Czech Government Expected to Issue Bidding Guide This Month
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
Recent news about overseas nuclear power plant projects, including new order placement in the Czech Republic, bodes well for constructors, especially the limited number of them capable of performing EPC projects.
New nuclear power plant construction projects announced, including for Czech Republic
According to media reports, Korea Hydro & Nuclear Power (KHNP) is pursuing some overseas nuclear power plant construction projects. This month, the Czech government plans to issue a bidding guide (Request For Proposal (RFP)) for the construction of a W8.0tn nuclear power plant (1.0~1.2 GW) in Dukovany. KHNP, Westinghouse (US), EDF (France), Rosatom (Russia), and China General Nuclear Power Group are in contention for the contract, with the winning operator to be announced in 2022. In Jul 2020, the Czech government accepted the EPC model proposed by KHNP. Meanwhile, KHNP is also in talks regarding potential participation in the El Dabaa (Egypt) project, for which Rosatom (a leading power producer in Russia) has been contracted to build four 1.2GW nuclear power plants. Of note, Rosatom obtained approval from the Egyptian government in Mar 2019, and Russia has agreed to finance 85% of the total construction costs.
Due to the nature of a nuclear power plant project, selecting a location and obtaining approval takes several years. Given such, there tends to be a large gap in the timing between initial media exposure and the actual awarding of a contract. Media reports have been mentioning the Czech nuclear power plant project since 2018, along with projects in UK and Saudi Arabia. That said, with new domestic nuclear power plant projects unlikely to be undertaken for now, a constructor with an EPC-centered export model is more likely to eventually win out than one with a UAE project-like business model (ie, participation throughout the entire process). Due to required special levels of security and design, there are only a handful of construction players capable of participating in nuclear power plant projects. We point out that Hyundai E&C, Daewoo E&C, and Samsung C&T have gained experience through the UAE Baccarat project, Shin Hanul #1 & 2 projects, and Shin-Kori #5 & 6 projects—all of which required a new type of pressurized light water reactor (APR1400).
Last week’s key construction/real estate news items
On Mar 7, a Seoul City official said that preliminary negotiations for the Kwangwoon University station area development project are to wrap up within this month, with construction to begin in 1H22. The project entails the building of a 46-story logistics complex (2,466 mixed-use residential buildings) in Wolgye-dong, Nowon-gu. With HDC Hyundai Development having been selected as the constructor in 2017, the project has now started in earnest. Of note, Gwangwoon University Station is a stop on the GTX-C line. Considering plans to develop/improve transportation conditions in the area, nearby house prices appear undervalued compared to other areas in Seoul. Currently trading at a 2021 P/E of 5.4x, HDC Hyundai Development’s shares appear attractively valued versus the industry average.