Nuclear power to account for $120 billion of $200 billion US investment pledge

Korean firms also in talks to acquire Westinghouse stake; industry sees 'MANUGA' moment

The construction site of Shin Hanul Units 3 and 4 [Korea Hydro & Nuclear Power]
The construction site of Shin Hanul Units 3 and 4 [Korea Hydro & Nuclear Power]

Up to $120 billion of South Korea's $200 billion strategic investment pledge to the United States will go toward nuclear power — specifically, the construction of eight large reactors, two of which will be South Korea's own APR1400 design. The deal amounts to more than a financial commitment: with a path now open for Korean-designed reactors to enter the US market, the industry hopes it can serve as a springboard for expanding Korean nuclear power's global footprint. Participation in the US nuclear supply chain and hands-on construction experience there could help Korean firms break into third-country markets such as Europe. The question now is whether nuclear can follow the shipbuilding sector's MASGA project in using the US as a beachhead for global expansion.

The centerpiece of the deal is two APR1400 units. The remaining six reactors will be Westinghouse's AP1000 design, built in three phases: two AP1000 units in the first phase, two APR1400s and two AP1000s in the second, and two more AP1000s in the third. The two countries agreed to make "reasonable efforts" to ensure the engineering, procurement and construction contracts for the first and second phases are signed within six months of each other.

The most significant element of the agreement is a commitment to revise the Settlement Agreement, or SA, between the Korean and US nuclear industries — the pact that has long blocked the APR1400 from entering the American market. The SA, signed in January last year between Korea Electric Power Corp., Korea Hydro & Nuclear Power and Westinghouse, contains restrictions on Korean reactor exports to the US. Under the agreement, exporting a Korean-designed reactor abroad also reportedly requires purchasing more than 1 trillion won ($736 million) worth of goods and services per unit from Westinghouse.

South Korea's Ministry of Trade, Industry and Energy said the APR1400 had been effectively shut out of the US market by the SA signed between the two sides' companies. The ministry added that the government had engaged the US Department of Energy, state governments, Congress and industry from multiple angles and negotiated intensively with the American side to achieve market entry.

By explicitly including two APR1400 units in the framework, the agreement opens a door that had been firmly closed. If Korean-designed reactors are actually built in the United States — the birthplace of commercial nuclear power — South Korea will gain both a track record and direct construction experience.

In the nuclear industry, real-world construction and operating experience translates directly into competitiveness for future contracts. Establishing an APR1400 build record in the US could bolster the credibility of the Korean design in future bidding contests in Europe and other third-country markets. The government expects the US entry to raise the APR1400's chances of winning orders elsewhere.

The six AP1000 units also represent a new opportunity for Korean nuclear firms. Korean companies can participate in the construction and supply chain for the American-designed AP1000. Demonstrating their supply chain and construction capabilities on US soil could broaden the foundation for joint bids with Westinghouse on third-country projects in Europe and beyond.

That is why the government convened a nuclear export planning committee on Thursday — the day after the US agreement was reached — to discuss the APR1400's basic design, licensing, EPC and commissioning arrangements, as well as Korean firms' participation in the AP1000 supply chain.

On top of all this, Korean firms are pursuing a stake in Westinghouse itself. Industry Minister Kim Jung-kwan said Korean companies plan to acquire a Westinghouse equity stake in order to share broadly in the commercial returns from the large-scale nuclear project. According to political and industry sources, South Korea is in discussions with the US about acquiring a 5 to 10 percent stake in Westinghouse at a 10 percent discount to the offering price, along with board voting rights. The specific ownership percentage and terms remain under negotiation.

If this cooperation materializes, nuclear power could achieve an industrial expansion effect similar to what shipbuilding has pursued through MASGA. Just as the shipbuilding sector aims to broaden its market through US local production and supply chain entry, the nuclear sector hopes to secure both experience and supply chain access in the US — a collaboration being dubbed "MANUGA," for Make America Nuclear cooperation Great Again.

The $120 billion figure alone, however, does not guarantee a large volume of work for Korean companies. The key variable determining the profitability of the APR1400's US entry will be the revised SA's specific terms. Korea Electric Power Corp., Korea Hydro & Nuclear Power and Westinghouse will enter follow-on negotiations over technology fees, services and nuclear fuel supply. Sources inside and outside the government say related costs are being discussed at around $2 billion, though final terms have not been set. The more South Korea pays Westinghouse for access to the US market, the smaller the share Korean firms stand to keep.

The commercial viability of the projects also remains to be verified. Each of the eight reactors will be developed as a separate project, with commercial feasibility assessed based on site conditions, licensing, construction costs and power demand. To guard against potential cost overruns, the government has set aside $20 billion of the $120 billion as a contingency reserve — an amount that counts toward the investment commitment even if never spent. An additional $10 billion will be paid upfront to the US side to allow advance procurement of long-lead equipment.

Workforce is another challenge. If construction of the eight US reactors overlaps with two units at the Czech Republic's Dukovany plant and two new reactors at the Yeongdeok site in South Korea, demand for specialists in design, construction, commissioning and quality control could surge sharply. Given the staffing constraints facing public institutions such as Korea Electric Power Corp. and Korea Hydro & Nuclear Power, how to allocate the personnel and capabilities of "Team Korea" — spanning private contractors and equipment suppliers — will be critical to converting the US opportunity into actual contracts. Observers note that because the Ministry of Economy and Finance currently controls headcount at public institutions, expanding the workforce at the two state-run nuclear companies has become an urgent need.


oskymoon@heraldcorp.com