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Presentation of the 2011/2012 Necsa Annual Report

12 October 2012. Presentation of the 2011/2012 Necsa Annual Report. Parliamentary Portfolio Committee on Energy. 1. Content. 2012 Necsa Annual Report Overview of Revenue Generators of the Necsa Group Progress on Necsa Skills Training Programmes Progress on Necsa Transformation Programme

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Presentation of the 2011/2012 Necsa Annual Report

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  1. 12 October 2012 Presentation of the 2011/2012 Necsa Annual Report Parliamentary Portfolio Committee on Energy 1

  2. Content • 2012 Necsa Annual Report • Overview of Revenue Generators of the Necsa Group • Progress on Necsa Skills Training Programmes • Progress on Necsa Transformation Programme • SAFARI-2 Feasibility Study • Retrenchments at Necsa • Radioactive Waste Management

  3. 2011/ 2012 Necsa Annual Report 3

  4. Mandate In terms of Section 13 of the Nuclear Energy Act, No. 46 of 1999, the South African Nuclear Energy Corporation SOC Limited (Necsa) is mandated to: • Undertake and promote research and development (R&D) in the field of nuclear energy and radiation sciences and technology and, subject to the Safeguards Agreement, to make these generally available; • Process source material, special nuclear material and restricted material and to reprocess and enrich source material and nuclear material; and Co-operate with any person or institution in matters falling within these functions, subject to the approval of the Minister.

  5. Highlights of the Review Period • A post-Fukushima Daiichi safety re-assessment, conducted on the SAFARI-1 research reactor and its operational systems in response to a National Nuclear Regulator (NNR) directive, confirmed the fundamental safety and integrity of the reactor and its operations. • In line with its core R&D Mandate, Necsa recorded 11 new innovation disclosures and 39 peer reviewed publications. • NTP remains one of the world leaders in the supply of medical isotopes and the only company in the world that produces Molybdenum-99 (99Mo) using a fully Low Enriched Uranium (LEU)-based process. • NTP achieved 2 million disabling injury free hours. Continues…

  6. Highlights of the Review Period • The Necsa Visitor Centre, which incorporates interactive displays on nuclear technologies, received nearly 10,000 visitors since February 2011. • A total of 447 apprentices completed semester training programmes offered by Necsa’s Nuclear Skills Development Centre. • Eleven interns were enrolled at Necsa’s NSD centre to complete studies in technical trades. • Necsa Group donated a Positron Emission Tomography (PET) Camera to Tygerberg Hospital and the instrument was be functional by the end of the fourth quarter of 2011. • Financial support was provided to the “Skills for Life” project in Diepsloot to provide skills development to unemployed people in the Diepsloot informal settlement. Continues…

  7. Highlights of the Review Period • US 25$ million was awarded to Necsa by the US DoE to acknowledge the successful commercial scale production of Mo-99, using low enriched uranium target plates. • During the 2011 National Science Week, Necsa hosted more than 2,075 learners and educators from 41 schools, the attendance rate increased by 11% compared to the previous reporting year.

  8. 2011/12 Performance • Financial KPI’s were not met as a result of: • A decline in Group sales mainly due to difficult market conditions in the manufacturing and medical isotope sectors; and • A reduction in baseline allocation; • Operational KPI’s that were exceeded: • Research publications outputs and innovations were exceeded; • Safari 1 reactor has availability of 308.3/303 days Continues…

  9. 2011/12 Performance • Human Resources KPI’s were typically exceeded: • A higher number of Black technical professionals were recruited; and • Investment in staff training exceeded its target. • Marketing KPI’s were typically exceeded: • The Necsa brand penetration outperformed target mainly due to its direct involvement in addressing nuclear safety questions following the Fukushima incident in March 2011; and • Compliance KPI’s were met: • Necsa achieved an unqualified audit; • There were no National Key Point incidents; and • Public dose impact of annual releases was only 4.8% of the NNR authorised limit.

  10. Environmental Performance Water Consumption • The following table reflects water consumption for the period April 2011 – March 2012 Continues…

  11. Environmental Performance Electricity Consumption • Progressive energy savings opportunities implemented resulted in significant cost savings for Necsa. The site electricity consumption for the reporting year was 100.2 GWh (102.9 GWh for the previous year) representing a reduction of 2.7 GWh (2.6%).

  12. Auditor-General’s Report • Unqualified report for 2011/12 • Emphasis of matter • Restatement of Corresponding Figures (as a result of an error in classification between operating leases and finance leases discovered during the2012 financial year) • “The directors’ report indicates that whilst Necsa has been assessed as a going concern for the financial year ended 31 March 2012, there has been a significant reduction in government funding. This along with other matters set forth in the directors report indicate the existence of a material uncertainty that may cast significant doubt on the entity’s ability to fulfil certain of it’s obligations as they become due”. • Fruitless and wasteful expenditure

  13. Report of the Audit and Risk Committee • The Audit and Risk Committee evaluated the quarterly financial reports • The Committee has a standing agenda item on compliance with regulation and has adopted terms of reference which spell out the roles of the committee. • The Committee is satisfied that internal controls and systems have been put in place and that these controls have functioned effectively during the period under review • During the year, the Committee met with the external auditors, without management being present. The Committee accept the audit opinion of the Auditor-General on the annual financial statements. There were no uncorrected material errors

  14. Statement of Financial Position

  15. Statement of Comprehensive Income

  16. Statement of Cash Flows

  17. Overview of Revenue Generators of the Necsa Group

  18. NTP Group • NTP was established as a wholly owned subsidiary of Necsa in 2003 and operates as a commercial subsidiary of Necsa. • NTP routinely serves customers in 60 countries on six continents with a range of radiation-based products and services and is one of the world’s leading producers of radiochemicals, radiopharmaceuticals and other radiation technology-based products • NTP Group mainly generates the Necsa Group’s external revenue and achieved sales of R 842 million during the 2011/12 financial year, in the face of challenging global market conditions.

  19. Pelchem SOC Ltd (Pelchem) • Pelchem was established as a wholly owned subsidiary of Necsa in April 2007. • It has a proud record of more than 25 years experience in locally produced fluorspar beneficiation, • Pelchem maintains a portfolio of fluorochemical business activities that serve local and international markets while playing a leading role in the SA Fluorochemical Expansion Initiative (FEI) • Pelchem is the only company in the Southern Hemisphere which produces fluorochemicals from fluorspar. Continues…

  20. Pelchem SOC Ltd (Pelchem) • South Africa has the largest global reserves of fluorspar, but currently supplies less than 10% of the global fluorspar demand, while earning less than 0.5% of the $16 billion annual global turnover. Downstream value adding manufacturing is therefore a strategic focus for Pelchem • Pelchem achieved sales of R186.0 million during the 2011/12 financial year

  21. Nuclear Manufacturing Centre (NMC) • NMC is a Necsa commercial business unit with vast experience and specialised capabilities in manufacturing. • NMC can fabricate high quality products and plant components from a wide range of metals and exotic alloys and is certified to do manufacturing that complies with the following codes and standards: • ISO 9001/2008 • ISO 3834 • OHSAS 18001 • ASME VIII U Stamp • ASME III (only company in Africa with this certification) Continues…

  22. Nuclear Manufacturing Centre (NMC) • ASME III certification is critically important for Necsa’s nuclear manufacturing capabilities in providing a platform for leveraging localisation opportunities that will arise from the nuclear power reactor new-build programme for the fabrication of high level nuclear reactor equipment. • NMC is thus aligned with the Government’s policies and objectives as outlined in the Industrial Policy Action Plan 2 (IPAP2). • NMC achieved sales of R 44.0 million during the 2011/12 financial year

  23. Analytical and Calibration Services (ACS) • ACS is a Necsa business unit that supports Necsa’s compliance with Nuclear, safety, health and environmental regulatory and license requirements, including compliance to process and/or product specifications. • ACS’s services comply with the strict nuclear industry requirements. • Since most ACS services are not available from any other laboratories in South Africa, these services are offered commercially to industries in South Africa & SADC countries as well. Continues…

  24. Analytical and Calibration Services (ACS) • ACS’s client base includes: • Nuclear industry • Mining industry • Energy sector • Government environmental monitoring programmes • Environmental consultants and safety managers • ACS achieved sales of R 26.7 m for the 2011/12 financial year. Continues…

  25. Nuclear Liabilities Management (NLM) • NLM is a Necsa business unit that provides radioactive waste management services • These professional and cost effective Radioactive Waste Management and Radiation Protection services are also offered to external clients. • NLM has been authorised by Government (Departments of Energy and Department of Health) to accept radioactive waste from external generators and small users for further management and eventual disposal • NLM achieved sales of R 15.0 m for the 2011/12 financial year.

  26. Challenges Experienced by Revenue Generators • All commercial revenue generators are under financial pressure due to: • Market pressures • Global economy • Economies of scale • Ageing infrastructure • Competitive medical isotope market • Strain on achievement of targets • Austerity measures are also being implemented, however these are not medium to long-term solutions as they stifle growth

  27. Progress on Necsa Skills Training Programmes

  28. Index • Human Resources Development Priorities • Study Assistance Scheme [218] • Mentoring and Coaching [23] • Necsa Graduate Support Programme (NGSP) [45] • Internships [36] • Apprenticeships [398] and Learnerships [10] • Adult Basic Education and Training (ABET) [68] • Decentralised Trade Test Centre (DTTC) [428]

  29. Internal Key Drivers • The shortage of skilled people in core business. • Creation of indigenous experts. • The existing workforce is aging and thus the knowledge base is shrinking due to natural attrition. • The need to invest in big projects to attract young professionals and sustain knowledge transfer from the ageing workforce to young professionals. • The demand for nuclear skills is limited to specific skills sets.

  30. Human Resource Development Priorities • Increase the ratio’s of technical staff in regard to support staff. • Increase the number of researchers with Masters and PHD degrees. • Increase the number of Previously Disadvantaged Individuals (PDI) technical staff. • Establish a Necsa Learning Academy: • Increase capacity of manufacturing skills (NSD, NNMC and DTTC) • Radiation Safety • Leadership, management and supervisory training • Transversal skills

  31. Study Assistance Scheme • The programme assists Necsa employees to develop their skills by obtaining further educational qualifications at various institutes of higher learning throughout South Africa. • From April 2011 to March 2012, 218 employees were assisted through this program.

  32. Mentoring and Coaching • The program was established to accelerate the transfer of skills and experience, especially in core skills areas, to young graduates who are progressively entering the organization. • In 2011/12, 18 mentors and 23 mentees participated in the program.

  33. Necsa Graduate Support Program (NGSP) • This program consists of the Graduate-in-Training Scheme (GiTS), Undergraduates Bursary Scheme (UBS) and Postgraduate Bursary Scheme (PBS). • It was established to ensure the creation of a sustainable pool of critical skills. • There were 19 GiTS, 16 undergraduate bursars and 10 postgraduate bursars in 2011/12, mainly in the fields of engineering, physics and chemistry.

  34. Necsa Internships • In continued support of the National Skills Development Strategy Necsa hosted the training of 36 interns and learners that were funded and supported by CHIETA (Chemical Industries Education and Training Authority), DST (Department of Science and Technology) and DoE (Department of Energy) during 2011/12.

  35. Apprenticeships and Learnerships • Necsa was awarded 398 Apprenticeships by several Seta’s • Necsa was awarded provider accreditation by SASSETA (Safety & Security Sector Education and Training Authority) for the provision of 10 learnerships

  36. Adult Basic Education and Training (ABET) • A total of 92 employees enrolled for the program for the period 01 February 2011 to 30 November 2011 with 68 declared competent in the relevant ABET levels. • During this period 26 learners were declared competent at NQF Level 1 in both Communications in English and Mathematical Literacy after writing the IEB (Independent Examination Board) exams. • Employees enroll voluntarily on the program after permission has been granted by their line managers. .

  37. Nuclear Skills Development Centre (NSD) • The NSD continues to grow and fulfill its mandate in terms of the National Skills Development Strategy. • The quality of training at NSD is of a high standard and is partnered with several clients externally such as: • Department of Public Works (100 students) • Development Bank of South Africa (150 students) • Alstom (55 students) • DB Thermal (35 students) • Others on job creation projects (88 students)

  38. Decentralised Trade Test Centre (DTTC) • In its Decentralized Trade Test Centre (DTTC), the NSD • Conducted 120 pre-tests to determine the readiness of candidates for the final trade tests, • 280 candidates received trade test preparation required by the SETAS and • 245 candidates wrote the artisan trade tests. • 207 passed (84.5%)

  39. Progress on Necsa Transformation Programme

  40. Staff Composition

  41. Group Employment Equity Performance

  42. Black Professionals and Technical Staff • The decrease in numbers at NSD is due to the new training period of 32 weeks skills training required by CHIETA as from 2011/12 instead of the 24 weeks skills training that was acceptable in the previous financial year. The 218 target represents the capacity that the NSD can accommodate.

  43. SAFARI-2 Feasibility Study

  44. SAFARI-1 Today • Impressive track record of being a world leader in safe operation and extensive utilisation of a research reactor of this type. • Since 25 June 2009, the SAFARI-1 reactor has been run continuously on a fully low enriched (LEU) fuel with a U235 content of less than 20%, conforming with International Safeguards requirements. • Central to Necsa Group’s business activities (playing a pivotal role in global nuclear medicine) and execution of Necsa’s nuclear R&D mandate from Nuclear Energy Act. Loss of SAFARI-1 will be detrimental to Necsa and South Africa. • Extensive maintenance programme underway to optimise and extend remaining lifetime within safety and licensing limits. • Will reach end of its operational life between 2022 and 2030, depending on ageing management programme. Preferable that alternative is in place by beginning of this period.

  45. Studies on a Possible Replacement Reactor • During 2010-2011 a feasibility study was performed on a Dedicated Isotope Production Reactor (DIPR) to follow SAFARI-1, but changes in global market conditions necessitated a broader approach. • In December 2011 the Necsa Board approved expansion of the scope of the DIPR study to include feasibility of upgrading from a DIPR to a Multi-Purpose Reactor (MPR) and to assess the possibility of including such a reactor in the nuclear new build procurement framework. • Most of the work already undertaken for the DIPR project could be used in expanded MPR (SAFARI-2) feasibility study that is currently underway.

  46. Main Benefits of SAFARI-2 • Maintain and secure global leadership as an international medical isotope producer based exclusively on the use of low enriched uranium. • Establish a world-class R&D capability in neutron beam applications and reactor physics (based on SAFARI-1 track record). • Provide material testing capability for qualification of future locally produced power reactor fuel. • Contribute to maintaining RSA’s nuclear leadership in Africa. • Provide opportunity for learning before New Build construction. • Provide launch pad for nuclear skills development and training. • Underpin Necsa’s financial requirements with steady foreign currency income. An investment in SAFARI-2 will be an investment in jobs, skills, knowledge generation and industrial growth.

  47. Retrenchments at Necsa

  48. Necsa Group Employment • The Necsa Group’s staff complement decreased by 4.59%, from 2,179 in 2010/11 to 2,097 at the end of the reporting period. The number of contract staff decreased from 311 in 2010/11 to 199 in 2011/12, in line with Necsa’s strategy to co-ordinate and consolidate its workforce to deliver on its strategic mandate.

  49. Reasons for Retrenchments • A reduction is baseline allocation from the DoE • High Electricity Tariff increases • High Costs of Running Necsa Site • Doubling of licence fees • Reduced Dividends from Subsidiaries compared to income • Sales Targets under challenging market conditions

  50. High Level Actions • Select key priority programmes • Identify and remove programmes, projects and support functions which do not support priority programmes. • Find strategic / investment partners for NTP, Pelchem and Manufacturing. • Consolidate and expand capacity to: • Develop Business Opportunities • Drive Sales • Access other grant funding • Drive Cost Savings Continues…

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