Necsa REPORT TO MINERALS AND ENERGY PORTFOLIO COMMITTEE 4 NOVEMBER 2005

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NecsaREPORT TO MINERALS AND ENERGY PORTFOLIO
COMMITTEE4 NOVEMBER 2005

• Presented by
• Schalk de Waal Interim CEO
• Ms Nomfuyo Galeni CFO

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ACKNOWLEDGEMENT ANNUAL REPORT 2004/05

• Mr Senti Thobejane was the Chief Executive
  Officer during the reporting period. He resigned
  on 31 March 2005.
• The CFO of Necsa, Ms Nomfuyo Galeni was the
  Acting CEO from 1 April 2005 until 24 October
  2005.

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• PMG note graphic not included, please
  info_at_pmg.org.za

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Vision and Mission

• Necsas long term growth strategy, Vision 2010,
  seeks to pursue nuclear technology excellence
  for sustained social and economic development.
• Its mission is to develop, utilize and manage
  nuclear technology for national and regional
  socio-economic development.
• Values that are strived for
• - Partnership
• - Life enhancement
• - Entrepreneurship
• - Excellence
• - Leadership and
• - responsibility

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NECSAs INTERIM ORGANISATIONAL STRUCTURE
Nuclear Security
Corporate Planning
Nuclear Safeguards
SHEQ
Internal Audit
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CHAIRMANS REPORT

• Necsa has to position itself to be a serious
  player in nuclear matters in terms of
• - active involvement in the international
  nuclear arena.
• - establishing Necsa as a recognized centre of
  excellence in nuclear technology and related
  fields.
• - becoming a major contributor towards the
  national agenda of developing people of South
  Africa.

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CHAIRMANS REPORTHIGHLIGHTS AND CHALLENGES

• SAFARI-1 reactor achieved 40 years of safe and
  successful operation.
• Necsa continued to experience a negative impact
  from the strengthening of the rand which resulted
  in net operating loss of R29m
• To reverse the financial challenge, a Recovery
  Plan was launched in consultation with labour.
• Reduced discretionary spending through the
  implementation of strict austerity measures.
• Necsa experts continued to play a pivotal role in
  the International Atomic Energy Agency/African
  Regional Co-operative Agreement for Research,
  Development and Training Related to Nuclear
  Science and Technology collaborative research,
  development and training programmes.

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CHAIRMANS REPORT LOOKING AHEAD

• Need to empower and re-organize Board of
  Directors
• Board intends to take SAs nuclear science and
  technology to new highs of development and
  invention
• Necsa to be established as a centre of excellence
• Necsa needs additional funding support to
• - remove balance sheet encumbarances
• - recapitalise and turn Necsa around

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MANAGEMENT REPORT HIGHLIGHTS

• Necsa experienced a turbulent time during 2004/05
  but maintained its positive image and remained
  balanced.
• Management and staff remained committed to safe
  and secured nuclear operations.
• Group revenue increased by 2,2 from previous
  year.
• Made good progress to curb the escalating cost of
  post-retirement medical aid liability.
• Success in improving gender equity quota
• - woman now 23 in 3 critical categories
• Continue

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MANAGEMENT REPORT HIGHLIGHTS

• A woman was appointed as CFO of Necsa and acted
  as CEO from April to October 2005.
• Target that 40 of workforce will be women by
  2010.
• Provide products regularly and reliably to 50
  countries mainly through NTP Radioisotopes (Pty)
  Ltd (a fully Necsa owned subsidiary).
• Implemented a staff retention strategy to protect
  core skills.
• Necsa has numerous collaborative research
  projects with the high education sector
  including universities and research institutions.
• Necsa engaged in various awareness and public
  relations programmes to educate stakeholders on
  nuclear matters.

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SAFARI-1 1965-2005
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SAFARI-1(SA FUNDAMENTAL ATOMIC REACTOR
INSTALLATION)

• SAFARI-1 is the mainstay of Necsas nuclear
  programme and will render at least a further 20
  years service to the country.
• Research reactor also utilized for production of
  medical radioisotopes mainly during last 10
  years.
• Annually 60 000 SA and 2,3 million patients
  across the world benefit from isotopes
  originating from SAFARI-1.
• Experimental beam line facilities are used
  extensively for research and training.
• ISO9001 and ISO14001 accredited (this is an
  exceptional achievement which only a few reactors
  in the world received)
• SAFARI-1 currently one of most efficiently
  operated and best utilized reactors in the world.
• The Government has approved that the reactor be
  converted to utilize low enriched uranium
  together with dedicated funding for this purpose
  (R12m/a for 3 years).

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PRODUCTS AND SERVICES

• Major products and services
• Radiopharmaceuticals used in nuclear medicine
• Radiochemicals used for medical and agricultural
  purposes
• Radioactive sources used in industry
• Irradiation services and radiation technology
  products
• Fluorine-based chemical products and services
• Specialised engineering products and services
• Operation of SAFARI-1 nuclear reactor
• Management of the institutional obligations on
  behalf of the State such as decommissioning,
  decontamination, storage and disposal of
  radioactive waste
• Management of the States programme of
  safeguarding nuclear material to prevent
  proliferation of nuclear weapons
• Provision of a support structure for African
  Regional Co-operative Agreement for Research,
  Development and Training
• Development of nuclear fuel production technology
  for PBMR
• Radiation and reactor theory research and
  services to Necsa and the PBMR Programme
• Radiochemistry and radioanalytical services for
  Necsa
• Utilisation of existing infrastructure and
  buildings
• Research collaboration with SA and international
  universities and research institutions

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ECONOMIC PERFORMANCE INDICATORS

• Approximately 14,8 per cent suppliers listed as
  black suppliers
• 33 of Necsas budget was spent on black
  suppliers
• 42 of Necsas expenditure comprised personnel
  expenses
• 69,6 of our workforce comprises designated
  employees
• Due to a moratorium on appointments, we lost 235
  employees who was replaced with 168 new appointees

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SKILLS DEVELOPMENT

• Strong alliance with the Chemical Industries
  Education and Training Authority SETA.
• About 70 learnerships were trained in various
  occupations such as engineering, chemistry,
  apprenticeships.
• Though the Necsa bursary scheme, 24 previous
  disadvantaged students are being sponsored for
  their studies in science and technology.
• A total of 1409 employees received training, some
  of whom attend more than one course in various
  disciplines, including leadership development,
  health and safety and technical training.
• ARECSA is a joint venture between five SA
  companies, namely, Eskom, Necsa, PBMR, NNR,
  Koeberg and Areva (France) for the training of
  especially previously disadvantaged individuals
  in the much sought-after nuclear and related
  skills.

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Necsa CURRENT SITUATION

• Salient issues
• Deficit recorded for 2004/05 R29,8m -
  cumulative R95,6m
• Vacancy of key personnel - 183
• Austerity measures due to cash constraints
• HSE security risk profile deteriorated
• Management systems inadequate
• Contributing factors
• Declining market conditions
• Economy of scale problems and operational
  inefficiencies
• Volatility of exchange rates
• Limited funding of institutional obligations by
  shareholder

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LOOKING TO THE FUTURE

• Necsa received an additional allocation of R56m
  for the current year to implement urgent
  HSE-related projects and to meet its commitments.
• Possible DST financial support for specific RD
  projects.
• Additional funding envisaged from 2006/07
  financial year onwards.
• Turnaround Plan submitted to Government.

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TURNAROUND PLAN

• Projects to focus on
• Nuclear technology RD expansion and upgrading.
• Restructuring and recapitalisation of commercial
  activities.
• Human capital development programmes.
• Infrastructure and HSE upgrading.
• High Temperature Reactor/PBMR Advance Fuel
  Development.
• Continue

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Necsa TURNAROUND PROGRAMME

• The Turnaround Plan to run over 5 years.
• Necsa will prioritise projects within available
  funding allocations.
• The plan will be aimed at the renewal of Necsa to
  take advantage of the re-emerging nuclear market.
• The plan will require significant commitment from
  Necsa, the Board and Government.
• Necsa is confident that the implementation of the
  plan will yield the desired results to ensure
  that Necsa could fulfill its mandate and be
  looked upon as a centre of excellence for the
  nuclear industry.