UAE deal may be more profitable
By Kim Tae-gyu
A Korean consortium, which won a contract to build four nuclear reactors in the United Arab Emirates (UAE) by 2020, may bring in more revenue than the original $18.6 billion agreed to.
A source familiar with the issue said Wednesday that the bilateral deal has an incentive clause that promises considerable bonuses if the first reactor is completed on time.
The consortium, headed by the Korea Electric Power Corp. (KEPCO), is supposed to build the first reactor by May 1, 2017 and one more through each of the following three years.
“As far as I know, the UAE will offer $200 million to KEPCO if the latter meets the May 1 deadline. The clause is stipulated in contract documents,” said the source who asked not to be named.
The source, who works closely with KEPCO officials and the country’s bureaucrats at the Ministry of Knowledge Economy (MKE), expects that the consortium will be able to get all the bonuses in consideration of its track record.
“Korean contractors have tended to finish various nuclear facilities ahead of schedule. Hence, we believe that KEPCO and the other consortium participants will easily win the extra payments,” he said.
The UAE is highly likely to sign a $20 billion contract to operate the four power plants and the general belief is that KEPCO and Korean companies will win the follow-up deal.
The anonymous source noted that there is also a penalty clause that may burden the Korean players should they fail to meet the deadline. But they will pay additional costs only if they are responsible for the delay.
When contacted, the MKE overseeing KEPCO confirmed the incentive clauses, but refused to confirm the specific conditions including the amount.
Market observers also predict that KEPCO would get the bonuses.
“Korea embraced the incentive clauses when the country assigned facilitation of nuclear power plants to overseas entities. We are quite accustomed to the bonus-penalty structure,” professor Hwang Il-soon at Seoul National University said.
“It won’t be a big deal for KEPCO and its partners to meet the deadline. As a result, they will easily garner the bonuses,” he said.