It is hard to imagine a more politically sensitive new energy project
than the Arab world's first nuclear power plants. But by awarding the $20.4
billion contract to a group of South Korean companies, the United Arab Emirates
has shrugged off lobbying from Washington and Paris and gone for the cheapest
and simplest industrial option.
The U.A.E has sent a message it is open to foreign investors without close
political, military or oil-industry ties. And South Korea's victory suggests
the nuclear industry is less of an oligopoly than commonly perceived. The
consortium led by Korea Electric Power Corp. (KEP, 015760.SE) defeated bids led
by America's General Electric Co. (GE) and by France's Electricite de France SA (EDF.FR)
and Areva SA (ARVCY, CEI.FR).
The
UAE's decision to snub the American option was a surprise given its close links
to the
U.S.
The
country was singled out for special attention by former President George W.
Bush's administration. American exports to the U.A.E. almost quadrupled between
2002 and 2008 to more than $15 billion, making it the largest market in the
region for American trade. U.A.E. investment in America also ballooned,
including a large investment in Citigroup Inc. (C).
In the past, France might have exploited the opportunity. Yet the French
consortium did itself no favors, with EDF, owner of France's 58 nuclear plants,
formally joining the French bid only midway through the process.
The Korean success reopens a debate over whether Areva's advanced EPR reactor,
dogged by cost overruns and safety concerns at sites in Finland and France, might
be too big and expensive. The Korean alternative has a capacity of 1,400
megawatts compared with Areva's 1,650 megawatts. But it is hundreds of million
dollars cheaper. That is partly because the plant wouldn't withstand the impact
of an airplane crash--a key safety criterion in Finland and France and likely
to be one in the U.S.
KEP's older technology may struggle against new designs from GE, EDF-Areva and
Toshiba Corp. (6502.TO, TOSYY) in more safety conscious markets. But as other
players like Russia's Rosatom and partner Siemens AG (SIE.XE, SI) eye other
emerging market customers like India, the nuclear industry looks less locked up
by the U.S., Japan and France than many thought. The same goes for the
investment opportunities in the oil-rich UAE.