U.A.E. Awards $20 Billion Nuclear Contract to Korea (Update3)

By Ayesha Daya and Arif Sharif

Dec. 27 (Bloomberg) -- A South Korean group led by Korea Power Electric Corp. won a $20 billion contract to build four nuclear plants in the United Arab Emirates, the second-biggest Arab economy.

Korea Power, a state-run utility that supplies almost all the power in South Korea also known as KEPCO, won the U.A.E.’s first nuclear power plant order together with Doosan Heavy Industries & Construction Co., Hyundai Engineering & Construction Co., Samsung C&T Corp. and Westinghouse Electric Co., it said in a statement today.

“The KEPCO team is best equipped to fulfill the government’s partnership requirements in this ambitious program,” Khaldoon Khalifa al-Mubarak, chairman of Emirates Nuclear Energy Corp., or ENEC, said in a separate statement. “The nature of this project will require a partnership that endures for nearly 100 years.”

The U.A.E., the fourth-biggest producer among the Organization of Petroleum Exporting Countries, is turning to nuclear power to meet growing electricity demand as the country’s infrastructure investments use up domestic natural-gas supplies. Power demand in the nation will double to 40,000 megawatts by 2020, Anwar Gargash, the minister of state for foreign affairs, said Nov. 16.

First Plant in 2017

The South Korean group will design, build and help operate four 1,400-megawatt civil nuclear power units that will be completed from 2017 to 2020.

ENEC and KEPCO plan to set up a joint venture company to operate the plant, ENEC Chief Executive Officer Mohammed Al Hammadi said at a press conference in Abu Dhabi today. The two companies will explore other joint ventures together, such as sourcing fuel supply for the plants, he said.

The South Koreans won after competing against a French group led by Electricite de France SA, Europe’s biggest power generator, and a consortium led by General Electric Co.

The U.A.E. is continuing talks with other bidders on “potential cooperation in areas outside the scope” of the current contract, ENEC said in its statement. The French companies “remain open to future discussions and cooperation” with ENEC, they said in a joint statement today.

Today’s contract “is part of a fleet of power plants” the U.A.E. wants to construct. “We will be building more than four and those will be coming in the future.” Hammadi said.

South Korea is also seeking to win 10 nuclear reactor orders from countries including Jordan, China and Turkey, according to KEPCO’s statement.

Opportunities

The U.A.E. government has an atomic-energy agreement with the U.S., a necessary step to awarding construction contracts, and will prohibit the enrichment of uranium on U.A.E. soil. The civil nuclear agreement may create more than 10,000 jobs, while commercial opportunities could exceed $40 billion, according to the U.S. Chamber of Commerce.

William Travers, formerly a technical adviser at the International Atomic Energy Agency, is the first director- general of the country’s Federal Authority of Nuclear Regulation.

By foregoing the development of domestic uranium enrichment and spent-fuel reprocessing capabilities, “the U.A.E. has made it impossible for any future U.A.E. nuclear sector to produce weapons-usable nuclear material,” according to a Web site produced by the U.A.E. embassy in Washington D.C.

Nuclear Program

The U.A.E.’s nuclear program may propel other Arab Gulf states, including the world’s biggest oil producer, Saudi Arabia, to seek similar technology, a Chatham House report said on Nov. 10. The Sunni-led Gulf monarchies may also seek to counter Iran’s nuclear developments as they fear that country’s Shiite clerical regime, the report’s author Ian Jackson wrote.

Iran has been under investigation by the UN since 2003 because it concealed nuclear work from the IAEA for two decades. It is subject to three sets of UN economic sanctions for ignoring Security Council demands that it suspend uranium enrichment and related work and allow wider inspections.

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