Nuclear bid for UAE contract may set industry norm

South Korea's US$20 billion price tag for four nuclear reactors in Abu Dhabi is likely to become a benchmark for atomic energy technology across the region.

South Korea's US$20 billion (Dh73.46bn) price tag for four nuclear reactors in Abu Dhabi is likely to become a benchmark for atomic energy technology across the region, a Kuwaiti nuclear official said yesterday. After a competition in which price was cited as a key factor, a consortium led by Korea Electric Power Corporation (KEPCO) beat bids from a team of French firms and a US-Japanese alliance in a race to design, build and operate a fleet of nuclear reactors in the UAE, it was announced on Sunday.
The country is set to become the first Arab state to harness atomic energy on a commercial scale, but it is not likely to be the last. Kuwait, Saudi Arabia, Jordan and Egypt, among others, have put forward proposals to build reactors. A delay in the award process, which was initially due to be finalised in September, indicated "clearly tough negotiations with competitive biddings" that could serve as a reference for the region, said Dr Adnan Shihab-Eldin, the secretary general of Kuwait National Nuclear Energy Committee.
"We now have another good reference point for the cost of nuclear power plants, and in the Middle East," Dr Shihab-Eldin said. The Korean reactor design to be built in the capital is an upgraded model that is not yet operational anywhere in the world, but he predicted KEPCO and its partners would be able to build it to the price and time limits set by the contract. "There is always a first, but the technology is not revolutionary, it is evolutionary," Dr Shihab-Eldin said. "It will be challenging but feasible."
Claude Gueant, the general secretary to the French president Nicolas Sarkozy, said yesterday a bid for the Abu Dhabi reactors from a consortium led by Electricite de France failed on price. "South Korea has won it over the price of electricity," Mr Gueant told the French newspaper Les Echoes. "The price over 30 years of the project was lower than the French offer. That was a decisive factor for Abu Dhabi, where electricity prices are very low."
The Korean offer was 30 per cent below the French bid, and even lower than the price put forward by the US-Japanese group of General Electric and Hitachi, said a senior diplomatic source close to one of the bidding consortiums. Executives at Emirates Nuclear Energy Corporation (ENEC) on Sunday stressed that the award was based on a number of factors, including price and the contractor's ability to deliver the project on time.
Officials also factored in the bidder's capability to train Emiratis to take part in the programme. But they said $20bn was a very competitive price. "We got from the three bids a good offer that was very competitive," said Mohammed al Hammadi, the chief executive of ENEC. Mr al Hammadi said costs for the project had declined in the past year as a result of falling prices for reactor materials and lowered interest from other plant buyers around the world.
"We were competing with the nuclear renaissance before the financial crisis with many, many nations that wanted to build nuclear power plants," he said. "After the crisis, the other competitors started reducing in number, and our award became more of a clear business opportunity." The average price of $5bn a reactor is higher than the $3.15bn figure quoted by Korean media for each of two plants of the same design at Shin Kori, on the country's east coast.
Industry sources said the difference was explained by the costs of shifting the Korean firms' technology and facilities abroad, building reactors in a country with no previous nuclear experience, and the fact that the construction would not start before 2012, when costs would presumably be higher. And over their 60-year lives, the reactors will produce electricity at a cost that compares favourably with the current costs of generating electricity from natural gas - slightly above Dh0.20 a kilowatt hour, said a senior industry figure who declined to be named.
That figure also compares favourably with a worldwide cost estimate of almost Dh31 a kwh for nuclear energy put forward by researchers at the Massachusetts Institute of Technology (MIT) this year. @Email:[e-mail]