South Africa to Re-Examine Nuclear Plant Plan

South Africa's plan to build a nuclear plant to tackle its energy
shortages has to be revisited in light of the economic climate and the
project may be postponed, an energy ministry official said on Thursday.

The country plans to build its second nuclear power plant, estimated
to cost billions of dollars and meant to provide 20,000 megawatts of power
to help meet fast-rising demand that the country has not been able to keep
up with.

France's Areva and U.S.-based Westinghouse Electric have bid for the
contract. South Africa's state-owned utility Eskom has said it plans to
choose by the end of the year which company will get the contract.

Tseliso Maqubela, acting deputy director general at the Department of
Minerals and Energy, said the large scale of the investment made the
decision difficult, especially in the context of the global economic
downturn.

"To say that we can proceed with the nuclear build the way we had
envisioned would be misleading. All our plans will have to be re-looked at
and we will have to come to a happy medium we will have to prioritise," he
told an energy conference.

Maqubela said that re-prioritisation did not mean a change of policy,
but that it would be difficult to see how South Africa could afford the
nuclear plant now.

A decision either to give the contract to build the plant to one of
the two bidders, or to delay the plant altogether was envisaged by the end
of this year, he added.

The credit crisis and downgrading of Eskom's credit rating was likely
to increase costs of borrowing, Maqubela said.

He said the government was waiting for Eskom to decide before acting
further, but declined to elaborate on the timing.

"The decision still has to be made by the Eskom board and Eskom has to
advise the government. We need advice on how to proceed," he said.

But Maqubela said he saw nuclear power playing a major role in South
Africa's energy production in the future.

Andrew Etzinger, a spokesman at Eskom, said the utility could fund the
nuclear facility only from a fresh injection of cash from the government,
higher tariffs or borrowing.

QUICK DECISION

"Everyone is hoping for a decision quickly. It will require a close
alliance between us and the government before an announcement is made," he
said.

"Borrowing as we have seen is very problematic at the moment, both in
terms of the availability of funds and the cost of borrowing," Etzinger
added.

"With all the pressure on consumers already, it would be very
unpopular to increase prices by a substantial amount. It's really up to the
shareholder, the government, to get involved in funding some of these
programmes."

Speaking at the conference, Yves Guenon, an Areva official, urged
South Africa to make a "positive" decision on the nuclear plant, regardless
which company would win the contract, saying the facility would benefit the
country.

In its bid to reverse years of underinvestment in power, and to ease
chronic power shortages, Eskom plans to spend a total of about 343 billion
rand over five years on new power plants.

The South African government has said it would loan Eskom 60 billion
rand over the next three years, while the utility would raise further funds
from capital markets, higher power tariffs or loans with development
agencies such as the World Bank.

(Writing by James Macharia, editing by Anthony Barker) (For full
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