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S. Koreans win $20B UAE nuclear power contract

By Andrew England, Peggy Hollinger, Song Jung-a,
  • South Korean group wins $20.4B contract to develop UAE nuclear power plants
  • French, US and Japanese rivals were vying for contract
  • UAE hopes to become first Gulf state to develop civilian nuclear program

(FT) -- A South Korean consortium has won a $20.4bn contract to develop civilian nuclear power plants for the United Arab Emirates, beating French, US and Japanese rivals to win one of the world's largest nuclear tenders on offer.

The Korean-led group of companies includes Korea Electric Power Corporation (Kepco), Hyundai Engineering and Construction, Samsung and Doosan Heavy Industries. Westinghouse, the US group, is also involved in the consortium.

The other bidders in the year-long process included a consortium of French companies - Areva, Total and GDF Suez - initially touted as the front runner, and a third consortium of US and Japanese companies, including General Electric and Hitachi.

The UAE hopes to become the first Gulf state to develop a civilian nuclear program to help meet soaring demand for power. The contract involves construction, commissioning and fuel loads for four 1,400 megawatt plants.

A "high percentage" of the contract was offered under a fixed-price arrangement. The Korean consortium's competitive price is thought to have played an important role in winning the contract, analysts said.

"The gap in technology and price was simply too big," said a person close to the French negotiations.

By the terms of the agreement the Korean investors will have an equity interest in a joint venture that will operate and own the plants. Officials declined to give details.

"We were impressed with the Kepco team's world-class safety performance, and its demonstrated ability to meet the UAE program goals," said Mohamed al-Hammadi, chief executive of the Emirates Nuclear Energy Corporation (Enec).

The decision surprised some analysts given Korea's lack of political clout in the region. It is also a blow to French ambitions to lead a global renaissance in atomic energy with its new generation EPR 1600MW reactor.

The French bid had been closely coordinated with the office of Nicolas Sarkozy, the French president.

Mr Hammadi said discussions with the losing bidders would continue in other areas of potential cooperation.

The UAE's nuclear program, led and funded by Abu Dhabi, the wealthy capital, is considered by Washington to be a model for others in the region.

The UAE has pledged to forgo any domestic enrichment or reprocessing - technologies that can lead to nuclear weapons capability.

Many other Middle Eastern states have signaled interest to develop civilian nuclear power plants to meet future power demand, partly in response to Iran's nuclear ambitions. The UAE, a close US ally, is the first nation in the region to act.

The deal marks the first time South Korea will export its nuclear reactors. The South East Asian nation will hope the deal will pave the way for more overseas energy contracts.

The first of the UAE's nuclear units is scheduled to produce electricity to its grid in 2017, the other three to be complete in 2020.

© The Financial Times Limited 2009