Czech Nuclear Plant Contract Talks Collapse... Is Korea's Nuclear Edge at Risk? [Weekend Money]

Korea Hydro & Nuclear Power at odds with contractor over construction costs and contract terms
Breakdown in negotiations fuels concerns over nuclear power's cost competitiveness
"Concerns will fade once a new contractor is selected"

Analysts say it is difficult to conclude that the competitiveness of the nuclear power industry has been undermined by the collapse of contract negotiations for construction of the Czech Republic's Dukovany nuclear power plant between Korea Hydro & Nuclear Power and a consortium of Daewoo Engineering & Construction and Doosan Enerbility.

On October 29, Korea Hydro & Nuclear Power announced that it had terminated contract negotiations with the consortium for construction of the Czech Republic's Dukovany nuclear power plant. The company plans to complete the selection of a new contractor by July 2027.

Korea Hydro & Nuclear Power had been negotiating with the consortium for about 15 months, but the two sides failed to resolve their differences over construction costs and the contract structure. The consortium sought a provision for additional adjustments to account for costs rising after the design phase, while Korea Hydro & Nuclear Power insisted on a fixed-price contract.

The breakdown in negotiations has heightened concerns about the profitability of the Dukovany nuclear power project in the Czech Republic. Replacing the contractor is likely to increase the risk of cost overruns and delay penalties, in part because of the challenges of maintaining continuity in construction.

The market viewed the development as undermining "Team Korea's" cost competitiveness and raised questions about the economic viability of nuclear power itself. During trading, Daewoo Engineering & Construction shares fell 23.41% from the previous day's closing price to 10,930 won, while Hyundai Engineering & Construction shares fell 10.99% to 85,000 won.

However, analysts say it is difficult to view the breakdown in negotiations as having weakened the competitiveness of the nuclear power industry as a whole. Daewoo Engineering & Construction's net debt has increased by more than 3 trillion won since 2021, and its last nuclear power plant construction project was completed more than 10 years ago, which may have made it difficult for the company to shoulder the risks. Concerns are expected to ease through a new bidding process for the contractor and subsequent projects.

The development could instead create more opportunities for other contractors. In particular, analysts say the likelihood that Hyundai Engineering & Construction will participate in Team Korea's future project pipeline has increased. This is because volumes for Westinghouse could grow even if Team Korea's cost competitiveness weakens.

"From a medium- to long-term perspective, this appears to be an event that has raised the importance of contractors and the barriers to entry," said Moon Kyung-won, an analyst at Meritz Securities. "Both the margins contractors earn on future nuclear power projects and safety standards are expected to improve."

This content was produced with the assistance of AI translation services.