Korea

Obama's Nuclear Power Plan Cheers Koreans


Few business executives outside the U.S. saw better opportunities in President Barack Obama's recent embrace of nuclear power than Kim Ha Bang. His company, South Korea's Doosan Heavy Industries & Construction has already won deals to provide six reactors and a dozen steam generators to Westinghouse Electric, the main contractor to build six nuclear power plants in the U.S., including two in Georgia that will directly benefit from $8.3 billion in loan guarantees that Obama announced on Feb. 16. "Obama will certainly be a spur to a renaissance in nuclear power," says Kim, global marketing chief for Doosan's nuclear power plant business.

Kim and his corner-office colleagues at Doosan are some of many Koreans applauding Obama's recent enthusiasm for nuclear power. According to Korean President Lee Myung Bak and his economic ministers, the nation that stuck with nuclear power for decades despite its unpopularity elsewhere is now poised to cash in as governments around the world warm to the idea of nukes. "Korea has emerged as the most competitive nation in the huge nuclear power market," Lee said after Christmas, when a Korean consortium headed by Korea Electric Power, or KEPCO, beat out a French group led by giant Areva and a joint venture between GE (GE) and Hitachi to win a $20 billion contract for four nuclear plants in the United Arab Emirates.

The UAE win is a milestone for Korea's nuclear ambitions. Relying on foreign technology, state-controlled KEPCO began commercial operation of the country's first nuclear plant in 1978, just a year before a partial meltdown at Pennsylvania's Three Mile Island Unit 2 reactor halted new construction of nuclear plants in the U.S. While that meltdown and the 1986 Chernobyl nuclear blowout in Ukraine forced the nuclear industry into dormancy through most of the world, a headlong drive by the Seoul government has equipped Korea with 20 active nuclear plants that mostly use domestic technology.

During the process, the country built up a cost-efficient nuclear industry supply chain that involves parts suppliers such as Doosan and construction arms of Hyundai and Samsung, the country's two largest conglomerates. Now, with the UAE deal, the Koreans are applying their expertise outside the country for the first time.

A cost advantage for Korean reactors

The KEPCO-led Korean consortium is determined to be an aggressive international bidder. The utility monopoly, which has developed a Korean reactor called APR-1400 by improving third-generation U.S. model System 80 Plus, is in talks with at least nine countries—including Jordan, Turkey, Finland, Morocco, and Malaysia—to build nuclear plants, according to KEPCO officials. Seoul's Ministry of Knowledge Economy says that the country aims to win export contracts to build some 80 nuclear plants worth $400 billion over the next 20 years as the U.S., Europe, and Asian countries move towards less-carbon-intensive electricity generation. Its goal is to provide one in every five nuclear plants to be built on the planet and make Korea one of the top three nuclear powers, together with the U.S. and France.

Korea's biggest weapon is price. KEPCO statistics show that the cost of building its APR-1400 reactor in Korea is $2,300 per kilowatt, at least a fifth cheaper than its French or Japanese equivalent. Korea has kept building identical Korean-standard nuclear models for more than a decade to secure "a pool of skilled manpower as well as a cost-competitive ecosystem of the industry," says KEPCO Director-General Lee Soon Hyung at Kori, a site for a new plant due to be completed in 2013 that is one of six being built in Korea. KEPCO executives also point out that Westinghouse is buying Doosan reactors not only in the U.S. but also in China, where the Toshiba subsidiary is building two plants.

Rivals question the potential profitability of aggressive Korean bids. The UAE deal has a fixed price, which means the Korean consortium will have to absorb any cost overruns. "I wouldn't do a deal like that," says Areva Chief Executive Anne Lauvergeon, whose company has been hit with more than $3 billion in cost overruns in a fixed-price contract following years of construction delays at a nuclear plant at Olkiluoto, Finland. Nuclear experts in Europe also note that Areva's advanced reactors offer more rigorous safety features than the Korean models.

The Koreans are confident they can pull off a safe, low-cost package. "The French are judging the deal based on their high cost structure," says Lee Jong Ho, director of state-funded Nuclear Engineering Technology Institute, which helped develop Korea's latest reactors. Lee adds that Korea, which has a track record of delivering reactors on time, is also due to modify its reactor design to meet Europe's more stringent safety requirements by the end of next year.

—With Carol Matlack in Paris

Moon_ihlwan
Moon is BusinessWeek's Seoul bureau chief.

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