x Abu Dhabi, UAEThursday 18 January 2018

South Koreans a surprising choice as nuclear plant suppliers

Winners credit their reputation for careful project management as Government saysbids were evaluated on the basis of technical, not political, considerations

The Abu Dhabi Government turned heads across the world yesterday with the announcement that it would award its nuclear energy contract to a group of South Korean firms. The contract given to a consortium of firms led by Korea Electric Power Corporation (Kepco) supported the Government's claim that bids for the country's first nuclear power stations were evaluated on the basis of technical, not political, considerations.

South Korean officials reacted with delight at the news after a year-long race among a narrowed field of competitors in which they were often cast as underdogs to a French group and a Japan-US alliance. Kepco and its partner firms were selected on the basis of their project management structure, competitive cost and strong record of delivering reactors on time, said Mohamed al Hammadi, the Emirates Nuclear Energy Corporation (Enec) chief executive.

"The deliverability of the Korean team was demonstrated in the last decade of constantly improving their capability," he said. "The Koreans, from our analysis and due diligence, they've been improving their construction capability unit after unit to make it more efficient, to make it higher quality, and cost continues to improve." Enec also favoured the structure of the South Koreans' bid, which put Kepco firmly in charge of the other firms in its consortium and reduced the possibility that intra-company squabbling could delay the construction process.

Kepco also offered a strong plan for training Emiratis, which is a Government priority, Mr al Hammadi said. Kepco's top official in the UAE, Hee Yong Lee, said he believed his company's consortium came out on top because of its reputation for careful project management. "I think one of the key reasons Enec selected Kepco is that Kepco will be the prime contractor as one entity to lead all the team and bring very systematic programs in terms of project management," he said.

South Korea has built 20 reactors since 1978 and has six more under construction. With each plant the country has moved farther away from using foreign technology and the contractors will utilise only a small number of US and Japanese components in Abu Dhabi in the reactor vessel and fuel cycle. The reactor model offered to Abu Dhabi, the APR 1400, is a so-called Generation III reactor designed to rival the best models in Europe and Japan for safety systems and cost efficiency. The design is an improvement from the OPR 1000, the country's former export model, which borrowed much more heavily from older US technology.

The APR 1400 is under construction at two sites in South Korea but is not yet in operation anywhere in the world. While experts had previously warned that it could be risky for the UAE to adopt such a new design, Mr al Hammadi said Enec was confident of the South Koreans' ability to innovate. "It comes down to the supply chain maturity, it comes down, at the bottom line, to the human resources that will be building these power plants," he said.

Korean firms have stood out for their ability to successfully deliver large infrastructure projects in the Emirates, said Christian von Tschirschky, a Gulf energy expert at the management consultancy AT Kearney. "They are contractors for large-scale infrastructure that is successfully working," Mr von Tschirschky said, referring to the companies involved in the bid. The award caps a watershed year for South Korean firms in winning contracts in the UAE. The Abu Dhabi National Oil Company awarded well over $10bn worth of contracts to South Korean engineering firms for a new refinery and fertiliser plant in Ruwais and parts of an offshore natural gas project. And in a construction project with symbolic weight for the country, the construction arm of Samsung Group is putting the finishing touches on the Burj Dubai.

Although some experts had been predicting a South Korean win for several months, most had expected the French group or the US-Japan alliance to have a leg up because of strategic considerations. Abu Dhabi's decision suggested that technical factors played a much more important role in the process, said Al Troner, the president of Asia Pacific Energy Consulting. "Korea has a good track record in terms of safety and price and it's a surprise to see the US and France are not part of the bid, because they are the ones with the more political strength in the Middle East," Mr Troner told Reuters.