Antinuclear

Australian news, and some related international items

The ‘pie in the sky’ financials of the South Australian Nuclear Royal Commission’s Report

scrutiny-on-costs

What happens when the private public partnership goes wrong, the private company can just declare bankruptcy and go back to whatever tax haven they more than are likely based in?

 

David Richards,  Commenting  on the specific recommendations in the Royal Commission’s Report, 12 June 16  http://yoursay.sa.gov.au/discussions/nuclear-community-conversation-comment-on-the-specific-recommendations-in-the-final-report

The real weakness for this report is the ‘pie in the sky’ financials: The numbers may add up, however their basis in fact is largely illusory… Completion of the construction of the underground storage facility is by use of the money collected after many thousands of tonnes of waste has been collected and stored on the S.A surface. The proposal’s model is supposed to be simple: we start collecting the used fuel for which we will be paid $1.2 million a tonne, we store it on the surface for 10 plus years while the repository is prepared under the surface, and then inter it permanently underground. The weakness of this financial model is that it relies upon our potential customers providing a constant supply of waste at a premium price that we nominate for a sustained period.

What happens if not all of our customers is prepared to continue to pay the $1.2 million a tonne? They might send, 100 tonne, say, at the nominated price to get things started, and then ask for a discount. The potential suppliers will know the score, once the canisters are on the surface; the clock in S.A is ticking: success will rest upon this timeline for permanent storage below the surface, achieved by the sustainability of the cash flow generated by maintenance of the waste stream at the nominated price. The overseas suppliers will have done their sums, some of them have held on to this waste for the last 50 years, holding back for a little while longer to get a cheaper price is good business sense. Paying our initial asking price may free up enough space in their local repositories to allow them to absorb new waste until we offer them disposal at a reduced rate. They will have a good idea of the breakeven point of disposing of this waste, and will if they are feeling generous offer this price. Once the waste is accumulating on the South Australian surface, who will be the most desperate, those getting rid of the stuff, them that have been stock piling it for years, or us with a partially built facility and waste in temporary storage on the surface?

If I might be allowed some additional speculation… As the management of the disposal facility is likely to be by an overseas-based private firm, linked to the nuclear industry (Why not? S.A governments have a tendency to farm out the management of utilities to foreign companies), a case could be envisaged where their interest in the S.A facility is more as a ‘service’, rather than as a strictly profit making venture. It could become just a profit shifting exercise, the object of which is not to maximise profit by disposing of waste in S.A, but to reduce the upstream costs of nuclear production. The only benefit to S.A is that this benefit to the energy producers reinvigorates the demand, and hence price for Uranium rises, and the shelved plans for Olympic Dam are once again dusted off, and a few of the other mines currently closed down around the state become economically viable once again.

What are we going to do if the price for dumping the waste falls? Once the first canister arrives (for us whose futures are here in S.A, those whose interest is not as a shareholder of a foreign mining company), we will be committed, there is no going back. This is a game for grown-ups and the total lack of discussion (by its proponents) about the proposals potential for failure is unbelievable. This has the potential to be a greater disaster than the State Bank, or the Queensland government’s recent involvement with Linc Energy. THIS IS NOT A JOKE, this thing is off the rails, and it is going to be hard for the members of our State Government to admit that the $9 million plus already invested in developing a report to advocate for increased involvement in the nuclear ‘cycle’ was nothing more than a reckless waste of State taxpayer resources.

If this thing was going to work, and all of a sudden, a market for disposing of a tonne of used fuel for 1.2 million bucks suddenly existed, do you not think others would not also join the game? I foresee China putting its hand, up saying…”We have similar geology, out in the Gobi desert or somewhere, we’ll take it for $50 less than whatever the South Australians will do it for, and we’ll throw in a free Blu-ray player”, or the like…This is how global trade works. If a new market develops in a commodity or in a service, then others will seek to enter. (In whose interest other than our own, is it to have a monopoly in fuel dumping?) Once we move past the ‘proof of concept’ to actually shipping the canisters to a site, the economics of the costs of leaving the waste where it is versus sending it to an alternative facility comes into play. S.A, with its imported waste sitting on the ground, will be left hoping to get enough business to pay the Wormald man at the gate, and the next bit of diesel to dig the hole just a metre deeper. – The weakness of these dependencies will be added to by other challenges, the demand to get the stuff off the surface and down the hole before the next big earthquake or terrorist attack, or whatever, occurs.

What happens when the private public partnership goes wrong, the private company can just declare bankruptcy and go back to whatever tax haven they more than are likely based in? Then we are left with a decision of whether we let a Chinese company, with links to its government (the Kidman scenario), buy a controlling interest in the dump. Or do we bankrupt the state, lose the AAA credit rating, sell off all our utilities (no, we did that last time), sell the last of bit of our sovereignty that we still able to control, so as to manage the disaster this project will no doubt become? We do not seem to be learning the lessons of history.

The whole thing is a sick joke. I believe those proposing this even know there will inevitably be stuff ups, and the economics will not work: they are just hoping they can manage it (like leaving the plutonium at Maralinga to blow around on the surface for fifty years). The plans are all about the economic activity generated in the next five years, and not the future consequences. There is a confidence in government that they will be able to ‘manage’ public perception of any problem. The public are offered the “carrot” of a future fund, where South Australians will all be in Norwegian clover for the foreseeable future. We are being consulted on the economic model of a project based on little more than dreams and high hopes. How do we meaningfully engage as a community with people who think that the Japanese, Taiwanese and Koreans are going to send us their waste at such a premium for the next 120 years? It is just silly. “Build it and they will come”, maybe, but not for 100 years, and not at premium prices!

With the current collapse of the uranium price to its lowest price since May 2005, this process has more to do with subsidising the upstream nuclear energy business –as Kevin Scarce admitted in his address at the Hawke Centre on Wed 1st June: all aspects of the nuclear chain “certainly since Fukushima – it’s gone into the doldrums.” (see, Hawke Centre lecture recording,1:06:00).

The same could no doubt be said of the intellectual backbone of the South Australian Labor Party. The party has so reversed its previous policy undertakings, it has become the servant of the of the uranium mining industry. The paper industry in the S.E. is dead, steel manufacture in Whyalla is on the ropes, we no longer control our power, water or gas, the Whitegoods industries are gone, and Holden’s is finished. It is ‘the poverty of the imagination’, both major political parties continue to favour the grand economic model that risks everything on one endeavour – the multi-billion dollar project that will be a game changer – and when they fail, as they always seem to, it will be the taxpayer that is left picking up the pieces.

Our political leaders are the worshipers of a form of Cargo Cult. It is time that they ask themselves if it is not all a bit hard for them. They are really only taking up space that somebody with real policies might occupy, their failures are not doing the State any good. This ‘big picture thing’ is a gamble, calculated to make up for the lack of any meaningful policy development in the state. What, other than a collection of well-meaning pipe dreams, does this government consider its industry policy to be? The years of weak policy, development is finally coming home to roost. When the Labor party starts reversing its former positions by 180 degrees, is it not time to ask yourself, if it is all been really worth it? It may be strength to admit when you are wrong, it is another thing to abandon the policy positions of the last 50 years, and think that your former constituents will not feel the betrayal.

BHP’s Olympic Dam mine is struggling, and no doubt, this is the State Government’s attempt to stop it going the same way as Rio Tinto’s Energy Resources of Australia Ranger mine in the N.T, so we are putting our hands up to their customers and saying… “Struggling with the cost of your waste, no worries buy our yellow cake and we will take your waste.” Some jokers even try to tell me I have a moral responsibility to repatriate this transformed material. The world does not work like that! It’s laughable – It’s the invitation to a mad hatter’s tea party, the whole process is based on a fallacy of a yet to come into existence market for dumping nuclear waste, at some incredible premium, with a price that will never fall only go up. This is a very poor business for us to contemplate being involved.

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June 13, 2016 - Posted by | NUCLEAR ROYAL COMMISSION 2016

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