Negotiations Enter New Phase
Korea Electrical Power Corp. (KEPCO) has lost preferred bidder status to take over Toshiba’s equities in NuGen, the operator of Moorside Nuclear Power Plant in the UK, the Japanese company said on Aug. 1 (local time).
The Korean power company acquired the status last year. However, negotiations have entered a new phase as the UK government decided to go ahead with the Moorside project in a new way that guarantees a secure payback and return on investment.
According to the Financial Times (FT) on July 30 (local time), Toshiba said that KEPCO no longer has preferred bidder status to acquire its shares in NuGen.
The Moorside project is to build three 3.4GW nuclear power plants with a cost of 15 billion pounds in Cumbria, northwest England. Since KEPCO was selected as preferred bidder in the acquisition of NuGen in December last year, the Korean government has been negotiating with the UK government over specific business conditions.
As the project was based on project financing (PF), the negotiation did not make much progress. The Moorside project is different from the Baraka, UAE nuclear power plant project, which was a turn-key project. The company that completes the Moorside nuclear power plant is expected to recoup its investment by selling electricity produced from the plant for 35 years. This is why the Korean government has been negotiating with the UK government about the purchase price of electricity and the possibility of equity investment by the UK government.
Therefore, Toshiba informed KEPCO that it has lost its preferred bidder status. Some experts say that financially troubled Toshiba may look for another buyer. The FT also said Toshiba will continue to negotiate with KEPCO but will also negotiate with other potential buyers.
In this regard, the Korean Ministry of Trade, Industry and Energy explained that the loss of the preferred bidder status would not affect negotiations. Rather uncertainties have decreased as the UK government decided to apply a regulatory asset base (RAB) model to finance the nuclear power project, the Korean government said. An RAB system is designed to provide a secure payback and return on investment sufficient to service loans and generate profits.