Necsa 2013/14 Annual Report Presentation to Parliament. 17 October 2014.

Necsa 2013/14 Annual Report Presentation to

Parliament.

17 October 2014

Presentation Outline

• Necsa mandate

• 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

2

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.

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Necsa Group Performance Report (Planned Outputs)

4

Output

KPA

Indicator

KPI

Actual Achievement

2012/13

Planned Target

2013/14

Actual Achievement

2013/14Nuclear fuel cycle programme initiatives

Achievement of programme objectives in collaboration with key stakeholders

Nuclear Fuel Cycle Strategy plan is in place and remains the same; awaiting roll–out of nuclear programme

Strategic plan for establishment of viable NFC front end in SA

Business case issued

Pelchem Group financials

Net profit after tax

(R35.9m) (R21m) (R77m)

Nuclear Power Cluster

Necsa Group Performance Report

5

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

Output

KPA

Indicator

KPI

Actual Achievement

2012/13

Planned Target

2013/14

Actual Achievement

2013/14NTP Group financials

Net profit after tax R137m R93m R89m

SAFARI-1 operation

SAFARI-1 operational availability (reactor days available per year)

304.7 287 301.7

LEU fuel and target plate manufac-turing plant

Achievement of project objectives

Basic Design and Construction Safety Assessment Report partly completed

Business plan for LEU fuel and target plate plant

Completion of:

i) Project Brief and Outline Business Case for establishment of LEU fuel and target plate manufacturing facility

ii) Draft integrated strategic approach for security of LEU supply

Radiation Science and Applications Cluster


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Output

KPA

Indicator

KPI

Actual Achievement

2012/13

Planned Target

2013/14

Actual Achievement

2013/14D&D programme execution

Execution of Annual Plan of Action as approved by DoE

110% 100% 104%

Compliance to SHEQ, license and other regulatory requirements

Disabling Injury Incidence Rate (DIIR)

0.60 0.8 0.64

Public dose impact (expressed as % of allowable limit)

3.8% <20% 3.9%

Necsa as a Host of Nuclear Programmes Cluster


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Output

KPA

Indicator

KPI

Actual Achievement

2012/13

Planned Target

2013/14

Actual Achievement2

013/14

Necsa Corporate financials

Total Necsa Income R893m R1.00 billion R926m

Innovation value chain

Number of innovation disclosures

17 14 17

Refereed Outputs

Number of refereed research publications

34 30 33

Cross-Cutting Priorities


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Output

KPA

Indicator

KPI

Actual Achievement

2012/13

Planned Target

2013/14

Actual Achievement2

013/14

Staff composition

Technical staff as % of total staff

48.8% 50% 50.4%

Black technical staff as % of all technical staff

45.8% 47% 48.7%

Cross-Cutting Priorities

Key Capital Projects

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• 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.

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• 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.

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• 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.

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Alignment to Strategic Integrated Projects (SIPs)

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Electricity expansion• SAFARI-2 provides infrastructure for fuel to nuclear fleet

• SAFARI-2 implementation provides test-case for nuclear localisation

• NECSA sustains SA skills for nuclear build

NECSA infrastructure

investment

SIP 10

SIP 14SIP 4

Economic Opportunity – North West Province

• NECSA second largest employer of high level skills (2000 employees) to North West University in NW Province

• Large portion (approx 90%) of NECSA outputs exported from province and SA

Higher Education Infrastructure

• NECSA provides research platform to scientists and engineers from a cross-section of sectors

• NECSA sustains nuclear skills capability in SA

• NECSA works closely with a number of universities and DST

Transformation

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• 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

• Manufacturing

• Localisation

• Activities related to the nuclear fuel cycle

• Skills development

Directives from SONA 2013/14 – Necsa’s role in the Newbuild

International Collaborations

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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.

Financial Report

BBBEE Spend

18

Procurement Spend on BBBEE Companies

2014 2013

Orders Suppliers Value (m) Orders Suppliers Value (m)

Total no. of orders

13,759

1,040

342

12,536

1,066

269

No. of BBBEE orders

10,556

680

294

7,940

583

203

% BBBEE orders of total orders

77% 65% 86% 63% 55% 76%

Top 10 suppliers for the Necsa Group

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Supplier Product/service rendered R’000 %

1 ANSTO Mo-99 103 298 12.54

2 CERCA

Radiation material and

Equipment 66 627 8.09

3 ESKOM Electricity 62 528 7.59

4 NATIONAL NUCLEAR REGULATOR Nuclear Licensing 33 439 4.06

5 VERGENOEG MINING COMPANY (PTY) Raw Materials 30 375 3.69

6 INSTITUT NATIONAL DES RADIOELE Mo-99 Isotopes 26 364 3.20

7 SASOL OIL FUEL MARKETING (PTY) Fuel 19 249 2.34

8 CENTRA VAC CC Hi Vacuum system for NTP 17 730 2.15

9 PROTEA IND CHEMICALS (PTY) LTD Chemicals 12 287 1.49

10 COMECER SPA Lutetium Plant for NTP 9 295 1.13

381 192 46.29

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.

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Financial Model

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Government Grant Reduction trend

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Salient Features

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Changes from 2013 Nominal %

Group sales – Decreased -3%

Corporation sales – Increased 6%

Group expenses – Increased 14%

Company expenses – Increased 22%

Group personnel costs – Increased 3%

Company personnel costs -Increased 3%

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%).

Group Income

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Company Income

25

Group Expenditure

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Company Expenditure

27

Company Sales & Company Sales

28

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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 .

• 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.

Financial pressures of the review period

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NTP Group financials


R93m R89m (R4m) (note 1)

Necsa Corporate financials

Total Necsa Income

R1.00 billion R926m (R74m) (note 2)

Pelchem Group financials


(R21m) (R77m) (R56m) (note 3)

Financial Pre-determined Objectives

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OUTPUT

KPA

INDICATOR

KPI

Planned Target

2013/14

Actual Achievement

2013/14

Deviation from Planned Target

2013/14

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

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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.

Notes to PDO’s

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Statement of Financial Position

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NECSA GROUP NECSA COMPANY 2014 2013 2014 2013 R'000 R'000 R'000 R'000AssetsNon-Current Assets 1,215,197 1,172,084 1,239,823 1,249,625Current Assets 1,164,078 1,100,529 299,106 262,624Total Assets 2,379,275 2,272,613 1,538,929 1,512,249

Equity and Liabilities Equity 946,793 887,611 376,784 416,026

Non-Current Liabilities 924,515 870,572 899,897 838,947

Current Liabilities 507,967 514,430 262,248 257,276

Total Equity and Liabilities 2,379,275 2,272,613 1,538,929 1,512,249

Statement of Comprehensive Income

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NECSA GROUP NECSA COMPANY 2014 2013 2014 2013 R'000 R'000 R'000 R'000

Revenue 1,670,638 1,681,237 830,945 793,057

Cost of Sales -748,217 -707,078 -168,329 -171,228

Other Income 142,277 78,335 42,378 41,057

OPEX and Admin Expenses -1,027,848 -845,503 -847,546 -661,896

Investment Revenue and Finance costs 29,780 27,892 51,100 55,363

Taxation -57,878 -57,794 - -

Profit / (Loss) 8,752 177,089 -91,452 56,353

Other comprehensive income 51,559 -37,526 52,210 -34,684

Total comprehensive income (loss) 60,311 139,563 -39,242 21,669

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.

• 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.

Auditor-General’s Report

37

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Role of the Audit and Risk Committee

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.

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• 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.

Auditor-General’s (AG) Report

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AG Report Commitment Plan

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• 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

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• 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

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• 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.

• 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

Internal Financial Controls

44

Compliance Monitoring

45

• 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 .


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

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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.

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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;

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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.

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THANK YOU

Necsa 2013/14 Annual Report Presentation to Parliament. 17 October 2014.

Documents

Transcript of Necsa 2013/14 Annual Report Presentation to Parliament. 17 October 2014.