NECSA GROUP CORPORATE PLAN (2011/12 - 2013/14)

By:

Rob Adam

Necsa CEO

24 June 2011

Parliament Portfolio Committee on Energy

Index

2

1. Necsa’s Achievements

2. Nuclear Power Cluster

3. Radiation Science and Application Cluster

4. Necsa as Host of Nuclear Programmes Cluster

5. Key Risk for Necsa Group

6. Key Performance Indicators

7. Budget Assumptions

8. Government Grant Budget 2012

9. Government Grant Reduction

10. Necsa Group Revenue 2011/12

11. Necsa Group Expenditure 2011/12

Index

3

11. Necsa Group Capital Expenditure Plan

12. Necsa Corporation Revenue 2011/12

13. Necsa Corporation Expenditure 2011/12

14. Necsa Corporation Government, Grants vs. Personnel Costs

Continues…

Necsa’s Achievements in 2010 - 2011

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• Necsa Group revenues from products and services reach R1,17 billion,

approximately 15% up from last year.

• NTP Radioisotopes (Pty) Ltd, the SAFARI-1 Reactor and the Necsa

MTR Fuel department combined forces to successfully address the

global medical radioisotopes supply crisis during the period 2009-2010.

In doing so the NTP Group achieved record sales and became the world

leader in the supply of medical isotopes for quite some time until the

Canadian NRU reactor was returned to operation.

• The Nuclear Skills Development Centre was established successfully,

received accreditation from three SETAs and also recognition as a

Decentralised Trade Test Centre to do the final trade testing of

apprentices.

Necsa’s Achievements

6

• The successful conversion of the SAFARI-1 reactor to low enriched uranium

(LEU) fuel, together with the irradiation of LEU target plates for Molybdenum-

99 production, saw NTP becoming the only company in the world with the

proven ability to produce Mo-99 on a commercial scale using a fully LEU

process. A project for the establishment of LEU silicide fuel fabrication and

LEU target plate manufacturing facilities are well on track.

• The Necsa Visitor Centre, as the first phase of the envisaged Nuclear

Science Centre, was successfully completed and opened to the public.

• Necsa is one of the first Corporations in Africa to obtain the American Society

for Mechanical Engineers (ASME) certificate. We are now in a position to

manufacture any class 1 (NB) class 2 (NC) or class 3 (ND) AMSE III

components without any design responsibilities.

Necsa’s Achievements

Continues…

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• A comprehensive set of feasibility studies relating to the re-

establishment of nuclear fuel cycle programmes in South Africa was

completed. In the process Necsa developed excellent relationships with

all major international suppliers of fuel cycle technologies and products,

which will be of great importance during the implementation of the

Nuclear Energy Policy. The project to establish development and test

facilities for uranium enrichment technologies are on track.

• Necsa enhanced its SHEQ System by adopting and including all the

quality management system requirements of the National Nuclear

Regulator as prescribed in RD-0034: Quality and Safety Management

Requirements for Nuclear Installations.

Necsa’s Achievements

Continues…

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• Necsa contributed to a range of policy making and public participation

processes relating to the energy planning, nuclear energy R&D and related

topics, and maintained participation in national and international collaborative

programmes in the field of nuclear R&D and Generation IV nuclear energy

systems.

• For the first time since 1963, Necsa has reached the point where we can

dispose low level radioactive waste that complies fully with the Vaalputs

Waste Acceptance Criteria. The first shipment of Necsa low level radioactive

waste was recently transported to the National Radioactive Waste Disposal

Facility at Vaalputs in the Northern Cape Province.

• The Necsa Group continued to receive unqualified audit reports from the

Auditor General

Necsa’s Achievements

Continues…

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Transport Truck at the Vaalputs Disposal Site

Necsa’s Achievements

10

Transport Truck at the Vaalputs Disposal Site

Necsa’s Achievements

Corporate Plan

2011 - 2013

Nuclear Power Cluster• Long Term Objective: To expand and industrialise Necsa’s nuclear

and related technologies to, amongst others, establish NFC

capabilities and plants and to ensure self-sufficiency of nuclear fuel

cycle activities for the RSA.

• Nuclear power cluster comprises:

– Uranium Beneficiation;

– MTR fuel and target plate production;

– PWR fuel programme;

– Nuclear Manufacturing;

– Components of Applied Chemistry; and

– Pelchem (Pty) Ltd.

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Nuclear Power Cluster

• Medium-Term Objectives include:

– To progress with preparations for the development or demonstration

of required nuclear fuel cycle processes and technologies

– To achieve the necessary project targets for establishment of MTR

and PWR fuel fabrication capabilities

– To increase nuclear manufacturing sales from current R52m to

R98m by 2013/14

– To diversify Pelchem’s product portfolio and increase current sales

of R169m to R232m by 2013/14

13

Continues…

Radiation Science and Applications Cluster• Long term Objectives:

– Radiation Sciences R&D outputs: To grow outputs of new technology,

products and services in alignment with applicable national priorities and

imperatives in science and technology; and to drive Necsa’s commercial

growth objectives.

– Reactor utilisation: To optimally utilise the SAFARI-1 reactor for isotope

production and research purposes by ensuring reliability and availability;

and to plan for the eventual replacement of the reactor and/or the

establishment of an additional neutron source for research and

production.

– Revenue growth: To maintain Necsa/NTP’s dominant status in the global

radioisotope market and further grow its market share.

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• This cluster comprises of:

– Radiation Science and components of Applied Chemistry

– SAFARI-1

– NTP Radioisotopes

• Medium-Term Objectives include:

– To increase Necsa’s research, development and innovation outputs

– To maintain the full operational capability of SAFARI-1 and to progress

with studies on future irradiation facilities

– To grow NTP Group current year sales of R851m by 47.5% to R1,255m

by 2013/14

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Radiation Science and Applications Cluster

Continues…

Necsa as Host of Nuclear Programmes Cluster• Long Term Objective: To continuously strengthen Necsa’s ability to

host nuclear programmes, through the nuclear compliance portfolio

of functions and support services including human resource

management, financial management and site and infrastructure

services.

• This cluster comprises of:

– Licensing

– Nuclear safeguards management

– SHEQ

– Security

– Technical Services

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– Human Resources

– Finance and Information Management

– Strategy and Performance

– Marketing and Communication

• Medium-Term Objectives include:

– To constantly improve SHEQ management performance

– To increase the percentage of black technical staff and black

professionals

– To maintain investment in training of staff

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Necsa as Host of Nuclear Programmes Cluster

Continues…

Key Risks for the Necsa Group• Key Risks for the Necsa Group

– Financial resource constraints, including misalignment of funding

required to deliver timeously on the role Necsa has to play in terms of

the NEP and challenging market conditions;

– Shortage of appropriately skilled staff to execute and expand Necsa’s

core technical programmes;

– Ageing equipment (particularly the SAFARI-1 reactor) and

infrastructure as well as production plant availability;

– Business sustainability (particularly of Pelchem); and

– Lack of public awareness and knowledge of nuclear technologies.

– Fragmented nuclear industry.

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Key Risks for the Necsa Group

• It should be noted that the reducing trend of the Government grant

allocated to Necsa over the past two MTEF budget processes,

together with more challenging market conditions for its commercial

subsidiaries, place Necsa at risk of not fulfilling its core legislative and

policy mandate.

• It is also pertinent to highlight here that although the NTP Group has

produced excellent results in the recent past, that its markets are

likely to stabilise going forward and that its envisaged Dedicated

Isotopes Production Reactor (DIPR) project will require significant

contributions from its reserves until around 2021/22.

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Continues…

Key Performance Indicators

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Output KPA KPI 2010/11 Actual 2011/12 Target 2012/13 Target 2013/14 Target1. Necsa Group

annual incomeAnnual % growth in Group income

19.90% 11.60% 14% 6.30%

2. Necsa corporate core grant

Annual % growth in core grant

6.70% 5% 5% 5%

3. Necsa Group other grant income

Annual % growth in other grant income

10.40% 109% 127% (33.2)%

4. Refereed research publications

Number of refereed research publications

17 22 28 32

5. Innovation value chain

Number of innovation disclosures

31 10 12 14

 Number of priority patent applications

1 3 4 6

 Number of PCT or equivalent applications

4 3 3 4

 Number of granted international patents

12 12 15 8

6. Nuclear fuel cycle (PWR) programme implementation

Achievement of strategic project objectives

Concept design for NFC development

facilities completed and included in various

study reports

• Necsa approved as supplier of PWR fuel components • Techno-economic study for

U from Usi completed

• Stage 1 of U-plant refurbishment

commissioned

• Basic design for U recovery from Mo production residue

and U from Usi submitted to NNR

Procurement and construction

of U from Usi facility

Key Performance Indicators

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Output KPA KPI 2010/11 Actual 2011/12 Target 2012/13 Target 2013/14 Target

7. Black technical professionalsBlack technical professionals as a % of all technical professional staff

29% 30% 31% 32.60%

8. Investment in trainingInvestment in training as % of staff budget

8% 7.60% 7.80% 8%

9. Public dose impact of annual releases and events

Reduction in releases (3-year moving average)

9µSv 6.3µSv 6.3µSv 5.8µSv

10. Unqualified audit: Compliance to GAAP accounting, auditing and PFMA requirements

Number of annual report qualifications

0 0 0 0

11. National key point reportable security incidents

No NKP events 0 0 0 0

12. Marketing and communication programmes to stimulate public awareness on nuclear energy (ito NEP policy principle 14)

Improve public perceptions of nuclear technologies as measured by the social development component of the Emex rating

15 points 15 points 15 points 15 points

 Promote and grow the Necsa brand as measured by the MSA rating

62% 60% 62% 64%

 Advertising volume equivalent

  R15.8 million R25.7 million R35.4 million

Continues…

Budget AssumptionsInflation 2012 2013 2014 2015

Projected CPI 5.2% 6.0% 5.7% 5.7%

Projected PPI 6.2% 6.9% 6.5% 6.5%

2012 2013 2014 2015

Salary increases Necsa 0.0% 0.0% 0.0% 0.0%

Salary increases SAFARI1

6.0% 5.7% 5.7% 5.7%

Exchange Rates 2012 2013 2014 2015

R R R R

1 American Dollar / Rand 7.13 7.85 8.50 8.96

1 British Pound / Rand 11.22 12.41 13.48 14.25

1 European Dollar / Rand 9.10 9.67 10.41 10.93

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Government Grant Budget 2012 (Excl. VAT)

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ACTUAL BUDGET PLAN PLAN PLAN

2011 2012 2013 2014 2015

ACTIVITIES 416.2 431.3 422.0 407.8 428.1

SECURITY SERVICES 8.2 8.4 8.2 7.9 8.3

LEU Conversion 11.0 11.1 10.9 10.5 11.0

D & D 68.2 63.2 61.9 59.8 62.8

TOTAL 503.6 514.0 503.0 486.0 510.2

Baseline Budget 2011 Nov. 2009 503.6 528.0 517.3 548.4 575.8

Reduction (R) - (14.0) (14.3) (62.4) (65.6)

Reduction % 0.0% -2.7% -2.8% -11.4% -11.4%

Government Grant Reduction Budget 2010 to Budget 2012

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  2011 2012 2013 2014 2015 TOTAL

Baseline Budget 2010 Nov. 2008 522.3

550.9

584.0

619.1

650.1 2,926.4

Baseline Budget 2012 Feb. 2011 503.6

514.0

503.0

486.0

510.2 2,516.8

Reduction (R) (18.7)

(36.9)

(81.0)

(133.1)

(139.9)

(409.6)

Reduction % -3.6% -6.7% -13.9% -21.5% -21.5% -14.0%

NECSA Group Revenue 2011/12

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NECSA Group Expenditure 2011/12

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Necsa Group Capital Expenditure Plan

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Budget Plan Plan Plan

2012 2013 2014 2015

R’000 R’000 R’000 R’000

Land & Buildings 26 712 9 502 1 860 592

Plant 125 338 241 627 340 995 166 384

Furniture & Fittings 770 591 586 631

Motor Vehicles and Transport Containers

8 019 1 647 1 232 180

IT Equipment 7 110 3 573 2 509 3 032

Machinery and Equipment

72 518 56 524 60 242 60 217

Component Spares 2 282 2 779 1 288 1 372

Total 242 749 316 243 408 712 232 408

NECSA Corporation Revenue 2011/12

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NECSA Corporation Expenditure 2011/12

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NECSA Corporation Government Grant vs. Personnel Cost

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31Thank You!!!