• On the one hand, the demand for energy, in all its forms, is increasing. This has had a negative impact on the availability and supply of key fuels – notably oil and gas – which has resulted in sharp price increases and disrupted economic growth across the globe. By March 2008, the oil prices had risen to more than $100 a barrel. At the same time, the International Energy Agency predicts a rise in global energy demand of 50 to 60% by 2030.
  
• On the other hand, mainstream climate science suggests that drastically reducing greenhouse gas emissions is essential to avert a major global catastrophe. While fossil fuels continue to generate most of the world’s energy, the visible signs and impacts of climatic change are forcing governments to seek alternatives.
  
• Meanwhile the earth’s population continues to rise, resulting in the increasing consumption of available energy, increased demand for food and potable water, as well as for jobs and food. In the past, one would have expected that the rising demand would be met principally by fossil fuels, which have generally been the cheapest and most convenient available. However, some natural gas reserves are showing signs of depletion, and there is growing global concern about the political instability associated with oil and gas supplies.

Small wonder that the so-called nuclear renaissance has become even more evident during the year under review, as even more countries are looking to nuclear energy as a viable alternative.

South Africa is meeting these challenges head-on through the development of the PBMR, the manufacturing of pebble nuclear fuel and the concomitant establishment of a nuclear industry in which PBMR is a main contributor. PBMR is striving to ensure the sustainability of the local nuclear industry, while providing the international community with a valued and reliable source of supply.

South Africa’s growing role in the international nuclear community was confirmed when it entered into an agreement with Brazil and India to assist the latter in its quest for more nuclear power. This cooperation would involve supplying technology, equipment and material. International cooperation is crucial if the world is to successfully make the transfer from fossil fuels to nuclear energy. By sharing ideas and technology, more reactors can be built more efficiently and, most importantly, more safely. At the same time, it demonstrates how nuclear development has become a global team effort: South Africa is also collaborating with the USA, Spain, Germany, Japan, Russia and China in various aspects of its current programme.

Cabinet approved accession to the Generation IV framework agreement on 18 April 2007. South Africa acceded to the Generation IV International Forum (GIF) through the Department of Minerals and Energy, and PBMR represents South Africa in the GIF programmes.

Cabinet approved South Africa’s hydrogen and fuel cell strategy in May 2007. PBMR has been able to play a key role in developing a platform for business planning for nuclear hydrogen solutions for South Africa, which has been adopted by the DST.

PBMR has successfully completed its first contract on Phase 1 of the Next Generation Nuclear Plant (NGNP) for the United States Department of Energy (DOE).

The shape of the future PBMR company became more defined during FY2007, as the various roleplayers moved closer to each other and the organisation took deliberate strides towards constructing the DPP at Koeberg. The dream to develop a fleet of gas-cooled modular nuclear reactors has become more tangible through specific accomplishments and events.

Firstly, the relationship with our shareholders matured through a closer working relationship. Working together with Eskom on the SAR, as well as ongoing interactions with the NNR, paved the way for the licensing process to start in earnest. This collaboration has placed PBMR firmly on the road to becoming the leading gas-cooled nuclear reactor company in the world, as well as the leading developer of graphite-coated nuclear fuel pebbles.

The support of the South African government has been invaluable. The consistent encouragement and support of government leaders inspires the entire company. The strategic understanding and acceptance by the government of its role in the development of first-of-a-kind engineering (FOAKE) has been encouraging and allowed the Board and executive management of the PBMR to focus on delivery.

In August 2007, the government launched its draft policy on nuclear energy to guide the creation of a new nuclear power generation industry. It has the approval of the Cabinet and is a logical development based on President Thabo Mbeki’s commitment in his ‘State of the Nation’ address to accelerate the preparatory steps required for South Africa to increase its reliance on nuclear and renewable energy. The draft policy presents a vision for South African to become globally competitive in the use of nuclear technology, and in the use of innovative technology for the design, manufacture and deployment of state-of-the-art nuclear energy systems, including both power reactors and the nuclear fuel cycle.

Secondly, there has been an enterprise-wide mindshift as the corporate culture transformed from research and development to the business of nuclear generation, fuel development and production. Following the 2008 Budget, the Minister of Finance announced a R60 billion loan to Eskom to provide funding for the planned energy-generation expansion programme. Part of the plan is to increase South Africa’s power generation from nuclear fuel to 20 000 MWe by 2025 to 2030, while doubling South Africa’s current generation capacity to 80 000 MWe. The new-build programme provides for at least 24 pebble bed reactors.

In the third instance, the realignment of the Board’s composition to the objectives of the Company, has improved the good working relationship between the Board and management even further. The Board subcommittees were reviewed and adapted to match the business, while corporate governance was strengthened and improved. The Board completed its own performance review and improved its communication with the PBMR management, shareholders and stakeholders.

In the fourth place, PBMR is firmly committed to the development of South Africa’s fledgling nuclear industry, in conjunction with Eskom, Necsa and other roleplayers. Initiatives to develop an ASME III manufacturing capability, as well as to establish and drive a Nuclear Industry Association of South Africa (NIASA), have cemented PBMR’s polar developmental role.

During the year under review, the global acceptance of nuclear power as a safe and clean energy source has increased manifestly.

Dr Mohamed ElBaradei, Director General of the International Atomic Energy Agency (IAEA), contends that innovation is necessary if nuclear power is to fulfil its potential as a source of energy worldwide. He adds that this calls for the design of new, innovative reactors and fuel cycles with enhanced features for safety, security and non-proliferation. ElBaradei says there is a need for small- and medium-size reactors. “Successful production of safe and affordable reactors in this size range will be essential if nuclear power is to be a feasible option for countries and regions with small electrical grids,” he believes.

Eminent British ‘green’ scientist, Dr James Lovelock, creator of the Gaia hypothesis, believes that nuclear power is the last, best hope for averting climatic catastrophe. He says: “We have no time to experiment with visionary energy sources; civilisation is in imminent danger and has to use nuclear, the one safe, available energy source, now, or suffer the pain soon to be inflicted by our outraged planet.”

Obviously, the historic concerns about nuclear proliferation, waste storage and accidents remain, which brings the PBMR into sharp focus: a safe, non-proliferating way to harness the atom in a reactor small enough to be assembled from mass-produced parts which should make it affordable to small countries.

It is essential that all the building blocks be put in place as planned, for the ultimate commercial success of the PBMR. Local and global interest in using pebble bed reactors for both electricity generation and process heat applications is growing rapidly.

While the PBMR team has presented its safety case to Eskom for its nuclear licence application, the application for a process heat licence in the USA is also under way. The PBMR programme provides opportunities for South African leadership in the global nuclear systems domain.

In 1953, USA President Eisenhower declared that a special purpose of Atoms for Peace would be “to provide abundant electrical energy in the power-starved areas of the world.” That vision has yet to be realised, especially in Africa where more than one sixth of the world’s population lives, using only 4% of the electricity generated globally. Three quarters of that is used in South Africa.

It is clear that the challenges of introducing nuclear power to developing economies are formidable, and much work is to be done in addressing these challenges. There is no doubt that the PBMR can provide the answer to power up the African Renaissance. South Africans, and all Africans, can be proud of the progress made on the PBMR.

It is, indeed, an idea whose time has come.

The past year has been challenging, but the learning achieved by PBMR teams, supported by our stakeholders, resulted in tangible progress with regard to the regulatory framework to ensure the safety and integrity of Africa’s first indigenous nuclear reactor development.

Compliance within the regulatory framework is subject to a tight time framework that will require excellent relationships with shareholders and stakeholders to maintain the lead in the global pursuit of the first New Generation nuclear reactor.

As international competition increases, the role of the government in support of the industry and, specifically, the PBMR will be crucial. Building the DPP at Koeberg and the nuclear fuel plant at Pelindaba will have to be underpinned by the coordination and development of local suppliers to maximise local job opportunities and skills development.

PBMR is already looking beyond the power plant at Koeberg to the commercial development of a fleet of modular reactors, and the benefit that would bring to the people of South Africa and the world.

I would like to thank the directors as well as the executive and employees of the PBMR for their excellent teamwork towards realising the dream of a sustainable future for our Company, our country, our continent and the world. Let us maintain our resolve, our drive and determination.