Abu Dhabi: Commercial and political considerations were primary factors in a South Korean consortium being chosen to build the UAE's first nuclear power plants, analysts said on Monday.
Unlike France and the United States, South Korea wields less political influence in the Middle East, one of the reasons that helped tip the scales in favour of the consortium led by Korea Electric Power (Kepco) for the Dh75-billion ($20.4-billion) contract, a senior Gulf Research Centre (GRC) analyst observed.
"The decision was clearly made on commercial considerations," said Christian Koch, GRC's director of international studies. "But there's one political dimension which may have played a role in at least the US consortium not winning. This is a very long-term contract and the UAE has had some negative experiences with the US."
Koch cited the opposition raised by the American Congress in 2006 to the attempt of Dubai Ports World to operate US ports, ultimately forcing DP World to sell its interests to an American operator.
"In 2017, when the first reactor is supposed to go online, if regional circumstances shift and there is increased opposition within US political circles to the UAE's civilian nuclear programme, you don't want your contract to be put in jeopardy," said Koch. "This is less likely to happen with Korean participation."
The contract provides for the construction of four nuclear plants with a capacity of 1,400 megawatts each, according to Emirates Nuclear Energy Corporation (Enec). The Kepco-led group will design, build and help operate the first plant by 2017 and three more by 2020.
Joint-venture company
The contract establishes a joint-venture company to build and operate the power plants, giving partial ownership to the Korean side. Speaking to reporters after the announcement, Enec CEO Mohammad Al Hammadi declined to disclose the ownership structure of the new company citing "commercial sensitivity".
Still, it is unlikely the size of the Korean stake had a significant impact on the decision in its favour, said an industry source who declined to be identified. An equity stake for the operating party was likely to be part of any deal because it serves as an incentive for both sides to live up to their obligations, he added.
The factor which likely played a larger role in Enec's decision, the source said, was Kepco's ability to put together a team of companies with experience and a proven track record in the region.
Samsung C&T, for instance, has been involved in some of Dubai's most prominent projects including the Palm Jebel Ali and Burj Dubai. Hyundai Engineering and Construction brought the first Korean migrant workers to the Gulf during the construction boom of the 1970s, while Doosan Heavy Industries has for decades built and operated water desalination plants in UAE, Saudi Arabia, and Kuwait.
Kepco officials said the contract reflected the confidence they had inspired that they were the best qualified to get the job done. "The key point is project management … to be on time and on budget," said Hee Yong Lee, a senior Kepco executive assigned to head the UAE project. "I think that is one of the key reasons why Enec selected us."
