A South African pact with Russia’s Rosatom to build nuclear reactors was deemed unlawful by a High Court on Wednesday, casting fresh doubt over the country’s energy plans.

Operator of Africa’s only nuclear power station, Eskom wants to add 9,600 megawatts (MW) of nuclear capacity — equivalent to up to 10 nuclear reactors — to help wean the economy off of polluting coal in what could one of the world’s biggest nuclear contracts in decades.

South Africa and Russia signed an Intergovernmental Agreement (IGA) in 2014 that sealed a cooperation pact between state-owned nuclear group Rosatom and state-owned utility Eskom.

Judge Lee Bozalek said any request for information to kickstart the procurement process was set aside as was the cooperation pact. The deal had included a favorable tax regime for Russia and placed heavy financial obligations on South Africa, Bozalek said.

“Seen as a whole, the Russian IGA stands well outside the category of a broad nuclear cooperation agreement, and at the very least, sets the parties well on their way to a binding, exclusive agreement in relation to the procurement of new reactor plants from that particular country,” Bozalek said.

The Southern African Faith Communities Environment Institute (SAFCEI) and Earthlife Africa-Johannesburg had jointly filed the court application to stop the nuclear program.

“There are no more secret deals and everything has to be done in the open,” said SAFCEI spokeswoman Liz McDaid.

It was not immediately clear whether the government would appeal the ruling. The Department of Energy declined to comment.

The government has downplayed the agreement with Russia, saying it was not a final contract and that an open tender process would still be conducted.

The head of South African nuclear state agency Necsa said last year that Rosatom is not the frontrunner and that the tender would be open to all bidders.

Eskom Chief Nuclear Officer Dave Nicholls said: “We haven’t been through the judgement yet so we can’t comment.”

Rosatom officials in Moscow were not available for immediate comment.

An official at Rosatom’s regional office in Johannesburg said the company “could not comment on legal disputes between South African entities that do not directly involve us.”

Nuclear option

After the 2011 nuclear disaster in Fukushima led many countries to cut back nuclear programs, South Africa is one of the few still considering a major new reactor project and the tender is eagerly awaited by manufacturers from South Korea, France, the United States and China.

 

With U.S. firm Westinghouse in Chapter 11 proceedings and France’s Areva being restructured, Rosatom’s two main competitors are hamstrung by financial difficulties, boosting the Russian firm’s chances.

China has little experience building reactors abroad and Korea’s KEPCO has only one major foreign reactor contract, in the United Arab Emirates.

France, which built South Africa’s two existing reactors, is keen to stay in the race and utility EDF – which is taking over Areva’s reactor manufacturing unit – said last month it would respond to the South Africa’s “request for information.”

With Eskom set to decommission 34 gigawatts of coal-fired power generation over the next 20 years and a lack of large-scale hydro or natural gas plans, nuclear is the best alternative, Eskom’s Nicholls said in an opinion piece in the Sunday Times.

Some economists, however, have questioned whether the country’s ailing economy can afford a nuclear building program they estimate could cost around 1 trillion rand ($76 billion).

Rating agencies S&P Global and Fitch downgraded South Africa’s credit to junk this month over the firing of finance minister Pravin Gordhan, saying the move risked changes to government policy.

Some pundits say Gordhan was axed partly because he resisted pressured by a faction allied to President Jacob Zuma, which criticised Gordhan’s plans to block spending on nuclear expansion.

New Finance Minister Malusi Gigaba has said nuclear expansion will only be pursued if it is affordable.

“This is most probably just another bump in the road and nothing is going to derail the nuclear program,” said Travis Hough, business unit leader for energy & environment at consultancy Frost & Sullivan Africa.
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