PBMR Company could shed 75% of its staff after budget is slashed

18th February 2010 By: Terence Creamer - Creamer Media Editor

A far-reaching restructuring programme was being contemplated at the State-owned Pebble Bed Modular Reactor (PBMR) Company, which could result in 75% its 800 employees being retrenched, following a sharp fall in budgetary support for the company from government.

The National Treasury indicated on Thursday that government's contribution to the PBMR Company would end, falling from the R1-billion-plus-a-year level to the single-digit millions of rands as from 2010/11.

Between 2006/7 and 2009/10, the country allocated R7,2-billion for the development of the demonstration and fuel plants to prove the pebble-bed modular reactor technology, while it allocated a further R1,73-billion in 2009/10 for the programme.

The nuclear energy technology, which the PBMR Company was researching and developing, incorporates passive safety features, which means it cannot melt down.

In recent times, the technology had been punted as a process-heat solution, whereby steam at temperatures of up to 750 °C could be used in industrial process applications, including electricity generation, as well as in the recovery of oil sands, or other petrochemical applications.

The Department of Public Enterprises indicated on Thursday that government funding allocation would come to an end on March 31, 2010, and that no further funds would be "allocated to the company going forward".

"This is because government’s original funding allocation required that PBMR attract additional investment through investors other than government, and that it secure a customer for its product, both of which it has been unable to do despite its revised business model and product offering," the department said in a statement.

Besides government, the PBMR's current shareholders include the State-owned Industrial Development Corporation, State-owned power utility Eskom and Westinghouse. But it has been unable to find a lead partner, following the withdrawal of Excelon, of the US, in May 2002.

A government inter-Ministerial task team had been working on the future direction of PBMR and would continue to attempt to ensure that valuable nuclear skills, expertise and technology developed by the company were not lost to South Africa and were retained for application in a possible future nuclear power generation programme. 

"A final decision on the way forward for the company is expected in August 2010 and the rationalisation being contemplated by PBMR is to extend the operational life of the company to that point using its existing funding allocation," the department said.

The company's CEO, Jaco Kriek, was holding out for yet more support from the National Treasury; having told the Sunday Times in an interview published only days before Finance Minister Pravin Gordhan's Budget that he would be watching the speech with interest.

"Can we afford this?" Kriek mused. "Maybe the question should be, can we afford not to do it?" He noted, the benefits of research, the potential job opportunities arising from commericalisation and the fact that South Africa was effectively punching above its weight in the area of new-generation nuclear technology.

But, in a statement released on Thursday, the PBMR Company said that, "as a result of the cash flow position", its board was contemplating a large-scale restructuring of the company "in an attempt to reduce costs and extend the operational life of the company".

"This will potentially involve a significant reduction of approximately 75% of the employee complement, which currently comprises more than 800 people," the company said.

The near- and medium-term future depended largely on the outcome of discussions with existing and future investors and/or stakeholders to determine their conditions for further investments.

"The decision is informed primarily by the recognition that the resources available to the company will not sustain the current cost structure," the company added, noting that the restructuring process would be facilitated by a representative of the Commission for Conciliation, Mediation and Arbitration.

"The PBMR board is committed to a fair and transparent process that is respectful of the commitment and achievements of all PBMR employees.
"All efforts will, therefore, be made to identify opportunities for PBMR employees who are displaced.

"Management is in discussions with industry players to assess their ability to employ affected people," the statement concluded.