The Arab Emirates (UAE) Barakah nuclear power plant project, the first exported by Korea, has recorded a deficit, and with the fact that it decided to pay royalties to the American nuclear corporation Westinghouse for 50 years while winning the contract for the Czech Dukovany nuclear power plant coming to light, warnings about managing the profitability of exported nuclear power plants are sounding. While nuclear plant exports positively impact the domestic nuclear power industry, if they fail to generate revenue, it seems difficult to avoid criticism for winning the bids at low prices.
On the 19th, Korea Electric Power Corporation's financial statements for the first half of the year show that the cumulative profit and loss for the 'UAE nuclear power project, etc.' item was accounted for a deficit of 34.9 billion won. This is the first time the cumulative profit and loss for the UAE nuclear power project has turned to a deficit. The cumulative profit and loss for the UAE nuclear power project decreased from 435 billion won at the end of 2023 to 72.2 billion won at the end of last year.
The extension of the construction period has been pointed out as the cause for the UAE nuclear power project turning to a deficit. Team Korea, led by Korea Electric Power Corporation, won contracts for four nuclear plants for about 20 trillion won in early 2009. The first unit started commercial operation in April 2021, and the fourth unit will begin commercial operation in September 2024.
The original completion target was 2020, but the completion timing has been delayed by four years. During this process, an additional construction cost of $1 billion (about 1.4 trillion won) was incurred. The UAE nuclear power project was carried out through contracts between KEPCO, the ordering party, and the UAE Nuclear Energy Corporation, with KEPCO signing subsequent contracts with domestic companies like KHNP. KEPCO and KHNP have applied for arbitration at the London Court of International Arbitration regarding who will bear the additional construction costs.
KEPCO reflected the additional construction costs as a liability amounting to 169.71 billion won as of the first half of this year. This figure has increased from the liability at the end of last year (154.644 billion won), and the increase in costs affected the cumulative profit and loss turning to a deficit.
Since starting construction in 2010, KEPCO has reflected the UAE construction costs in the cumulative profit and loss, but the settlement completion timing is undecided. A KEPCO official noted, "Settlement with the UAE Nuclear Energy Corporation, the ordering party, must be completed before the settlement with Team Korea, including KHNP, can be carried out."
The contract signed with Westinghouse during the process of KHNP and KEPCO obtaining the Czech Dukovany nuclear power project is also cited as a factor that could reduce the profitability of future exported nuclear projects. Westinghouse raised issues, stating, 'Korea misappropriated core technology,' but KHNP and KEPCO agreed in January this year to give them work worth $650 million (about 900 billion won) each time one nuclear unit is exported over the next 50 years. It is also reported that there is a clause to pay a technology usage fee of $175 million (about 240 billion won).
There is also a condition that technological verification must be obtained from Westinghouse when exporting Small Modular Reactors (SMRs).
Westinghouse raised issues when the Czech government selected KHNP as the preferred negotiator for the construction of the Dukovany units 5 and 6 in July last year. As a result, the Czech government postponed the contract with KHNP. KHNP and Westinghouse agreed in January to resolve the dispute, and although they did not disclose the conditions due to a confidentiality agreement, some details have now come to light.
At the time of securing the Czech nuclear project, KHNP reportedly offered a price lower than its competitor, Electricité de France (EDF). According to the World Nuclear Association (WNA), Korea's nuclear construction price was $3,571 per kilowatt, significantly lower than competitors like France ($7,931) and the U.S. ($5,833).
Due to this, the then-opposition party, the Democratic Party of Korea, raised suspicions about low-price contracts, but if large-scale work and royalties are given to Westinghouse, it seems inevitable that profitability will decline.
There is also a view that the agreement with Westinghouse represents an opportunity in the long run. Even if profitability decreases, cooperating with the U.S. could provide greater opportunities. Jeong Yong-hun, a professor at Korea Advanced Institute of Science and Technology (KAIST), said, "It would have been better if Korea had exported alone, but we need to compare the opportunities for obtaining contracts in a state of ongoing disputes with Westinghouse versus the opportunities to secure contracts by partnering with the U.S." He added, "There might be some losses, but joining hands with Westinghouse will allow Korean nuclear-related corporations to seize more business opportunities."
Jeong Beom-jin, a professor at Kyunghee University in the Department of Nuclear Engineering, also noted, "Even if the revenue drops due to payments to Westinghouse, we can see the effect of increasing the number of export contracts."