12 October 2012 Presentation of the 2011 2012 Necsa

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

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 2

2011/ 2012 Necsa Annual Report

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. 4

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 (99 Mo) using a fully Low Enriched Uranium (LEU)based process. § NTP achieved 2 million disabling injury free hours. Continues… 5

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 Continues… Diepsloot informal settlement. 6

Highlights of the Review Period § US 25$ million was awarded to Necsa by the US Do. E 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. 7

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… 8

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. 9

Environmental Performance Water Consumption § The following table reflects water consumption for the period April 2011 – March 2012 Amount (m 3) Permitted amount (m 3) % of permitted amount % change year on year 893 302 400 000 223. 3 0. 8 111230 840 000 13. 2 8 Borehole 0 9 490 0 0 Total 1 004 532 1 249 490 80. 4 1. 6 Resource Rand Water River Water Continues… 10

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%). 11

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 the 2012 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 12

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 13

Statement of Financial Position Necsa NECSA GROUP 31 -Mar-12 2012 Consolidated Statement of Financial Position R'000 Necsa Corporate 2011 2010 Restated 2012 R'000 Non current assets 1, 032, 857 899, 456 841, 558 1, 178, 497 1, 087, 043 1, 038, 932 Current assets 995, 300 662, 001 228, 331 Total Assets 2, 028, 157 1, 811, 766 1, 503, 559 1, 406, 828 1, 390, 932 1, 247, 779 Equity 748, 048 709, 382 558, 624 394, 357 469, 446 466, 737 Non Current Liabilities 838, 039 760, 095 617, 657 759, 786 693, 420 576, 982 Current liabilities 442, 070 342, 289 327, 278 252, 685 228, 066 204, 060 Total Equity and Liabilities 2, 028, 157 1, 811, 766 1, 503, 559 1, 406, 828 1, 390, 932 1, 247, 779 912, 310 R'000 2011 2010 Restated R'000 303, 889 R'000 208, 847 14

Statement of Comprehensive Income Necsa 31 -Mar-12 2012 Consolidated Statement of Comprehensive Income NECSA GROUP 2011 2010 Restated R'000 Necsa Corporate 2011 2010 2012 Restated R'000 Revenue 1, 643, 370 1, 612, 035 1, 520, 941 854, 753 806, 732 710, 123 Cost of Sales (647, 517) (705, 740) (642, 086) (191, 482) (196, 646) (202, 439) Gross Profit 995, 853 906, 295 878, 855 663, 271 610, 086 507, 684 Other Income 50, 121 77, 519 23, 566 32, 931 26, 821 34, 748 Opex and Admin expenses Investment revenue and finance costs Tax (947, 283) (827, 573) (734, 625) (791, 072) (709, 432) (643, 967) 29, 250 42, 119 45, 404 48, 440 62, 754 75, 206 (55, 127) (68, 920) (46, 394) - 1, 296 23, 983 129, 440 166, 806 (46, 430) (8, 475) (2, 346) (34, 148) 21, 367 325, 037 (28, 659) 11, 184 306, 429 38, 666 150, 807 491, 843 (75, 089) 2, 709 304, 083 31, 255 148, 822 490, 451 (75, 089) 2, 709 304, 083 7, 411 1, 985 1, 392 - - - Profit/(Loss) after tax for the year 72, 814 Other comprehensive income / (loss for the year net of taxation Total comprehensive income / (loss) Attributable to owners of the parent Attributable to non-controlling interest 15

Statement of Cash Flows Necsa NECSA GROUP 31 -Mar-12 Consolidated Statement of Cash Flows Net cash from operating activities Net cash from investing activities Net cash from financing activities Total cash movement for the year Cash at the beginning of the year Total cash at the end o the year 2012 Necsa Corporate 2011 2010 Restated R'000 2012 R'000 193, 745 275, 468 230, 560 65, 969 68, 074 62, 675 R'000 2011 Restated d (199, 281) (105, 325) (124, 081) (96, 609) (38, 591) (44, 747) (14, 715) (25, 225) (3, 474) (2, 834) (22, 993) - (20, 251) 144, 918 103, 005 (33, 474) 6, 490 17, 928 470, 622 325, 704 222, 699 109, 896 103, 406 85, 477 450, 371 470, 622 325, 704 76, 422 109, 896 103, 405 16

Overview of Revenue Generators of the Necsa Group

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. 18

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… 19

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 R 186. 0 million during the 2011/12 financial year 20

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… 21

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 (IPAP 2). § NMC achieved sales of R 44. 0 million during the 2011/12 financial year 22

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… 23

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… 24

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. 25

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 26

Progress on Necsa Skills Training Programmes

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] 28

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. 29

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 30

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. 31

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. 32

Necsa Graduate Support Program (NGSP) § This program consists of the Graduate-in-Training Scheme (Gi. TS), 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 Gi. TS, 16 undergraduate bursars and 10 postgraduate bursars in 2011/12, mainly in the fields of engineering, physics and chemistry. 33

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 Do. E (Department of Energy) during 2011/12. 34

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 35

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. . 36

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) 37

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%) 38

Progress on Necsa Transformation Programme

Staff Composition Necsa Group Staff Composition in Accordance with Internal Band Structure Job Category Total Black White Female Directors Management Engineers Scientists Other Professionals Supervisors Operators Artisans Technicians Skilled Semi-Skilled Unskilled Contract Staff Grand Total 31 March 2012 Grand Total 31 March 2011 21 149 64 113 153 100 229 109 137 450 305 68 199 2097 2179 13 50 22 52 54 37 176 41 97 215 243 62 101 1163 1182 8 99 42 61 99 63 53 68 40 235 62 6 98 934 997 6 37 13 32 37 11 17 6 53 235 101 30 60 638 653 40

Group Employment Equity Performance Total Employee Occupation Categories 2012 Strength Targets 2006 -2011 Performance Achieved Targets 2006 -2011 Targets 2011 -2015 Black Female (M & F) (B & W) 139 50 37 50% 45% 33. 6% 24. 8% 40. 0% 25. 0% 64 69 22 13 51% 23% 34. 4% 20. 3% 51. 0% 25. 0% 113 115 52 32 40% 30% 46. 0% 28. 3% 50. 0% 35. 0% 153 147 54 37 35% 30% 35. 3% 24. 2% 35. 0% 30. 0% Supervisors 100 99 37 11 25% 15% 37. 0% 11. 0% 30. 0% 15. 0% Operators 229 242 176 17 65% 10% 76. 9% 7. 4% Artisans 109 108 41 6 40% 3% 37. 6% 5. 5% Technicians 137 130 97 53 60% 40% 70. 8% 38. 7% Skilled 450 430 215 235 25% 50% 47. 8% 52. 2% Semi-skilled 305 328 243 101 65% 40% 79. 7% 33. 1% Unskilled 68 38 62 30 80% 25% 91. 2% 44. 1% 2012 2011 Management 149 Engineers Scientists Other Professionals Target achieved 40. 0% Target achieved 50. 0% Target achieved 10. 0% 3. 0% 45. 0% 50. 0% 40. 0% 41

Black Professionals and Technical Staff Targets for Appointment of Black Professionals and Technical Staff 2011 -2014 Description Actual 2011/1 2012/1 2013/1 2010/11 31/03/2010 31/03/2011 2 3 4 Percentage of technical staff in total staff 46. 9% 45. 80% 46. 36% 47. 16% 48. 16% 49. 76 % Black technical staff as percentage of all technical staff 40. 1% 41. 63% 41. 59% 42. 39% 43. 39% 44. 99 % Black technical professionals as percentage of all technical professional staff 31. 5% 29. 38% 29. 17% 29. 97% 30. 97% 32. 57 % Amended NSD Centre training output – Number of full-time 663 487 292 218 218 semester students trained per annum through NSD § 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. 42

SAFARI-2 Feasibility Study

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 U 235 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. 44

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. 45

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. 46

Retrenchments at Necsa

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. 48

Reasons for Retrenchments § A reduction is baseline allocation from the Do. E § 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 49

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 Continues… § Drive Cost Savings 50

High level Actions § Implementation of austerity measures § Reduction of employee costs a key imperative to ensure viability and sustainability § Effective and efficient utilization of existing Staff on mandated projects 51

High Level Actions § Freezing of non-critical vacant posts § Reduction of structure from eight to five divisions § Moratorium on external appointments § Voluntary reduction initiatives – Contractors, Consultants, Retirement & VSP § Compulsory retrenchments as a last resort. 52

Radioactive Waste Management

Delegated Activities § Currently Necsa has Ministerial delegation to carry out the responsibilities of the National Radio-active Waste Management Institute (NRWMI) § Minimisation of waste 54

Thank You!!! 55