By Kim Hyun-cheol
Staff Reporter
Korea has become the sixth exporter of nuclear plants following the United States, France, Canada, Russia and Japan.
The consortium of Korea Electric Power Corp. (KEPCO), Hyundai Engineering and Construction, Samsung C&T Corp and Doosan Heavy Industries beat out rival bidders to snatch the largest-ever energy deal in the Middle East, the Ministry of Knowledge Economy said Sunday.
The project is estimated to be worth $40 billion as the initial contract is likely to lead to more agreements to build several nuclear reactors of the same design in the UAE. They are expected to supply half the country's energy demand by 2020. Four 1.4-megawatt plants will be built in this initial stage of the project.
Construction works account for $20 billion of the deal, which is equal to exports of 180 300,000-ton class tankers. This is expected to create some 111,000 jobs over the next 10 years.
The economic impacts of the deal will last longer, as follow-up operations and management of the plants over their lifespan of 60 years take up the other half of the contract. With the deal, Korea has paved a solid foundation for an economic tie with the UAE that could last for as long as 100 years, the ministry said.
The bid is also of huge significance in the Korean nuclear industry in that the country proved its own competitiveness by outshining the world's top-notch players.
Other competitors in the race were a consortium of General Electric and Westinghouse Electric, a subsidiary of Toshiba Corp, and a French consortium led by Areva SA, the leader in the nuclear energy industry.
"What made the competition tough is that it was more like a competition between countries than that of individual bidding companies, like in all nuclear plant tenders. All our rivals have robust ties with the UAE in energy, so it was not easy for Korea to squeeze in," said Park Han-seo, an official of nuclear industry at the ministry.
"This is a victory Korea has made solely with its own technical capacity against other energy giants."
With no previous experience in overseas construction of nuclear reactors, Korea has emerged as a surprise winner with its edges in price and construction capacity based on its three-decade-old history of domestic nuclear operation.
Korea currently ranks sixth in nuclear energy production trailing the United States, France, Japan, Russia and Germany. Nuclear energy plants provide more than 36 percent of the country's electric power supply, way above the global average of 15.7 percent.
The average operational rate of its 20 commercial reactors reached 93.3 percent last year, up from 90.3 percent in 2007, according to the Ministry of Education, Science and Technology. The figure is also higher than the 91 percent and 76 percent of the United States and France, respectively, the world's top two nuclear energy users.
Cost competitiveness was also pivotal to make the country favored, according to officials. Korea's engineering-procurement-construction cost for its standard APR 1400 reactor amounts to $2,300 per kilowatt, more than 20 percent cheaper than other countries.
The capacity of Korean nuclear plants is linked to its heavy dependence on nuclear power in energy supply as the government is stepping up moves to further expand the use of nuclear energy. It plans to add 11 new plants to the current 20 plants in operation and eight more to be built after that.
Buoyed by the success in the UAE, Seoul is set to look at further plant exports as a new industrial growth engine, starting from visible new markets in countries such as Jordan and Turkey.
Jordan is expected to unveil a bid plan for two 1-megawatt plants to be built near Aqaba later next year at the earliest, while plans for Turkey's second nuclear plant in the Sinop region are yet to be set.
"A comprehensive plan for Korean nuclear plants will be unveiled early next year to help promote them to make further inroads to foreign markets," Park said.
President Lee Myung-bak visited the Middle East country over the weekend in a push to support the bid.
In the Korean bourse, companies involved in the bidding race hit the ceiling last week. Stocks of Doosan Heavy surged from 62,500 won ($53.2) to 73,900 won ($62.8), and Korea Power Engineering Company, KEPCO's nuclear engineering unit, soared 36.2 percent to 49,250 won.
During the two-day visit, Lee held a summit meeting with UAE President Sheikh Khalifa bin Zayed al-Nahayan to discuss ways to strengthen economic ties between the two countries, especially in energy industries.
Korea's diplomatic efforts for the deal date back before Lee's visit. Foreign Minister Yu Myung-hwan met with the UAE's Crown Prince Sheikh Mohammad bin Zayed al-Nahyan during his visit to the UAE and promoted the competence of Korean nuclear plants.
Prime Minister Han Seung-soo also visited the region in June to sign an agreement on nuclear cooperation between the two countries.