KOREA Electric Power Corp. (KEPCO) signed a memorandum of understanding (MOU) to secure the business rights to the Namakhvani Hydro Electric Power Generation Project with the Georgian Government in Tbillisi in November. This deal is expected to pave the road for KEPCO to enter the European market.
KEPCO and the Georgian Government signed the deal after the Georgian Government agreed to grant the Korean power company the business rights.
The Namakhvani Hydro Electric Power Generation is a project consisting of three dams that make use of water resources from the Caucasus Mountains. The three dams will generate 100MW, 250MW and 100MW of electric power, respectively. The total power generation volume will reach 450MW, 13% of the current total power generation of Georgia. The project will cost approximately US$1 billion. The project will be conducted using a BOO (Build, Own, Operate) system.
KEPCO selected SK Construction and Engineering of Korea and Nurol of Turkey as partners for the project. The three will jointly push forward with investment into and development of the project as part of their plan to sell power to Turkey. Industry experts say KOPEC has secured a bridgehead to the hydroelectric power generation business in Europe as this project will enable the Korean utilities company to expand its participation in the development of the hydroelectric power industry in Georgia and make a foray into the electric power market of Turkey.
Georgia has rich water resources thanks to the Caucasus Mountains and so has big potential (expected power generation volume: about 13,000MW). Thanks to the rapid economic growth of Georgia, demand for electric power is steadily increasing. Therefore, the power generation business in Georgia is very promising.
“It is quite meaningful that Georgia and KOPEC signed a deal to develop hydroelectric power as Georgia has rich water resources and KOPEC has strong technologies and rich experiences,” said Heo Gyeong-gu, a manager of overseas business development at KOPEC during the signing ceremony. “We want to cooperate with Georgia in all power generation business sectors, including power distribution and telecommunication via power supply lines.”
KOPEC’s power generation development project will activate the development of the Georgian industry, said Alexander Khetaguri, the minister of energy for Georgia. Khetaguri promised to give full support to KOPEC to ensure the project’s success. In addition to the project in Georgia, KOPEC is actively pushing forward with hydroelectric power generation projects in Laos, Asia and Bolivia and Colombia in South America.
In December, KOPEC approved an investment plan to take over 10% equity in Imouraren Uranium Mine in Niger with reserves of more than 200,000 tons of uranium by taking part in a capital increase in Areva NC Expansion, a subsidiary of French company Areva.
KOPEC will invest a total of 300 billion won in the project along with Korea Hydro & Nuclear Power Corp. This means KOPEC will be able to secure 10%, or about 18,000 tons, of uranium from the mine. In addition, the company will annually produce 700 tons of uranium from the mine for 24 years beginning in 2013. This volume accounts for about 15% of the 5,000 tons that Korea consumes annually.
This deal will enable KOPEC to secure a stable supply of uranium for at least the next 24 years as well as taking part in the management of ANCE and gaining valuable know-how in mine management. Moreover, via this deal, KOPEC will form a strategic cooperative relationship in uranium mine development and secure a bridgehead to uranium development in Africa. Areva NC is the fourth largest uranium developer in the world, producing 6,300 tons of uranium in 2008.
“2009 and 2010 is the optimum period for natural resources-related M&As,” said Kim Ssang-su, CEO of KEPCO regarding the equity participation. He added, “KEPCO was able to secure the equity through proper strategies. This deal is important as it is hard to find good mines to buy these days. Thanks to this deal, KOPEC will enhance its status in the global uranium industry.”