necsa group corporate plan (2012/13-2014/15)

NECSA GROUP CORPORATE PLAN (2012/13-2014/15)

By:

Adv. Nazreen Shaik-Peremanov, Deputy-Chair

Mr Don Robertson, Acting CEO

Mr Daniel Moagi, Group Executive: Human Resource

Ms Nishina Dayaram, Group Executive: Finance and Information

Ms Chantal Janneker, Group Executive: Marketing and Communication

23 March 2012

Introduction

Mr. Don RobertsonActing CEO

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Index

1. Necsa’s Legislative and Policy Mandate

2. Necsa’s Achievements in 2011/12

3. Key objectives of the Necsa Group

4. Key Risks for the Necsa Group

5. Budget Assumptions

6. Government Grant Budget 2013

7. Government Grant Reduction

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Index

8. Necsa DoE Grant and Personnel Cost trends

9. Necsa Corporation Budget Risks

10. Group Revenue Graph 2012/13

11. Group Expenditure Graph 2012/13

12. Necsa Group Capital Expenditure Plan

13. Necsa Corporation Revenue Graph 2012/13

14. Necsa Corporation Expenditure Graph 2012/13

Continues…

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Necsa’s Legislative and Policy Mandate

Necsa’s Main Functions (in terms of the Nuclear Energy Act, 1999)

To undertake and promote research and development in the field of nuclear energy

and radiation sciences and technology and .… to make these generally available.

To process source material, special nuclear material and restricted material and to

reprocess and enrich source material and nuclear material.

To co-operate with any person or institution in matters falling within these functions.

Also: Execute institutional responsibilities on behalf of government, e.g. operation and

utilisation of SAFARI-1, decommissioning and waste management, international

obligations.

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Necsa in the Nuclear Energy Policy (2008)

Necsa shall serve as the anchor for nuclear energy research, development and

innovation in South Africa. Necsa shall be encouraged to participate in the uranium value chain. Government, through Necsa, shall undertake/investigate...

– the development of uranium conversion capabilities,

– the viability of developing its own uranium enrichment capabilities and

simultaneously seek to obtain access to established uranium enrichment

programmes,

– a strategy to develop nuclear fuel fabrication capabilities.

Government’s intention is to…establish a modern nuclear technology industry

including manufacturing and construction capabilities as well as services.

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Necsa’s Achievements

Achievements Necsa Group revenue in the 2010/11 financial year amounted to R1.11 billion (including

grants and investment income R1.66 billion). The group revenue for the 2011/12

financial year is forecast to be R1.66 billion. NTP Radioisotopes (Pty) Ltd, the SAFARI-1 Reactor and the Necsa MTR Fuel

Department managed to maintain the Necsa Group in a strong position in the

radioisotope market. During the 2010/11 financial year the NTP Group achieved sales of

R869 million. 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.

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Achievements Comprehensive feasibility studies relating to the re-establishment of nuclear fuel cycle

programmes in South Africa was completed during 2011. Excellent relationships with

most major international suppliers of fuel cycle technologies and products were

developed. Significant capital investment is required if the vision of a future local fuel

supply to the power reactor fleet is to be achieved. The Nuclear Skills Development Centre received accreditation from various SETAs and

recognition as a Decentralised Trade Test Centre for the final trade testing of

apprentices and is currently in strong demand. 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.

Continues…

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Achievements

The Necsa Visitor Centre was opened to the public in February 2011 and has been a

big success in improving public understanding of nuclear science and technology (10

000 visitors are projected as at end-March 2012).

The Necsa Group continued to demonstrate compliance to good corporate governance

by receiving unqualified audit reports from the Auditor General.

Continues…

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Necsa Group Corporate Plan 2013-2015

Key Objectives of the Necsa Group

Nuclear Power Cluster

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 PWR fuel

fabrication capabilities.

To implement Pelchem’s strategy for growth and sustainability, including an

increase of sales from R194m (2011/12 forecast) to R333m by 2014/15.

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Key Objectives of the Necsa Group

Radiation Science and Applications Cluster

To maintain full operational capability of SAFARI-1 and implement the reactor’s

ageing management programme.

To perform a feasibility study on a multipurpose research reactor to replace SAFARI-1

at the end of its operational lifetime.

To achieve the project targets for the establishment of an LEU fuel and Mo-99 target

plate manufacturing plant.

Continues…

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Key Objectives of the Necsa Group

Radiation Science and Applications Cluster cont.

To grow NTP Group sales from R851m (2011/12 forecast) to R1068m by 2014/15.

Necsa as Host of Nuclear Programmes Cluster

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

To constantly improve SHEQ management performance.

To achieve a sustainable salary bill within existing funding constraints.

To maintain infrastructure at a suitable level.

Continues…

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Key Risks for the Necsa Group

Misalignment between available funding and the role Necsa has to play in terms of its

mandate;

The unavailability of an appropriate skills mix to execute and expand Necsa’s core

technical programmes;

Ageing equipment and infrastructure as well as production plant availability; and

Business sustainability and challenging global market conditions.

It should be noted that the reducing trend of the Government grant allocated to Necsa over

the past three MTEF budget processes, together with more challenging market

conditions for its commercial subsidiaries, has increased the risk that Necsa will not be

able to fully meet its core legislative and policy mandate.

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Budget Assumptions – Exchange Rates

Exchange Rates 2012/13 2013/14 2014/15 2015/16

  R R R R

1 American Dollar / Rand 7.77 8.04 8.69 9.33

1 British Pound / Rand 12.35 13.01 14.02 14.75

1 European Dollar / Rand 10.51 10.73 11.27 11.96

1 Australia Dollar/ Rand 7.72 7.87 7.86 8.52

1 New Zealand Dollar / Rand 6.12 6.15 6.2 6.97

1 United Arab Emirates Dirhams/ Rand

2.12 2.19 2.37 2.54

Sources: Nedbank; ABSA; Investec Bank; Rand Merchant Bank

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Budget Assumptions – OtherInflation

Inflation 2012/13 2013/14 2014/15 2015/16 Projected CPI 5.7% 5.5% 6.0% 6.1%

Projected PPI 6.0% 7.1% 6.7% 6.1%

Salary Increases

2012/13 2013/14 2014/15 2015/16

Salary increases Necsa 6.0% 6.0% 6.0% 6.0%

Salary increases NTP 7.0% 7.0% 7.0% 7.0%

Salary increases Pelchem 7.0% 7.0% 7.0% 7.0%

Necsa salary increases below Public service wage agreement levels for the past 3 years

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Government Grant Budget 2013 (Excl. VAT)

BUDGET PLAN PLAN PLAN

2012/13 2013/14 2014/15 2015/16

Activities 405.6 416.8 427.9 449.3

D & D 61.8 59.8 63.4 66.5

Security Service 8.2 7.9 8.4 8.8

LEU Conversion 10.9 10.5 11.2 11.7

TOTAL Baseline Budget 2013 486.5 495.0 510.8 536.4

Previous Baseline 502.7 486.0 510.3 535.8

Reduction (R) (16.2) 9.1 0.5 0.6

Reduction % -3.22% 1.86% 0.11% 0.11%

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Government Grant Reduction Budget 2011 to Budget 2013

  2012/13 2013/14 2014/15 2015/16 TOTALBaseline Budget 2011 - issued February 2010 517.3 543.2 570.3 598.9 2 229.7Baseline Budget 2013 - issued January 2012 486.5 495.0 510.8 536.4 2 028.7

Reduction (R) (30.9) (48.2) (59.5) (62.5) (201.1)

Reduction % -6.0% -8.9% -10.4% -10.4% 20

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Necsa DoE Grant and Personnel Related Cost

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Necsa Corporation Budget RisksThis is mainly as a result of the following items:

2012/13 2013/14 2014/15 2015/16Rm Rm Rm Rm

Risk included in R&D Budget (21) (21) (18) (20)

Decrease in initial anticipated dividends from NTP (23) (26) (10) 4

Decrease in expected interest received (3) (3) (3) (3)

Other items (Including increase in PRMA) (7) (3) (1) (7)

Funding received for Processing Facility* - 12 - -

Risk related to aggressive sales (50) (50) (50) (50)

Total Risk (104) (90) (82) (77)*Discussions between Necsa , National Treasury and DoE resulted in the agreement that the funds will be applied to operational requirements. Hence the funds are not ring fenced.

A 78% increase was budgeted for local and foreign sales, excluding Intra Group Sales. This huge increase in external sales is

associated with the risk of R15.6 million in particular in the laboratories and approximately the risk of R30 million in the Manufacturing

Department. There is also a R20 million risk in the R&D environment.

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Necsa Group Revenue 2012/13

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Necsa Group Revenue Analysis

Rm

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Necsa Group Expenditure 2012/13

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Necsa Group Capital Expenditure Plan

Budget Plan Plan Plan

2012/13 2013/14 2014/15 2015/16

R’000 R’000 R’000 R’000

South African Nuclear Energy Corporation Limited

149 410 212 130 211 667 162 517 AEC Amersham(Pty) Ltd

609 240 100 100 Gammatec Aseana NDT Supplies

159 11 15 12 Gammatec Middle East Trading

23 233 28 210 Gammatec NDT Supplies (Pty)Ltd

1 573 772 860 697 Lectromax Auatralia

1 074 - 39 85 NTP Logistics (Pty)Ltd

730 - 675 475 NTP Radioisotopes(Pty)Ltd

58 701 51 830 42 880 41 274Pelchem (Pty) Ltd

34 256 70 413 51 428 31 387 Total

246 536 335 629 307 692 236 757

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Necsa Corporate Revenue 2012/13

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Necsa Corporate Revenue analysis

Rm

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Necsa Corporate Expenditure 2012/13

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Necsa Corporate Expenditure Analysis

Rm

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Thank You!!!

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