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Chen Kane and Miles PomperJames Martin Center for Nonproliferation Studies
May 21, 2013Korean Economic Institute
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South Korea hopes to become a major exporterof nuclear plants
It has a proven success in building its domestic
nuclear industry If South Korea draws the right lessons from its
UAE experience it could record similar successin the future
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Domestic: 23 operating reactors 5 nuclear units are currently
under construction 4 more units are planned to
be completed between 2018and 2021
International: UAE: $20.4 billion contract to
build 4 nuclear power plants
Jordan: Constructing Jordansfirst research reactor ($130million )
Providing training programsto nuclear newcomer states(Egypt, Kenya, Mongolia,Indonesia etc.)
Source: Walter KIM, KINS, Nov. 2012
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Consortium led by KEPCO selected by UAE to build fourAPR-1400s in Barakah in 2009 Other companies in the consortium: KHNP, KOPEC E&C,
KNF, KPS, Doosan, Westinghouse, Hyundai and Samsung The consortium will design and build the four units, supply
the initial fuel loads, and provide the UAE with technicalsupport, training, and education
The first plant is scheduled to become operational in 2017 andthe three subsequent reactors completed by 2020
Source: Kepco, Investor Presentation, Feb. 2012 4
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KAERI and Daewoo signed$130 million agreement with
Jordan for its first researchreactor 3.5 years worth of fuel provided
by ROK.
ROK to provide $70 million softloan for additional fuel andstudy
ROK plans to train Jordaniannuclear engineers andtechnicians at JUST
Expected to be online and
operational by 2015.
Source: Khalifeh AbuSaleem, January 29, 2013
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Political factors
Technical factors
Business model
Financial factors
Cultural factors
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ROK leader in reactorreliability KEPCO renowned for having
highest capacity factor
Lowest unplannedshutdown
ROKs ability to initiate andcomplete projects quickly Reduces construction and
financing costs
Shortens time until electricitywould be available
Source: Nagatomi, Matsu and Murakami,IEEJ, July 2010,
Comparison of average outage time andthe operational cycle periods
(1990-2008)
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Experienced the consortium has worked togetherfor years on the domestic Korean nuclear powerprogram
Adaptable ROK was willing to adapt certainlegal aspects of their bids to UAE preferences
Construction and operation risks where all borneby KEPCO Puts responsibility on one organization, reduces the
litigation risks in case of delays or performance problemsand increases the incentives for the contractor to meet theproject delivery objectives
Commitment to extensive training, humanresources development and education
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The South Korea bid was significantly lowerthan the other bids
Financing package offered by ROK:
Fixed price 23-year deal
Low interest rates of 1.75-2.6, with full governmentguarantees on project risks
Includes investments, direct loans, and external debtguarantees, preferred loans for domestic suppliers
60 year contract for equipment replacement
and potential equity interest 10
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UAE choose ROK because:
Distinct competitive advantage in terms of low cost,high credibility, and high performance
Active political support from government andpresident
Attractive financing
US technology provided at a low cost and with close
cooperation (tied UAE to US-key security benefactor)
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MKE set a goal in 2010 to capture 20% of the worldmarket in the next 2 decades (80 reactors/ fourunits per year/$400 billion).
Scaled back following Fukushima, global financialcrisis, shortages of qualified personnel.
More realistic expectation: ten nuclear plants by 2030
ROK has signed nuclear cooperation agreements
with 27 states
Hopes to secure additional contracts (India,Vietnam, Poland, Saudi Arabia, South Africa,China and the United States)
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Finance
US reliance
Safety
Personnel
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Reactor price, financing, ROK profit margin ROK not expected to be as generous with
future customers UAE financial offering -the golden case that will not
happen again
Potential customers will seek to receive same deal
Suppliers like Russia, China driving prices
down (e.g. Russia and potentially France/Japan in Turkey) BOO model would be riskier
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ROKs links to the United States bothpolitically and commercially
ROK vulnerable to disruption in relations withUS
Bilateral civil nuclear agreement extension buys time but some issues remain: Politically: U.S. government still likely to have a
strong say over ROK nuclear power plant exports Technically: There are technologies that South Korea
has not mastered/ technologies that are patented byU.S. companies.
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Legally:
APR-1400 is based on a Westinghouse design meansU.S. approval is required for re-export under sections123 and 131 of the Atomic Energy Act
Westinghouse would likely need to seek Part 810Authorization before it and its employees can conductnuclear-related business abroad
Re-export of major U.S.-origin nuclear reactor
components may requires the ratification of a nuclearcooperation agreement between the U.S. and theimporting country
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In nuclear agreement talks, ROK wants US advancedconsent for reprocessing (pyroprocessing); US doesntwant to grant permission
How much effect on exports?
Pyroprocessing:--supply service to manage othercountries spent fuel? Political opposition is likely to be even higher to accepting
foreign spent fuel for reprocessing
Enrichment (reap both direct profits from selling
enrichment services and perceived additional profitsfrom offering a full-service) Difficult to compete with established enrichment suppliers
Existing suppliers have not expressed a willingness to transfertechnologies to the ROK
Front end/Enrichment market is a much smaller and complexmarket than nuclear reactor market 18
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ME particularly attractive market for ROK
Experience and prominence in running andoperating mega projects in the region
ROK experience to adapt APR-1400 to specificsecurity and geographic characteristics, training,quality assurance, and grid upgrade support
UAE deal led to more contracts, long-term profit:
Follow-on contracts being discussed
Hints that ROK would be supplier of future reactors
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Long-term nuclear cooperation agreement with US Pyroprocessing and enrichment less important than finding a
win-win solution with US to boost ROK exports
Strengthening competitive advantages Nuclear energy for desalination, training
Invest in construction of additional centrifuge capacity atexisting enrichment plants or equity
Consider SMR and KAERIs SMART reactors for export tosmall countries
Concentrate on countries that can afford nuclearenergy, especially ME in exchange for greater fossilenergy security
Quick and decisive action regarding safety
Cutting profit margins can be compensated in futuredeals and other realms bigger picture 21