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.
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.

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