New South Korean President Seen Hindering Nuclear Ambitions

  • Moon Jae-in campaigned to block new reactor construction
  • Kepco shares fell 5.8% on May 10 following election results

Nomura's Na Calls Moon's Election Very Good News

Playing on concerns about the safety of nuclear power in the wake of Japan’s Fukushima disaster in 2011, South Korea’s Moon Jae-in promised during his successful presidential campaign to scrap or suspend new atomic plants.

Now that Moon is president, that anti-nuclear stance is seen as a threat to South Korea’s ambitions to become a bigger exporter of nuclear equipment and technology -- a market valued at as much as $740 billion over the next 10 years.

“If the new government withdraws its support for nuclear development in South Korea, this could send a negative signal to foreign countries looking to purchase reactors,” Kerry-Anne Shanks, a Singapore-based analyst at Wood Mackenzie Ltd., said by email. “An anti-nuclear stance could challenge Korea’s ambitions to export nuclear technology to other countries.”

The irony is that even as Moon turns his back on nuclear, South Korea has proven itself as one of only a few nations capable of successfully designing and starting up a nuclear reactor using the most advanced technology available.

In 2009, a group led by Korea Electric Power Corp., South Korea’s state-run utility, won a $20 billion contract to build four nuclear plants in the United Arab Emirates for about $20 billion. Kepco, as the utility is better known, aims to export another six units by 2020.

In the wake of last week’s presidential election, Kepco’s shares fell 5.8 percent on May 10. The shares are down about 30 percent since their recent peak in early August 2016.

The Presidential Blue House and Kepco weren’t immediately available for comment.

Domestic Strengths

South Korea, which has been building reactors since the 1970s, has been positioning itself as a potential successor to pioneers of the industry such as Westinghouse Electric Power Co. and Areva SA, which have become mired in cost overruns and construction delays. To win the U.A.E. deal -- the first to be awarded by the Gulf Arab nation -- Kepco beat out France’s Areva and General Electric Co.

Coming on the heels of Westinghouse’s bankruptcy, the political shifts in South Korea are further threatening the global industry and possibly narrowing the field of reactor builders. As recently as March, Kepco said it would consider sponsoring a reorganization of Westinghouse if requested, according to a spokesman at the time.

South Korea has 25 nuclear reactors, which provide roughly a third of its energy needs, according to the World Nuclear Association. The Asian nation has the sixth-largest fleet of nuclear reactors in the world, accounting for about 23 gigawatts of capacity.

Besides the curbs on new nuclear facilities, Moon also campaigned to cancel any lifetime extensions for existing nuclear plants and to develop a roadmap to eventually rid the nation of atomic power altogether. In nuclear’s place, Moon would place greater emphasis on natural gas and renewables. On Monday, the new president ordered the shutdown for the month of June of 10 coal-fired power plants that have been operating for more than 30 years to cut pollution.

“If Korea stops building reactors domestically it will definitely hurt their export market,” said Jessica Lovering, director of energy at Breathrough Institute, an environmental think tank. “A big part of what makes Korea competitive in the global nuclear market is they have a thriving domestic industry with a proven track record of declining costs and reactors built on time.”

Global Market

The global civil nuclear market is expected to be valued at $500 billion to $740 billion in the next 10 years, according to the U.S. Department of Commerce. An average of $80 billion a year will be needed in nuclear power investment through 2030 in order to meet a goal of keeping global temperature increases below 2 degrees Celsius by reducing carbon emissions from burning fossil-fuels, according to the International Atomic Energy Agency.

Kepco and unit Korea Hydro & Nuclear Power co-developed South Korea’s latest homegrown nuclear reactor, known as the APR-1400. The reactor, a so-called generation III unit, incorporates advanced design features that meet safety standards in developed countries like the U.S. and U.K., according to Korea Electric.

South Korea began commercial operations of its first APR-1400 in December at its Shin Kori facility near the port city of Busan. Another APR-1400 is under construction at Shin Kori, as well as two at Shin-Hanul in the province of Gyeongsangbuk-do. While two additional units are being planned for Shin Kori, their future is in doubt following the election.

Government Support

“Exporting nuclear power plants requires substantial up-front financial support from the vendor and its home government,” said Rod Adams, publisher of Atomic Insights, an industry news website. “There is already some evidence suggesting that the anti-nuclear stance of President Moon Jae-in will make it more difficult for South Korea to export nuclear reactors.”

One challenge to South Korea’s ambitions regardless of the election outcome is competition from other nuclear-exporting nations.

Russia and China, which have governments that provide financing for projects, have emerged as new leaders of the global nuclear industry. Russia has more than 20 nuclear reactors confirmed or planned for export, totaling $133 billion at the end of 2016, according to the WNA.

China is actively promoting export of its homegrown nuclear reactor, the Hualong One. China has signed deals with several nations, including the U.K., Argentina and Pakistan.

“The competitors being Russia and the upcoming Chinese offerings are challenging to South Korea, given the comparative limited footing of Korea from a global economic perspective,” Neil Todreas, a professor at the Massachusetts Institute of Technology, said by email.

— With assistance by Heesu Lee, and Peter Pae

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