Page 14 - AMANGO MODEL ANSWER 2

P a ge | 14

This is our current situation as built to respond to Eskom crisis and before the climate change
protocols were signed and incorporated into domestic law. It will simply provide the same generating
capacity as Strategy 1 and it will be less expensive in capacity terms but will certainly not reduce
CO2 emissions.

Strategy 3:
The addition of a second new nuclear station would cost a further US$6000m and would increase

power-generating capacity by 11.8% (from 10,200 MW to 11,400MW). This would cover the
expected rise of 10% in demand for electricity due in the next five years. It would increase the total
CO2 emissions by only 1.1% (0.25/22.43), assuming it is done in combination with Strategy 1 and

would, therefore, further reduce the average CO2 emitted in the operation of the stations.

Recommendation: As a purely investment decision, we support Strategy 1 and 3 but advice
strongly to not proceed with this investment.

Justification: Strategy 1 and 3 delivers on the goal: to reach the 20% CO2 emission reduction target
in 5 years, while increasing capacity to cope with an expected power demand rise of 10% over that
period. We do not have the detailed figures for actual power output for each station but if we use the

maximum power capacity, then currently, we produce 0.00026 tonnes of CO2 per MW
(=26.51/10,200). Strategy 1 and 3 in combination, produces 0.0023 tonnes of CO2 per max MW
(=26.51/11,400). This is a 23% reduction which is higher than the government’s minimum target of
20%. If however, we pursue Strategy 2 and 3 in combination, then it will produce 0.0023 tonnes of

CO2per MW (=27.76/11,400). This is a 12% reduction and indicates the government’s target may
not be achieved. But the amount needed to implement strategy 1 and 3 is US$6,000m and clearly,
our balance sheet is not strong enough to support this!

Action: Investigate other cheaper options of meeting the new targets for CO2 emission reduction
and our future demand needs.

B6. ETHICAL DILEMMAS

B6.1 Kneejerk rejection to takeover offer
We have just received a potentially lucrative 50% premium offer to acquire 60% of our business; and

before even evaluating the offer, we seem (Group CEO) to offer a kneejerk reaction. Sure, the offer
at face value, includes the restructuring and collapsing of our corporate head-quarters into VR’s, to
save costs; so, ‘executives’ may be more worried about their ‘jobs’ or ‘empire’ than serving the
interest of shareholders. It would nonetheless constitute supporting self-interest or lack of due care

(hence unethical) if this board was to allow such a knee-jerk reaction to the offer!

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2017'
www.charterquest.co.za | Email: thecfo@charterquest.co.za