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KEPCO Considers Acquiring Toshiba’s UK Nuclear Business Stake
Merits Vs. Demerits
KEPCO Considers Acquiring Toshiba’s UK Nuclear Business Stake
  • By Jung Min-hee
  • February 15, 2017, 02:30
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Officials at the Korea Electric Power Corporation (KEPCO) and the Korean government are remaining cautious about an acquisition of Toshiba’s stake in NuGen.
Officials at the Korea Electric Power Corporation (KEPCO) and the Korean government are remaining cautious about an acquisition of Toshiba’s stake in NuGen.


The Korea Electric Power Corporation (KEPCO) and senior officials from the South Korean government are remaining cautious about an acquisition of Toshiba’s stake in NuGen, but they are also calculating actual profits the takeover.

This is because the KEPCO has not won any contracts after the deal to build nuclear reactors in the UAE in 2009. Although the company tried to obtain orders with a government-wide effort, it failed to win projects to construct nuclear power plants in Jordan in 2010 and in Sinop, Turkey, in 2011. In order to become a leading country in the nuclear power sector, a country needs to keep winning orders. However, South Korea has not received any orders for nearly eight years and China has outpaced the country over the period. This is why the government and the KEPCO sought to acquire the stake in NuGen of the U.K. last year. NuGen, a joint venture of Japan’s Toshiba and France's Engie, plans to construct three nuclear reactors in Moorside by 2025. The project cost alone is worth 15 billion pound (US$18.72 billion or 21.31 trillion won).

A senior official from the government said, “This the game we don’t need to rush.” It means that a buyer has it over a seller. Another official said, “We also need to review whether nuclear projects in the U.K. are profitable.” Since the nuclear business is a regulated industry, it can be stranded when some problems, such as license and workforce operation, occur during construction. An official from a state-run energy company said, “There is no problems with the UAE project because a company can employ Southeast Asian workers and the project is fully supported by the UAE government. But, the project in the U.K. can be different.”

Financing is another problem. Toshiba has a 60% stake in NuGen, and it is unclear that the company will sell the stake entirely or separately. Toshiba bought the stake in NuGen at 17 billion yen, (US$149.88 million or 172 billion won). Accordingly, the price of the stake is estimated at 150 billion won to 200 billion won (US$131.81 million to 175.75 million). The next step is the problem. For the nuclear business in the U.K., a business operator needs to provide finance to complete the construction and recoup its investment by selling electricity. It means that the company needs to raise an enormous cost amounting to about 10 trillion won (US$8.79 billion), but it is hard to do so immediately. The firm can raise money through equity participation by constructors and state-owned financial companies, including the export-import Bank of Korea. However, Toshiba’s nuclear power projects in the U.K. are not attractive to investors due to the failure earlier on. Moreover, there is no need for constructors to conduct an equity participation as it can simply take part in through a subcontract.

The presidency is also a burden in terms that it is now at the last stage. This is a pan-governmental mega project so it is hard for one or two government agencies, such as the Ministry of Trade, Industry and Energy, to take burden on. When there are problems with the project, they can take all the blame.

Nevertheless, some say that the business is still attractive. Above all, the KEPCO can initiate nuclear export, which has been stopped for a while, based on the projects. By 2030, 164 nuclear power plants will be built around the world, and 70 of them are expected to be put up for bid. Considering the fact that one nuclear reactor costs 4 trillion to 5 trillion won (US$3.51 billion to 4.39 billion), the market worth more than 300 trillion won (US$263.62 billion) will be opened.

This is also related to workforce utilization. The company can manage workforce effectively by relocating nuclear power experts in the UAE project to other projects. The KEPCO said, “We verified our construction ability through the nuclear project in the UAE and won the management right as well, gaining international recognition for expertise in nuclear power plant operation.”