S.Africa's Eskom to use $11 bln future earnings for nuclear expansion

By Mfuneko Toyana JOHANNESBURG (Reuters) - South Africa's power utility Eskom estimates it would have 150 billion rand ($11 billion) within the next decade to help fund a nuclear expansion programme planned by the government, a senior executive said. Africa's most industrialised country, which has the continent's only nuclear power station, has earmarked atomic expansion as the centrepiece of a plan to raise power generation to ease its reliance on an ageing fleet of coal-fired plants. In a column in the BusinessDay newspaper, Eskom's group executive for generation, Matshela Koko, said under the utility's 2016/17 business plan, the firm would raise significant funds to help build the proposed nuclear plants. "These cash resources could be deployed to fund the new nuclear build programme," Koko said. The plan for nuclear expansion has become controversial, with critics saying that it would be unaffordable. With a price tag of up to 1 trillion rand for an additional 9.6 gigawatts of nuclear power due to be operational by 2030, the proposal has drawn criticism from the opposition and civil society. The main opposition party, Democratic Alliance (DA), has described Eskom's plan to use its earnings on the project as "wishful thinking", saying the utility should rather spend its cash reserves to pay its liabilities and use cheaper and more sustainable renewable and gas projects for power generation. "The validity of their projections notwithstanding, spending any cash reserves on a nuclear build programme would be financially irresponsible," the DA's shadow minister of public enterprises Natasha Mazzone said in statement. Eskom's aim to build three new power plants by 2018 have been hamstrung by delays and cost overruns, casting doubt on its ability to deliver on its expansion plans. Independent energy analyst Chris Yelland said he was uncertain how Eskom could make revenue predictions so far into the future while its sales volumes were declining and its cost of borrowing was likely to increase. S&P Global Ratings downgraded Eskom's debt to subinvestment status in March last year. Moody's already has some of the utility's debt in junk territory. "What we are seeing is a very determined propaganda exercise to sell the idea of nuclear to the public," Yelland said. Finance Minister Pravin Gordhan has said the treasury would only support the nuclear expansion if it was affordable. The energy ministry has said the government would issue requests for proposals on the new nuclear fleet on Sept. 30. ($1 = 13.6120 rand) (Editing by James Macharia)