [subsidiary] Pelchem is loss-making and we need to support it,” he said.

The Necsa group includes two subsidiary companies, speciality fluorine chemicals business Pelchem, and medical and industrial radioisotopes (and related products) manufacturer NTP Radioisotopes. (Other Necsa units and operations include the SAFARI-1 research reactor, Pelindaba Enterprises and the Nuclear Skills Training Centre.)

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“The Necsa board has given instructions to me to ensure we operate commercially,” he pointed out. “This is so we’re not dependent on the government’s grant for everything we do,”

“We had requested, in the previous financial year [2016/17], that NTP stand surety for Pelchem, to ensure that the group was financially balanced,” he explained. “If you look at the group’s balance sheet, it is positive, but some parts of the group are not in good shape.”

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Necsa earns income from NTP. It gets paid dividends, it gets paid for services that it renders to NTP, including, but not restricted to, access to SAFARI-1. NTP also pays rent to Necsa for the buildings it uses. And the business pays royalties on intellectual property (IP) developed and held by Necsa.

“Necsa is rationalising how we benefit from utilising IP,” reported Tshelane. “It’s always been Necsa’s IP. At the time of transfer, if there was a transfer, any company would have to pay for it.”

There is light at the end of the tunnel. “The Pelchem situation is showing improvement. It made a profit in the last two quarters. Small profits, but still profits. So financial relief is on the way.”

The investments made by Necsa in redeveloping its nuclear manufacturing capacity are also starting to bear fruit. Nuclear Manufacturing, part of Pelindaba Enterprises, is now winning orders. These are not only for components for Eskom’s solitary nuclear power plant (NPP) at Koeberg, near Cape Town, but also for components for other Eskom power plants.

“This is not going to be an overnight success,” he observed. “But it is encouraging.”

Even the highly probable delay in implementing the country’s planned NPP expansion programme, which Necsa has been preparing itself to support, has benefits for the group. “A delay in the NPP new build programme will also delay the required extra investment by us to meet the resulting demands on us, so reducing the short-term financial pressures we are facing.”

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