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This presentation outlines the mandate, performance, key projects, and future plans of Necsa for the year 2013/14. It covers strategic outcomes-oriented goals, transformation, international collaborations, financial performance, and more.
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Necsa 2013/14 Annual Report Presentation to Parliament. 17 October2014
Presentation Outline • Necsamandate • Necsa Group performance report (Planned Outputs) • Key capital projects • Strategic Outcomes-oriented goals and priorities • Strategic Integrated Projects (SIPs) • Transformation • Directives from SONA 2014/14 Necsa’s roles in the Newbuild • International collaborations • Financial Performance • Future plans
Necsa Mandate Necsa derives its mandate from: • The Nuclear Energy Act No 46 of 1999; • The Nuclear Energy Policy (NEP) of 2008; and • Directives conferred on it by the Minister of Energy • Necsa is mandated to undertake and promote research and development in the field of nuclear energy and radiation sciences and technology. • 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.
Necsa Group Performance Report (Planned Outputs) Nuclear Power Cluster
Necsa Group Performance Report Radiation Science and Applications Cluster Insurance payment of R9.2m received in 2014/15 by NTP for business interruption in 2013/14 means actual performance was R5.2m over budget
Necsa Group Performance Report Necsa as a Host of Nuclear Programmes Cluster
Necsa Group Performance Report Cross-Cutting Priorities
Necsa Group Performance Report Cross-Cutting Priorities
Key Capital Projects • The work to develop the Outline Business Case and Project Brief for the LEU fuel and target plate manufacturing plant is complete. The project scope was changed to cover security of supply of LEU fuel and target plates. • SAFARI-2 project – An outline business case for the SAFARI-2 project is being prepared. • Neutron Research Facility Development (Beamlines upgrade) continues and is scheduled for completion in 2015 (R33m once-off grant from the DoE). • Security Upgrade project (phase 1) has been completed (R13m once-off grant from the DoE).
Strategic Outcomes-Oriented Goals and Priorities • Raising the performance of R&D, NMC (Nuclear Manufacturing Centre), Operations, the NTP Group and the Pelchem Group. • Increasing the awareness of Necsa’s research and production outputs and the positive impact thereof. • Finding sustainable funding models for the expansion and enhanced viability of Necsa’s subsidiaries. • Expanding R&D collaboration with iThemba LABS and the rest of the National System of Innovation, including government departments such as DST.
Strategic Outcomes-Oriented Goals and Priorities • Future proofing of Necsa activities through the SAFARI-2 feasibility study, ensuring LEU fuel and target plate security of supply and commercial sustainability, and driving SAFARI-1 life extension within a proper regulated framework. • Maintenance of site infrastructure based on the risks and potential liabilities associated with such infrastructure. • Strengthening Necsa’s project management and business development capabilities.
Strategic Outcomes-Oriented Goals and Priorities • Skills development and transformation by advancing employment equity, growing the pipeline of graduates and lowering the average age of researchers. • Obtaining early Shareholder support for key strategic projects.
Transformation • Necsa has recently adopted its employment equity targets for the next 5 years (2015-2020) in order to accelerate representativity across all previously disadvantaged groups. • Across the organisation we have created employment equity forums to monitor implementation. • During the 2014 B-BBEE verification process, Necsa’s B-BBEE corporate rating moved from level 4 contributor to level 3
Directives from SONA 2013/14 – Necsa’s role in the Newbuild • Manufacturing • Localisation • Activities related to the nuclear fuel cycle • Skills development
International Collaborations Necsa maintained cooperation with counterpart institutions from different countries through mechanisms such as MOU’s in order to support its drive to achieve its mandated goals. Necsa experts continuously contribute to the development of international standards and codes in nuclear technology through participation in various IAEA fora. Necsa participated in various global policy conferences such as the WNA and the annual general conference of the IAEA.
BBBEE Spend Procurement Spend on BBBEE Companies
Financial Risks Risks: • The going concern of Pelchem SOC Ltd is under extreme pressure and hence Necsa signed a letter of support for Pelchem, • Contingent liabilities relating to decommissioning and decontamination of Necsa’s past strategic operational nuclear facilities and waste disposal at Vaalputs. Mitigations: • The Necsa Board of Directors have emphasised the strategic importance of Pelchem’s function and have appointed a Task Team to evaluate different options to ensure long term sustainability of these strategic functions. • Necsa is engaging with the DoE & Treasury to determine accountability of decommissioning liabilities and to find suitable funding strategies.
Salient Features • The decrease in Group sales are mainly due to an incident at NTP Radioisotopes which caused a break in production. R58.4m of an estimated loss of R88m has been recovered from insurance (66%).
Financial Highlights of the review period • Unqualified audit reports for all entities within the Group • Necsa achieved, and in some instances exceeded, the targets of 10 of the 13 key performance indicators. If the NTP profit target is adjusted for insurance recovery, 84.6% of targets have been achieved. • R190m (including VAT) additional funding received. • Necsa signed an MOU with the IDC to jointly focus on some projects funding .
Financial pressures of the review period • R88.7m impairment of Investment in Pelchem • Task team in the process of reviewing Pelchem options • 3% decrease in Group Sales • A higher sales drive throughout the Group • Pressure on the salary bill due to higher salary increases than budgeted • To negotiate a longer than 1 year salary increase agreement with labour unions • Abnormal increases in Electricity, Rates and Taxes and Licenses • Cost saving measure in other areas, like S&T and consultant fees.
Notes to PDO’s NOTE 1: • NTP group missed profit targets, mainly due to the incident at NTP Radioisotopes and a slower take off by foreign subsidiary, NTP Europe. • The decrease in Group sales are mainly due to an incident at NTP Radioisotopes which caused a break in production. R58.4m of an estimated loss of R88m has been recovered from insurance (66%).
Notes to PDO’s NOTE 2: • Necsa Corporate has not reached sales targets due to: • Scheduling/timing difference, i.e. orders received but not yet completed and invoiced, • Lower Safari-1 sales to NTP because of lower operational- and capital expenditure funding requirement and • Funding for Nuclear Forensics that did not materialize. NOTE 3: • Sales target was missed due to NF3 and XeF2 sales not being met due to market demand and plant availability. This resulted in negative net profit/(Loss) after tax deviation.
Fruitless & wasteful and irregular expenditure • Certain items of fruitless and wasteful expenditure were identified relating unrecoverable overpayments, penalties and interest. Total of R0.3m in the group and R0.2m on Necsa corporate. • Systems controls have been improved to further prevent these expenditure irregularities. • Irregular expenditure of R5.8m disclosed in the annual report relates to: • Procurement of goods and services regarding the 80/20 and 90/10 principle where tenders came in higher than foreseen and • Isolated occurences relating to procurement of goods and services where tax clearance certificates were not on file. These were isolated incidents & not reflective of the standard applied as tax clearance certificates are requested from all bidders and are a key component of the bids evaluation criteria.
Auditor-General’s Report • During the year, the Audit Committee met with the external auditors, without management being present. The Committee accepted the audit opinion of the Auditor- General on the Annual Financial Statements and recommended that the audited Annual Financial Statements be accepted and read together with the report of the Auditor-General. • There we no uncorrected material errors. • Emphasis of matter on contingent liabilities relating to decommissioning and decontamination of Necsa’s past strategic operational nuclear facilities and waste disposal at Vaalputs. Summary:The Necsa Group of Companies achieved an unqualified report for 2013/14 and have a clean bill of health.
Audit Committee Terms of Reference • The Committee has conducted its affairs in compliance with its Terms of Reference and has discharged its responsibilities contained therein; • The Committee comprises of three Non-executive Directors; • A Non-executive Director, who is not the Chairman of the Board, chairs the Committee. • The Committee assists the Board in over seeing: • The quality and integrity of the Group’s financial statements and the disclosure thereof; • The scope and effectiveness of the external audit function; and • The effectiveness of the Company’s internal controls and internal audit function.
Auditor-General’s (AG) Report • During the year, the Audit Committee met with the external auditors, without management being present. The Committee accepted the audit opinion of the Auditor- General on the Annual Financial Statements and recommended that the audited Annual Financial Statements be accepted and read together with the report of the Auditor-General. • There were no uncorrected material errors. • There was an emphasis of matter on contingent liabilities relating to decommissioning and decontamination of Necsa’s past strategic operational nuclear facilities and waste disposal at Vaalputs waste disposal site. Summary: The Necsa Group of Companies achieved an unqualified report for 2013/14 and has a clean bill of health.
AG Report Commitment Plan • The Commitment Plan is Management’s commitment to address all AG findings such that there are no repeat findings and to implement AG audit recommendations • Management prepares such an action plan after the audit results with due regard to the AG Dashboard and submit to the Audit Committee • Internal Audit verifies and confirms the accuracy of such report • The Audit Committee monitors implementation of AG recommendations and progress through the quarterly reports and own interrogation of the action plan
Roles and Responsibilities • External Auditor Appointments and Independence • The Committee is satisfied that the external auditor was independent to the Group, as set out in the Companies Act, which includes consideration of conflicts of interest as prescribed by the Public Auditors Act. • The Committee, in consultation with Executive Management, agreed to the engagement letter, audit plan and budgeted audit fees for the 2014 year.
Roles and Responsibilities • Annual Financial Statements (AFS) and Accounting Practices: • The Committee has evaluated the AFS of the Company and the Group for the year ended 31 March 2014; and • Considers that the AFS comply, in all material respects with the requirements of the Companies Act, PMFA, and SA GAAP. • The Committee concurs that the adoption of the going concern premise in the preparation of the AFS is appropriate. • The Committee has recommended the adoption of the AFS and the Integrated Annual Report by the Board of Directors.
Internal Financial Controls • The Committee is satisfied, based on the information and explanations given by management and the internal audit department, as well as through discussions with the Auditor-General on the results of their audits, that an adequate system of internal control is being maintained to: • Reduce the entity’s risk to an acceptable level; • Meet the business objectives of the organisation; • Review changes in accounting policies and practices; • Ensure the organisation’s assets are adequately safeguarded; and • Ensure that transactions undertaken are recorded in the organisation’s records. • Ensure compliance with Legislation & approved company policies • Adequate & reliable performance information is maintained by the business
Compliance Monitoring • Statutory Duties • Includes duties as per the Companies Act, PMFA and further responsibilities assigned to the Committee by the Board of Directors. • Compliance Monitoring • The Committee is satisfied that the internal controls are adequate to ensure compliance with legislation and approved company policies. • These controls do ensure prevention and detection of non compliance where deviations occur and corrective measures are monitored by the Audit Committee .
Internal Financial Controls Going Concern • The Committee has reviewed Management’s assessment of the Group and has made recommendation to the Board of Directors. • The going concern future outlook is however negatively influenced by the following matters: • The going concern of Pelchem SOC Ltd is under extreme pressure and hence Necsa signed a letter of support for Pelchem, • The current contingent liabilities relating to Decommissioning and Decontamination of Necsa’s past strategic nuclear facilities require significant funding
Internal Financial Controls Governance of Risk • The Committee oversees the implementation of the policy and plan which ensure that risk is managed by means of risk management systems and processes • The Committee is satisfied that appropriate and effective systems are in place for risk management.
Future plans The main focus in the year ahead will be to further align the organisation’s Expenditure Framework with the available resource base, and implement projects to enable further growth of the resource base to ensure that Necsa is effectively able to service the current and future nuclear research needs of our nation. Necsa growth prospects for the near future include the following: • Government decision regarding the procurement process for the planned nuclear power reactor fleet; • Projects towards the establishment of a LEU fuel and target plate manufacturing plant at Necsa; • In-principle decision-making regarding a multipurpose reactor to replace Safari-1 at the end of its operational life; • Continue progress with the Ketlaphela Project;
Future plans Necsa growth prospects for the near future include the following (Continued): • Further market penetration for new NTP business initiatives relating to 18F-FDG, gamma irradiation and radiography sources; • Demonstration of the PlasWen System; • Demonstration of the uranium recovery process that was proven on laboratory scale; • Further expansion of the NTeMBI network and clinical trials of candidate radiopharmaceuticals; and • Application for an N-Stamp to support the ASME III accreditation.
